As filed with the U.S. Securities and Exchange Commission on October 7, 2015

 

Registration No. 333-206696  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

PRE-EFFECTIVE AMENDMENT NO.1

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

Old Line Bancshares, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

1525 Pointer Ridge Place

Bowie, Maryland 20716

(301) 430-2500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

James W. Cornelsen

President and Chief Executive Officer

Old Line Bancshares, Inc.

1525 Pointer Ridge Place

Bowie, Maryland 20716

(301) 430-2500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

 

 

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed proxy statement/prospectus.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ◻

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ◻

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ◻

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):

 

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)                 ◻

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)       ◻

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

Dear Regal Bancorp, Inc. Stockholder:

On August 5, 2015, Regal Bancorp, Inc. entered into an Agreement and Plan of Merger with Old Line Bancshares, Inc., as amended, pursuant to which Regal Bancorp will be merged with and into Old Line Bancshares, with Old Line Bancshares surviving the merger. 

If the merger is completed, you will have the right to receive for each share of Regal Bancorp common stock you own, at your election, (i) $12.68 in cash, (ii) 0.7718 shares of Old Line Bancshares common stock, or (iii) a combination of cash and Old Line Bancshares common stock, subject to the allocation and proration provisions described in this proxy statement/prospectus whereby no more than 50% (approximately 221,793) of the shares of Regal Bancorp’s outstanding common stock will be exchanged for cash and the remaining outstanding shares of Regal Bancorp common stock will be exchanged for shares of Old Line Bancshares common stock, as further described in the attached proxy statement/prospectus.  Cash will be paid in lieu of any fractional shares.  Assuming 50% of the outstanding shares of Regal Bancorp common stock are converted into shares of Old Line Bancshares common stock in the merger, if the merger is completed, Old Line Bancshares will issue approximately 171,179 shares of common stock and pay approximately $2,812,352.52 in cash in exchange for the outstanding shares of common stock of Regal Bancorp upon consummation of the merger.  The value of the per-share and aggregate stock consideration will depend on the market price of Old Line Bancshares common stock on the effective date of the merger. 

Old Line Bancshares’ common stock is listed and traded on the NASDAQ Capital Market under the symbol “OLBK.”  The closing stock price of Old Line Bancshares’ common stock on the NASDAQ Capital Market on August  4, 2015, the day preceding public announcement of the merger, and on October 6, 2015, the latest practicable date prior to the date of this proxy statement/prospectus, was $15.76 and $16.76, respectively. 

In addition, each share of Series A Non-Cumulative Perpetual Preferred Stock of Regal Bancorp will be converted into the right to receive $2.00 per share in cash, or an aggregate of $1,016,876.00, at the effective time of the merger.

Stockholders of Regal Bancorp will be asked to vote on approval of the merger agreement and the merger at a special meeting for Regal Bancorp’s stockholders.  We cannot complete the merger unless we obtain the required approval of the stockholders of Regal Bancorp.  The merger agreement and the merger must be approved by the affirmative vote of holders of two-thirds of the outstanding shares of common stock of Regal Bancorp. 

The Board of Directors of Regal Bancorp recommends that you vote “FOR” approval of the merger agreement and the merger.    

You should read this proxy statement/prospectus and all annexes carefully.  Before making a decision on how to vote, you should consider the “Risk Factors” discussion beginning on page 14 of this proxy statement/prospectus.

This proxy statement/prospectus incorporates important business and financial information about Old Line Bancshares from reports it has filed with the Securities and Exchange Commission (the “SEC”).  This information is available without charge at the SEC’s Web site located at www.sec.gov or upon written request to Old Line Bancshares, Inc., ATTN: Secretary, 1525 Pointer Ridge Place, Bowie, Maryland 20716, or oral request at (301) 430-2500.  In order to ensure timely delivery, you must request this information no later than five business days prior to the date of the Regal Bancorp special meeting, or November 13, 2015.

Neither the Securities and Exchange Commission, nor any bank regulatory agency, nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus.  Any representation to the contrary is a criminal offense.  The securities offered through this proxy statement/prospectus are not savings accounts, deposits or other obligations of a bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other government agency.

This proxy statement/prospectus is dated October [_], 2015 and is first being mailed to Regal Bancorp, Inc. stockholders on or about October 19, 2015.

 

 

REGAL BANCORP, INC.

11436 Cronhill Drive

Owings Mills, Maryland 21117

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 20, 2015 AT 10:00 A.M.

A Special Meeting of Stockholders of Regal Bancorp, Inc., a Maryland corporation, will be held on November 20, 2015, at 10:00 a.m. (local time), at Regal Bankcorp’s corporate headquarters located at 11436 Cronhill Drive, Suite 1, Owings Mills, Maryland 21117 for the purpose of considering and voting upon the following:

Only stockholders of record at the close of business on October 9, 2015 will be entitled to notice of and to vote at the special meeting or any adjournment or postponement thereof. 

You are cordially invited to attend the special meeting in person.  Whether or not you plan to attend the special meeting, however, we urge you to return the enclosed proxy card in order to indicate your vote as soon as possible.  To complete the merger, the merger agreement and the merger must be approved by the holders of two-thirds of the issued and outstanding shares of common stock of Regal Bancorp, Inc.  An abstention, a failure to vote and a broker non-vote will have the same effect as a vote against the approval of the merger agreement and the merger.  Whether or not you intend to attend the special meeting, please vote as promptly as possible by signing, dating and mailing the proxy card.  If you attend the special meeting, you may vote in person or by your executed proxy.  If your shares are held in the name of a broker, bank or other fiduciary, please follow the instructions on the voting instruction card provided by such person. 

You may revoke your proxy at any time prior to or at the meeting by written notice to Regal Bancorp, Inc., by executing a proxy bearing a later date, or by attending the meeting and voting in person.  If you wish to attend the special meeting and vote in person and your shares are held in the name of a broker, trust, bank or other nominee, you must bring with you a proxy or letter from the broker, trustee, bank or nominee to confirm your beneficial ownership of the shares.

The proxy statement/prospectus that accompanies this notice provides you with detailed information about the proposed merger and the other matters to be voted on at the special meeting.  It also contains information about Old Line Bancshares, Inc. and Regal Bancorp, Inc. and related matters.  We urge you to read the entire proxy statement/prospectus carefully.  In particular, you should read the “Risk Factors” section beginning on page 14 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you.

 

 

Owings Mills, Maryland

October 19, 2015

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

 

The following are some questions that you, as a stockholder of Regal Bancorp, may have regarding the merger agreement, the merger and the other matters being considered at the special meeting and the answers to those questions.  We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger agreement, the merger and the other matters being considered at the special meeting.  Additional important information is also contained in the annexes to this proxy statement/prospectus.

 

SUMMARY

This summary highlights selected information from this proxy statement/prospectus including information incorporated by reference into this proxy statement/prospectus.  It does not contain all of the information that may be important to you.  We urge you to carefully read the entire document so that you fully understand the merger and the related transactions.  Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.  Unless otherwise indicated in this proxy statement/prospectus or the context otherwise requires, all references in this proxy statement/prospectus to “Old Line Bancshares” refer to Old Line Bancshares, Inc., all references to “Regal Bancorp” refer to Regal Bancorp, Inc. and all references to “Regal Bank” refer to Regal Bank & Trust. 

The Companies

Old Line Bancshares, Inc.

1525 Pointer Ridge Place

Bowie, Maryland 20716

Telephone: (301) 430-2500

Old Line Bancshares was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank.  On May 22, 2003, the stockholders of Old Line Bank approved the reorganization of Old Line Bank into a holding company structure pursuant to which Old Line Bank became a subsidiary of Old Line Bancshares.  The reorganization became effective on September 15, 2003.  On April 1, 2011, Old Line Bancshares acquired Maryland Bankcorp, Inc., the parent company of Maryland Bank & Trust Company, N.A, and on May 10, 2013, Old Line Bancshares acquired WSB Holdings, Inc., the parent company of The Washington Savings Bank, F.S.B. (“WSB”).  The acquisition of WSB created the fourth largest independent commercial bank based in Maryland, with assets of more than $1.1 billion and with 23 full service branches serving five counties at the time of the acquisition.  As of December 31, 2014, Old Line Bancshares closed four of its branches that were in close proximity of existing branches leaving it with 19 full service branches in its service area.

Old Line Bancshares also owns an approximately $424,000 investment in a Maryland limited liability company named Pointer Ridge Office Investment, LLC (“Pointer Ridge”), which owns the commercial office building in which Old Line Bancshares leases and operates its main headquarters as well as a branch of Old Line Bank.  Old Line Bancshares owns 62.50% of Pointer Ridge.

Old Line Bank is a trust company chartered under Subtitle 2 of Title 3 of the Financial Institutions Article of the Annotated Code of Maryland.  Old Line Bank was originally chartered in 1989 as a national bank under the title “Old Line National Bank.”  In June 2002, Old Line Bank converted to a Maryland chartered trust company exercising the powers of a commercial bank, and received a Certificate of Authority to do business from the Maryland Commissioner of Financial Regulation (the “Maryland Commissioner”). 

Old Line Bank does not exercise trust powers and its regulatory structure is the same as a Maryland chartered commercial bank.  As of December 31, 2014, Old Line Bank was a member of the Federal Reserve System and its primary federal regulator was the Board of Governors of the Federal Reserve System (the “FRB”).  On March 6, 2015, Old Line Bank cancelled its stock in the Federal Reserve Bank of Richmond (the “Federal Reserve Bank”), thus terminating its status as a member of the Federal Reserve System.  As a result, its primary regulator is now the Federal Deposit Insurance Corporation (“FDIC”) and as of that date it is subject to regulation, supervision and regular examination by the Maryland Commissioner and the FDIC.  Deposits of Old Line Bank are insured to the maximum legal limits by the Deposit Insurance Fund of the FDIC.  Old Line Bancshares’ current primary market area is the suburban Maryland (Washington, D.C. suburbs) counties of Anne Arundel, Calvert, Charles, Montgomery, Prince George’s and St. Mary’s.  Old Line Bancshares also targets customers throughout the greater Washington, D.C. metropolitan area.

As June 30, 2015, Old Line Bancshares had consolidated assets, deposits and stockholders’ equity of approximately $1.3 billion, $1.1 billion and $136.0 million, respectively.

Old Line Bancshares’ common stock is listed and traded on the NASDAQ Capital Market under the symbol “OLBK.”

Regal Bancorp, Inc.

11436 Cronhill Drive

Owings Mills, Maryland 21117

Telephone: (443) 334-4700

Regal Bancorp was incorporated under the laws of the State of Maryland on June 18, 1990 to serve as the holding company of Regal Bank.  Regal Bancorp is primarily engaged in the business of directing, planning, and coordinating the business activities of Regal Bank. 

Established in 1947, Regal Bank is a Maryland state chartered, full-service trust company exercising the powers of a commercial bank.  Regal Bank operates through three branch locations at Owings Mills, Hunt Valley, and Westminster, Maryland.  The primary business of Regal Bank is to attract deposits from individual and corporate customers and to originate residential and commercial mortgage loans, commercial loans and consumer loans, primarily in the Greater Baltimore Metropolitan area.  Regal Bank also wholly owns 5900 Erdman, Inc., a Maryland corporation that buys, leases, sells, and otherwise operates in real estate transactions.  Regal Bank is subject to competition from other financial and mortgage institutions in attracting and retaining deposits and in making loans.  Regal Bank is subject to the regulations of certain agencies of the federal and state governments and undergoes periodic examination by those agencies. 

At June 30, 2015, Regal Bank consolidated with its subsidiary had total assets of $133.5 million, total deposits of $106.2 million and stockholders’ equity of $12.9 million.

The Regal Bancorp Special Meeting

Date, Time and Place of Special Meeting (see page 29)

Regal Bancorp will hold a special meeting of stockholders on November 20, 2015 at 10:00 a.m., local time, at Regal Bancorp’s corporate headquarters located at 11436 Cronhill Drive, Suite 1, Owings Mills, Maryland 21117.  The Regal Bancorp board of directors has set the close of business on October 9, 2015 as the record date for determining stockholders entitled to notice of, and to vote at, the special meeting.  On October 7, 2015, there were 443,586 shares of Regal Bancorp common stock outstanding.

Matters to be Considered at the Special Meeting (see page 29)

Stockholders of Regal Bancorp will be asked at the special meeting to vote on (i) a proposal to approve the merger agreement and the merger, (ii) a proposal to adjourn the special meeting to solicit additional proxies, if necessary, in the event there are not sufficient votes at the time of the meeting to approve the merger agreement and the merger, and (iii) any other business that properly arises during the special meeting or any adjournment or postponement thereof.

Under the terms of the merger agreement, Old Line Bancshares will acquire Regal Bancorp by merging Regal Bancorp with and into Old Line Bancshares.  Pursuant to a separate agreement, we anticipate that immediately after the merger, Regal Bank, the bank operating subsidiary of Regal Bancorp, will merge with and into Old Line Bank, with Old Line Bank being the surviving bank. 

A copy of the merger agreement, as amended, is attached to this proxy statement/prospectus as Annex A.

Consideration to be Received in the Merger  (page 46)

If the merger is completed, each outstanding share of common stock of Regal Bancorp will be exchanged for either $12.68 in cash or 0.7718 shares of Old Line Bancshares common stock, and each outstanding share of Regal Bancorp preferred stock will be exchanged for $2.00 in cash, upon consummation of the merger, for a total value of approximately $6.6 million. The number of shares of Old Line Bancshares common stock that will be exchanged for each outstanding share of Regal Bancorp common stock may be increased if Old Line Bancshares exercises its option to increase the merger consideration to avoid termination of the merger agreement based on recent closing prices of the Old Line Bancshares common stock prior to the merger, as further described below under “-Old Line Bancshares and Regal Bancorp can Amend of Terminate the Merger Agreement.”

Pursuant to the merger agreement, you will have the opportunity to elect the form of consideration to be received for your shares of Regal Bancorp common stock, subject to proration and allocation procedures as set forth in the merger agreement that, if you elect to receive cash in exchange for some or all of your shares of Regal Bancorp common stock in the merger, may result in your receiving a portion of the merger consideration in shares of Old Line Bancshares common stock instead.  The value of the stock consideration is dependent upon the value of Old Line Bancshares common stock and, therefore, will fluctuate with the market price of Old Line Bancshares common stock.  Accordingly, any change in the price of Old Line Bancshares common stock prior to the merger will affect the market value of the stock consideration that stockholders of Regal Bancorp will receive as a result of the merger.  For more information, see “The Merger Agreement and the Merger – Terms of the Merger – What Regal Bancorp Stockholders Will Receive in the Merger.”

Upon the closing of the merger the outstanding shares of Regal Bancorp preferred stock will be converted into the right to receive $2.00 per share, or an aggregate of $1,016,876.00.  Holders of preferred stock will not have the option to have their shares converted into shares of Old Line Bancshares capital stock.

Based on the Old Line Bancshares closing sales price of $16.76 on October 6, 2015, the most recent practical date prior to the date hereof, the tables below indicate the consideration that a Regal Bancorp stockholder would receive for 100 shares of Regal Bancorp common stock assuming that a stockholder elects to receive as consideration, and, with respect to a cash election, no proration occurs, (a) all shares of Old Line Bancshares common stock, (b) 50% cash and 50% shares of Old Line Bancshares common stock, and (c) all cash.

 

(1)Based on the closing sales price for Old Line Bancshares common stock of $16.76 on October 6, 2015.
(2)Consists of $2.96 of cash in lieu of a fractional share of Old Line Bancshares common stock.

 

(1)Based on the closing sales price for Old Line Bancshares common stock of $16.76 on October 6, 2015.
(2)Including $9.69 of cash in lieu of a fractional share of Old Line Bancshares common stock.

 

Allocation and Proration of the Merger Consideration (page 49)  

The merger agreement contains allocation provisions that are designed to ensure that no more than 50% (or 221,793 shares) of the outstanding shares of Regal Bancorp common stock will be exchanged for cash and the remaining outstanding shares of Regal Bancorp common stock will be exchanged for shares of Old Line Bancshares common stock, provided that such 50% figure will be reduced as necessary to ensure that (i) no more than 59% of the total consideration to be paid in the merger, including any cash paid for fractional shares, the cash to be paid in exchange for Regal Bancorp preferred stock and a reasonable estimate of the amount by which the cash payment to be made for each share of Regal Bancorp common stock held by stockholders that exercise their dissenters’ rights will exceed $12.68, consists of cash, and (ii) the merger will qualify as a tax-free reorganization for federal tax purposes. 

The merger agreement provides that if the holders of more than 50% of the shares of Regal Bancorp common stock outstanding at the effective time of the merger, as such percentage may be adjusted downward in order to ensure that the cash consideration paid in the merger does not exceed 59% of the total consideration paid in the merger and the merger otherwise qualifies as a tax-free reorganization, as discussed above (which we refer to as the “maximum cash conversion number”), elect to receive cash for such shares in the merger or exercise their dissenters’ rights, then the shares for which no election as to cash or stock has been made, which we refer to as “no-election shares,” will be converted into the right to receive Old Line Bancshares common stock and the shares for which stockholders have requested be exchanged for cash will be reallocated by the exchange agent on a pro rata basis such that the total number of shares that will be exchanged for cash (including pursuant to dissenters’ rights) equals the maximum cash conversion number.  As a result, stockholders that elected to receive cash for some or all of their shares of Regal Bancorp common stock may receive shares of Old Line Bancshares common stock instead with respect to some of such shares.

If holders of less than the maximum cash conversion number of shares of Regal Bancorp common stock elect to receive cash in the merger or exercise their dissenters’ rights, then the shares which stockholders have requested be exchanged for cash will be converted into the right to receive cash in the merger, shares for which stockholders have requested be exchanged for Old Line Bancshares common stock in the merger will be converted into the right to receive shares of Old Line Bancshares common stock, and no-election shares will be converted into the right to receive shares of Old Line Bancshares common stock.  In other words, if holders of no more than 50% (as such figure may be adjusted) of

the outstanding shares of Regal Bancorp common stock elect to receive cash in the merger, then the Regal Bancorp stockholders that make a valid election will receive in the merger the form of consideration that they elect.

Election Procedures for Stockholders; Surrender of Stock Certificates (page 48)  

No more than 40 business days and no less than 20 business days before the expected date of completion of the merger, an election form will be sent to Regal Bancorp stockholders along with a letter of transmittal containing instructions for use in surrendering their Regal Bancorp stock certificates in exchange for the merger consideration.  You may use the election form to indicate whether your preference is to receive cash, shares of Old Line Bancshares common stock or a combination thereof.  The election deadline will be set forth in the election form, but will be no later than 5:00 p.m., Eastern Time, five days prior to the anticipated closing date of the merger.  To make an election, a holder of Regal Bancorp common stock must submit a properly completed election form and return it, together with a properly completed letter of transmittal and all stock certificates, so that the form, letter of transmittal and certificates are actually received by the exchange agent at or before the election deadline in accordance with the instructions on the election form.  

You should not send in your stock certificates until you receive the election form, letter of transmittal and instructions from the exchange agent.

No-Election Shares (page 48)  

Regal Bancorp stockholders who do not submit a properly completed election form, or who revoke their election form prior to the election deadline and do not submit a new properly completed election form, will have their shares of Regal Bancorp common stock designated as “no-election shares.”  No-election shares will be converted into the right to receive shares of Old Line Bancshares common stock in the merger.

The Regal Bancorp Board of Directors Recommends Stockholder Approval (see page 29)

The Regal Bancorp board of directors believes that the merger is in the best interests Regal Bancorp and its stockholders, and recommends that stockholders vote “FOR” approval of the merger agreement and the merger.

Opinion of Regal Bancorp’s Financial Advisor (see page 40)

In connection with the merger, Regal Bancorp’s financial advisor, Feldman Financial Advisors, Inc. (“Feldman”), delivered a written opinion, dated August 5, 2015, to the Regal Bancorp board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Regal Bancorp common stock of the merger consideration in the proposed merger.  The full text of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Feldman in preparing the opinion, is attached as Annex B to this proxy statement/prospectus.  The opinion was for the information of, and was directed to, the Regal Bancorp board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger.  The opinion did not address the underlying business decision of Regal Bancorp to engage in the merger or enter into the merger agreement or constitute a recommendation to the Regal Bancorp board in connection with the merger, and it does not constitute a recommendation to any holder of Regal Bancorp common stock as to how to vote in connection with the merger or any other matter (including, with respect to holders of Regal Bancorp common stock, what election any such stockholder should make with respect to the per-share stock consideration or the per-share cash consideration).

Approval of the Merger Requires the Affirmative Vote of Stockholders Holding Two-Thirds of the Shares of Regal Bancorp Common Stock Outstanding on the Record Date of October 9, 2015 (see page 30)

The approval of the merger agreement and the merger by stockholders of Regal Bancorp requires the approval of the holders of at least two-thirds of the shares of Regal Bancorp common stock that are issued and outstanding as of the record date of October 9, 2015.  Each holder of shares of Regal Bancorp common stock outstanding on the record date will be entitled to one vote for each share held.  The vote required for approval of the merger agreement and the merger is a percentage of all outstanding shares of Regal Bancorp common stock.  Therefore, an abstention, a failure to vote and a broker non-vote will each have the same effect as a vote against the approval of the merger agreement and the merger.

The affirmative vote of a majority of the shares of Regal Bancorp common stock present in person or represented by proxy at the special meeting and entitled to vote is required to approve the adjournment of the special meeting to solicit additional proxies, if necessary.  An abstention does not count as a vote cast under Maryland Law.  Therefore, an abstention, a failure to vote and a broker non-vote will each have no effect on the outcome of this proposal.

Regal Bancorp’s Directors have Agreed to Vote in Favor of the Merger Agreement (see pages  30 and  65)

As of October 7, 2015, there were 443,586 shares of Regal Bancorp common stock issued and outstanding and entitled to vote.  The directors of Regal Bancorp have agreed, in writing, to vote all shares of Regal Bancorp common stock for which they are the record or beneficial owner “FOR” the approval of the merger agreement and the merger.  As of the record date, such directors and their affiliates are entitled to vote [____]% of the issued and outstanding shares of the Regal Bancorp common stock.  Therefore, approval of the merger agreement and the merger is assured.

Regal Bancorp’s Directors and Management may have Interests in the Merger that Differ from Your Interests (see page 63)

The directors and executive officers of Regal Bancorp have interests in the merger as directors and employees that are different from your interests as a Regal Bancorp stockholder.  These interests include, among others, the offer of employment and payments to be made to Regal Bancorp’s President and Chief Executive Officer, as well as indemnification and insurance provisions included in the merger agreement.

Regal Bancorp’s board of directors was aware of these interests and considered them in approving and recommending the merger agreement, the merger and the related transactions.

Regulatory Approval Must be Obtained and Other Conditions Must be Satisfied Before the Merger can be Completed (see pages 61 and  56)

Old Line Bancshares’ and Regal Bancorp’s obligations to complete the merger are subject to various conditions that are usual and customary for this kind of transaction, including obtaining approval from the FRB and the Maryland Commissioner for the merger and obtaining approval of the FDIC and the Maryland Commissioner for the bank merger (which is included in any references to regulatory “approvals” in this proxy statement/prospectus).  On September 4, 2015, Old Line Bancshares and/or Old Line Bank filed the appropriate applications for approval with the FRB, the FDIC and the Maryland Commissioner.  In addition to the required regulatory approvals, the merger will be completed only if certain conditions, including the following, are satisfied or waived by the companies:

The merger agreement attached to this proxy statement/prospectus as Annex A describes all of the conditions that must be met before the merger may be completed.

Old Line Bancshares and Regal Bancorp can Amend or Terminate the Merger Agreement (see page 58)

Regal Bancorp and Old Line Bancshares may agree to terminate the merger agreement and not complete the merger at any time before the merger is completed.  Each company also may unilaterally terminate the merger agreement in certain circumstances, including if:

In addition, Regal Bancorp may terminate the merger agreement if:

In addition, Old Line Bancshares may terminate the merger agreement if:

Old Line Bancshares and Regal Bancorp can agree to amend the merger agreement in any way.  Either company can waive any of the requirements of the other company in the merger agreement, except that neither company can waive the requirement that the companies receive all required regulatory approvals, the requirement for approval of the Regal Bancorp stockholders or the requirement that no order, decree or injunction preventing the transactions contemplated by the merger agreement has been issued.

Regal Bancorp Must Pay a Termination Fee to Old Line Bancshares if the Merger Agreement is Terminated Under Certain Circumstances (see page 59) 

Regal Bancorp must pay Old Line Bancshares a termination fee in the amount of $450,000 if the merger agreement is terminated because:

Old Line Bancshares Must Pay a Termination Fee to Regal Bancorp if the Merger Agreement is Terminated Under Certain Circumstances (see page 59)

Old Line Bancshares has agreed to pay a termination fee in the amount of $450,000 to Regal Bancorp if Regal Bancorp terminates the merger agreement because:

Rights of Old Line Bancshares Stockholders Differ from those of Regal Bancorp Stockholders (see page 72)

When the merger is completed, Regal Bancorp stockholders who receive Old Line Bancshares common stock as consideration in the merger will become Old Line Bancshares stockholders.  The rights of Old Line Bancshares stockholders differ from the rights of Regal Bancorp stockholders in certain important ways.  These differences have to do

with provisions in Old Line Bancshares’ articles of incorporation and bylaws that differ from the provisions in Regal Bancorp’s articles of incorporation and bylaws. 

Regal Bancorp Stockholders have Dissenters’ Rights in Connection with the Merger (see page 70)

Regal Bancorp stockholders are entitled to exercise dissenters’ rights with respect to the merger and, if the merger is completed and they perfect their dissenters’ rights, to receive payment in cash for the fair value of their shares of Regal Bancorp common stock instead of their share of the aggregate merger consideration.  In general, to preserve their dissenters’ rights, Regal Bancorp stockholders who wish to exercise these rights must: 

The text of Sections 3-201 through 3-213 of the MGCL governing dissenters’ rights is included with this proxy statement/prospectus as Annex C.  Failure to comply with the procedures described in Annex C will result in the loss of dissenters’ rights under the MGCL.  We urge you to carefully read the text of Sections 3-201 through 3-213 of the MGCL governing dissenters’ rights.

RISK FACTORS

In addition to the other information contained in this proxy statement/prospectus, including the matters addressed under the caption “Caution Regarding Forward-Looking Statements,” you should carefully consider the following risk factors in deciding whether to vote for approval of the merger agreement and the merger.

Risk Factors Related to the Merger in General

Old Line Bancshares may fail to realize all of the anticipated benefits of the merger.    The success of the merger will depend, in part, on Old Line Bancshares’ ability to realize the anticipated benefits and cost savings from combining the businesses of Old Line Bancshares and Regal Bancorp.  To realize these anticipated benefits and cost savings, however, Old Line Bancshares must successfully combine the businesses of Old Line Bancshares and Regal Bancorp.  If Old Line Bancshares is unable to successfully combine the businesses of Old Line Bancshares and Regal Bancorp, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected.

Old Line Bancshares and Regal Bancorp have operated and, until the completion of the merger, will continue to operate, independently.  It is possible that the integration process could result in the loss of key employees, the loss of key depositors or other bank customers and the disruption of Regal Bancorp’s ongoing businesses, as well as or inconsistencies in standards, controls, procedures and policies that adversely affect Regal Bancorp’s ability to maintain its relationships with its clients, customers, depositors and employees, which could have a negative impact on Old Line Bancshares’ ability to achieve the anticipated benefits of the merger.  Integration efforts between the two companies may, to some extent, also divert management’s attention and resources.  These integration matters could have an adverse effect on each of Old Line Bancshares and Regal Bancorp during such transition period.

The opinion of Regal Bancorp’s financial advisor to its board of directors does not reflect changes in circumstances since the date of such opinion.  The board of directors of Regal Bancorp received an opinion from Feldman, its financial advisor, regarding the fairness of the merger consideration from a financial point of view, but this opinion is dated as of, and speaks only as of, the date of the merger agreement.  Changes in the operations and prospects of Old Line Bancshares and Regal Bancorp, general market and economic conditions and other factors that may be beyond the control of Old Line Bancshares or Regal Bancorp may significantly alter the prices of the shares of Old Line Bancshares common stock or Regal Bancorp common stock by the time the merger is completed.  Feldman’s opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion.  Because Regal Bancorp does not currently anticipate asking Feldman to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed.  The recommendation of Regal Bancorp’s board of directors that Regal Bancorp stockholders vote “FOR” the approval of the merger agreement and the merger, however, is made as of the date of this proxy statement/prospectus.  For a description of the Feldman opinion, refer to the section of this proxy statement/prospectus entitled “The Merger Agreement and the Merger – Opinion of Regal Bancorp’s Financial Advisor.” 

 

Because the market price of Old Line Bancshares common stock will fluctuate, Regal Bancorp stockholders cannot be sure of the value of the merger consideration they may receive.  Upon completion of the merger, at least 50% of the outstanding shares of Regal Bancorp common stock will be converted into the right to receive shares of Old Line Bancshares common stock.  The value of the shares of Old Line Bancshares common stock received in the merger approximates $12.68 per share as of the date of the merger agreement based on then-recent trading prices.  However, trading prices of Old Line Bancshares common stock may vary from the trading prices of Old Line Bancshares common stock on the date of the merger agreement, the trading date following the date we announced the merger, the date this proxy statement/prospectus was mailed to Regal Bancorp stockholders and the date of the special meeting of the Regal Bancorp stockholders.  Any change in the market price of shares of Old Line Bancshares common stock may affect the value of the merger consideration that Regal Bancorp stockholders will receive upon completion of the merger.  Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects and regulatory considerations.  Many of these factors are beyond our control.  You should obtain current market quotations for shares of Old Line Bancshares common stock.

The market price of Old Line Bancshares common stock after the merger may be affected by factors different from those affecting the shares of Old Line Bancshares or Regal Bancorp currently.  The businesses of Old Line Bancshares and Regal Bancorp differ and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations and market prices of common stock of each of Old Line Bancshares and Regal Bancorp.

If the merger is not completed, Old Line Bancshares and Regal Bancorp will have incurred substantial expenses without realizing the expected benefits.    Old Line Bancshares and Regal Bancorp have incurred substantial expenses in connection with the execution of the merger agreement and the merger.  The completion of the merger depends on the satisfaction of specified conditions, including the requisite approval of the stockholders of Regal Bancorp.  There is no guarantee that these conditions will be met.  If the merger is not completed, these expenses could have a material adverse impact on the financial condition of Old Line Bancshares and/or Regal Bancorp because they would not have realized the expected benefits.

The merger may not be consummated, may be consummated later or may be more expensive for Old Line Bancshares to consummate if the debentures that Regal Bancorp has issued to support the trust preferred securities go into default.  As discussed further below, Regal Bancorp has issued $6,702,000 of trust preferred securities through two wholly owned trust subsidiaries, and issued approximately $6,500,000 in junior subordinated debentures to the trusts.  The trusts use the debentures to back trust preferred securities that the trusts have issued to third party investors.  Regal Bancorp has deferred payment of the interest on the debentures in accordance with the terms of the indentures under which they were issued, however, these deferral periods end in mid-December.  The merger agreement requires Regal Bancorp to take steps under the indentures to obtain an extension of the interest deferral periods or a waiver of defaults caused by Regal Bancorp’s failure to pay the deferred interest when due, and to seek regulatory approval to repay the deferred interest though a dividend from Regal Bank.  If Regal Bancorp is unable to obtain such approvals or waivers, Old Line Bancshares at its option may loan funds to Regal Bancorp sufficient to pay the deferred interest and other charges due on the debentures.  If, however, Regal Bancorp is unable to make the required deferred interest payments when due and Old Line Bancshares does not loan the funds to Regal Bancorp to make the required deferred interest payments, and the debentures go into default, the trustees of the trusts or the holders of 25% or more in aggregate principal amount of the debentures may declare the entire principal of the debentures, and the interest accrued thereon, to be due and payable immediately. Such a result could make the merger more difficult or even impossible to consummate and, if consummated, could delay the effective date of the merger and make the merger more expensive for Old Line Bancshares. It is possible that Regal Bancorp stockholders would not receive anything for their shares of common stock if Regal Bancorp defaults on its repayment obligations with respect to the debentures.  We are unable, however, to predict exactly what would happen with respect to the merger if Regal Bancorp were to default on the debentures.

The merger must be approved by multiple governmental agencies.    Before the merger may be completed, various approvals must be obtained from the FRB, the FDIC and the Maryland Commissioner.  These governmental entities may impose conditions on the completion of the merger or require changes to the terms of the merger.  Although Old Line Bancshares and Regal Bancorp do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of Old Line Bancshares following the merger, any of which might have a material adverse effect on Old Line Bancshares following the merger.  Old Line Bancshares is not obligated to complete the merger if the regulatory approvals received in connection with the completion of the merger include any conditions or requirements that, in the reasonable opinion of its board of directors, would (i) so materially and adversely impact the economic or business benefits to Old Line Bancshares following the merger as to render consummation of the merger inadvisable, or (ii) materially impair the value of Regal Bancorp and its subsidiaries to Old Line Bancshares and its subsidiaries, but Old Line Bancshares could choose to waive this condition.

Failure to complete the merger could negatively impact the stock prices and future businesses and financial results of Old Line Bancshares and Regal Bancorp.  If the merger is not completed, the ongoing businesses of Old Line Bancshares and Regal Bancorp may be adversely affected and Old Line Bancshares and Regal Bancorp will be subject to several risks, including the following:

In addition, if the merger is not completed, Old Line Bancshares and/or Regal Bancorp may experience negative reactions from the financial markets and from their respective customers and employees.  Old Line Bancshares and/or Regal Bancorp also could be subject to litigation related to any failure to complete the merger their respective obligations under the merger agreement.  If the merger is not completed, Old Line Bancshares and Regal Bancorp cannot assure their stockholders that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of Old Line Bancshares and/or Regal Bancorp.

Old Line Bancshares and Regal Bancorp may choose not to proceed with the merger if it is not completed by January 31, 2016 or, if due to the lack of a required regulatory approval, April 30, 2016.  Either Old Line Bancshares or Regal Bancorp may terminate the merger agreement if the merger has not been completed by January 31, 2016 or, if due to the lack of a required regulatory approval, April 30, 2016.  See “The Merger Agreement and the Merger – Terms of the Merger – Termination.”  There can be no assurance that all conditions to the merger will have been satisfied by the required date(s).  See “The Merger Agreement and the Merger – Terms of the Merger – Conditions to the Merger.”

Risk Factors Relating to Old Line Bancshares’ Business

This section discusses risks relating to Old Line Bancshares’ business and includes risks it will continue to face after the merger.  References to “Old Line Bancshares” include its subsidiary Old Line Bank as the context requires.

System failure or cybersecurity breaches of Old Line Bancshares’ network security could subject it to increased operating costs as well as litigation and other potential losses.  Old Line Bancshares relies heavily on communications and information systems to conduct its business.  The computer systems and network infrastructure it uses could be vulnerable to unforeseen hardware and cybersecurity issues.  Old Line Bancshares’ operations are dependent upon its ability to protect its equipment against damage from fire, power loss, telecommunications failure or a similar catastrophic event.  Any damage or failure that causes an interruption in Old Line Bancshares’ operations could have an adverse effect on its financial condition and results of operations.  In addition, Old Line Bancshares’ operations are dependent upon its ability to protect the computer systems and network infrastructure it uses, including its Internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems caused by the Internet or other users.  Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through its computer systems and network infrastructure, which may result in significant liability to Old Line Bancshares, subject it to additional regulatory scrutiny, damage its reputation, result in a loss of customers, and inhibit current and potential customers from its Internet banking services, any or all of which could have a material adverse effect on its results of operations and financial condition.  Each year, Old Line Bancshares adds additional security measures to its computer systems and network infrastructure to mitigate the possibility of cybersecurity breaches including firewalls and penetration testing, but there can be no assurance that such security measures will be effective in preventing such breaches, damage or failures.  Old Line Bancshares continues to monitor developments in this area and consider whether additional protective measures are necessary or appropriate, and it has obtained insurance protection intended to cover

losses due to network security breaches; there is no guarantee, however, that such insurance would cover all costs associated with any breach, damage or failure of Old Line Bancshares’ computer systems and network infrastructure.

Old Line Bancshares relies on certain external vendors.  Old Line Bancshares’ business is dependent on the use of outside service providers that support its day-to-day operations including data processing and electronic communications.  Old Line Bancshares’ operations are exposed to risk that a service provider may not perform in accordance with established performance standards required in their agreements with Old Line Bancshares for any number of reasons including equipment or network failure, a change in their senior management, their financial condition, their product line or mix and how they support existing customers, or a simple change in their strategic focus.  While Old Line Bancshares has comprehensive policies and procedures in place to mitigate risk at all phases of service provider management from selection, to performance monitoring and renewals, the failure of a service provider to perform in accordance with contractual agreements could be disruptive to its business, which could have a material adverse effect on its financial condition and the results of its operations. 

A worsening of current economic conditions could adversely affect Old Line Bancshares’ results of operations and financial condition.  Changes in prevailing economic conditions, including declining real estate values, changes in interest rates that may cause a decrease in interest rate spreads, adverse employment conditions, the monetary and fiscal policies of the federal government and other significant external events may adversely affect Old Line Bancshares’ financial results.  Although the U.S. economy has emerged from the severe recession that occurred in 2007 through 2009, economic growth has been slow and uneven, and employment growth remains weak.  Recovery by many businesses has been impaired by lower consumer spending.  A return to prolonged deteriorating economic conditions could significantly affect the markets in which Old Line Bancshares’ does business, the value of its loans and investments, and its ongoing operations, costs and profitability.  Although signs of stability have emerged, Old Line Bancshares expects that the business environment in the State of Maryland and the entire United States will continue to present challenges for the foreseeable future.  Further continuing economic uncertainty, including regarding concerns about U.S. debt levels and related governmental actions, including potential tax increases and cuts in government spending, may hamper the ongoing recovery or otherwise negatively impact economic conditions going forward.  In addition, an increase in unemployment levels may result in higher than expected loan delinquencies, increases in Old Line Bancshares’ nonperforming, criticized or classified assets and a decline in demand for its products and services.  These events may cause Old Line Bancshares to incur losses and may adversely affect its financial condition and results of operations.

Although the adverse economic climate during the past several years has not severely impacted Old Line Bancshares due to its strict underwriting standards, any adverse changes in the economy going forward, including decreases in current real estate values, increased unemployment or the economy moving back into a recession, could have a negative effect on the ability of its borrowers to make timely repayments of their loans, which would have an adverse impact on its earnings.

A worsening of credit markets and economic conditions could adversely affect Old Line Bancshares’ liquidity.  Old Line Bank must maintain sufficient liquidity to ensure cash flow is available to satisfy current and future financial obligations including demand for loans and deposit withdrawals, funding of operating costs and other corporate purposes.  Old Line Bancshares obtains funding through deposits and various short term and long term wholesale borrowings, including federal funds purchased, unsecured borrowings, brokered certificates of deposits and borrowings from the Federal Home Loan Bank of Atlanta and others.  Economic uncertainty and disruptions in the financial system may adversely affect Old Line Bancshares’ liquidity.  Dramatic declines in the housing market and falling real estate prices coupled with increased foreclosures and unemployment resulted in significant asset value write downs by financial institutions during and after the most recent recession, including government sponsored entities and investment banks.  These write downs have caused financial institutions to seek additional capital.  Should Old Line Bancshares experience a substantial deterioration in its financial condition or should disruptions in the financial markets restrict its funding, it would negatively impact Old Line Bancshares’ liquidity.  To mitigate this risk, Old Line Bancshares closely monitors its liquidity, maintains a line of credit with the Federal Home Loan Bank, and has received approval to borrow from the Federal Reserve Bank.

Old Line Bancshares’ concentrations of loans in various categories may also increase the risk of credit losses.  Old Line Bancshares currently invests more than 25% of its capital in various loan types and industry segments, including commercial real estate loans and loans to the hospitality industry (hotels/motels).  While declines in the local commercial real estate market following the most recent recession have not caused the collateral securing Old Line Bancshares’ loans

to exceed acceptable loan to value ratios, a deterioration in the commercial real estate market could cause deterioration in the collateral securing these loans and/or a decline in its customers’ earning capacity.  This could negatively impact Old Line Bancshares. Although Old Line Bancshares has made a large portion of its hospitality loans to long term, well established operators in strategic locations, a decline in the occupancy rate in these facilities could negatively impact their earnings.  This could adversely impact their ability to repay their loans, which would adversely impact Old Line Bancshares’ net income.

Old Line Bancshares’ need to comply with extensive and complex governmental regulation could have an adverse effect on its business and growth strategy.  The banking industry is subject to extensive regulation by state and federal banking authorities.  Many of these regulations are intended to protect depositors, the public or the FDIC insurance funds, not stockholders.  Regulatory requirements affect Old Line Bancshares’ lending practices, capital structure, investment practices, dividend policy, ability to attract and retain personnel and many other aspects of its business.  These requirements may constrain Old Line Bancshares’ rate of growth and changes in regulations could adversely affect it.  The cost of compliance with regulatory requirements could adversely affect Old Line Bancshares’ ability to operate profitably.  Further, if it is not in compliance with such requirements, Old Line Bancshares could be subject to fines or other regulatory action that could restrict its ability to operate or otherwise have a material adverse effect on its business and financial condition.  Although Old Line Bancshares believes it is in material compliance with all applicable regulations, it is possible there are violations of which it is unaware that could be discovered by its regulators in the course of an examination or otherwise, which could trigger such fines or other adverse consequences.

In addition, because federal regulation of financial institutions changes regularly and is the subject of constant legislative debate, Old Line Bancshares cannot forecast how federal regulation of financial institutions may change in the future and impact its operations.  In light of the performance of and government intervention in the financial sector, there will be significant changes to the banking and financial institutions’ regulatory agencies in the future.  Changes in regulation and oversight, including in the form of changes to statutes, regulations or regulatory policies or changes in interpretation or implementation of statutes, regulations or policies, could affect the services and products Old Line Bancshares offers, increase its operating expenses, increase compliance challenges and otherwise adversely impact its financial performance and condition.  In addition, the burden imposed by these federal and state regulations may place banks in general, and Old Line Bank specifically, at a competitive disadvantage compared to less regulated competitors.

New capital rules require insured depository institutions and their holding companies to hold more capital.  The impact of the new rules on Old Line Bancshares’ financial condition and operations is uncertain but could be materially adverse.    In July 2013, the FRB and FDIC adopted new capital rules implementing the capital standards of the Basel Committee on Banking Supervision and the minimum capital requirements and certain other provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  These rules substantially amend the regulatory risk-based capital rules applicable to Old Line Bancshares and Old Line Bank.  The rules phase in over a period of time beginning in 2015 and will become fully effective in 2019.  The rules apply to Old Line Bancshares as well as to Old Line Bank.  Currently, Old Line Bancshares’ and Old Line Bank’s are subject to the following minimum capital requirements (i) a common equity Tier 1 capital requirement (4.5% of risk based assets); (ii) a Tier 1 capital requirement (6% of risk based assets); and (iii) a total capital requirement (8% of risk based assets). Beginning in 2016, a capital conservation buffer will phase in over three years, ultimately resulting in a requirement of 2.5% on top of the common equity Tier 1, Tier 1 and total capital requirements, resulting in a required common equity Tier 1 risk based ratio of 7%, a Tier 1 risk based  capital ratio of 8.5%, and a total risk based capital ratio of 10.5% (Old Line Bancshares’ and Old Line Bank’s leverage ratio requirement will remain at the 4% level now required).  Failure to satisfy any of these capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary bonuses.  These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions. 

Regulations pursuant to the Dodd‑Frank Act may adversely impact Old Line Bancshares’ results of operations, liquidity or financial condition.  The Dodd‑Frank Act represents a comprehensive overhaul of the U.S. financial services industry.  The Dodd‑Frank Act required the new Consumer Financial Protection Bureau (“CFPB”), which has the responsibility for making rules and regulations under the federal consumer protection laws relating to financial products and services, and other federal agencies to implement many new and significant rules and regulations to implement its various provisions.  There are a number of regulations under the Dodd‑Frank Act that have not yet been proposed or adopted.  Old Line Bancshares will not know the full impact of the Dodd‑Frank Act on its business until regulations implementing the statute are adopted and implemented, which could be years.  As a result, it cannot predict the full extent to which the Dodd‑Frank Act will impact Old Line Bancshares’ business, operations or financial condition.  However,

compliance with these new laws and regulations may require Old Line Bancshares to make changes to its business and operations and will likely result in additional costs and a diversion of management’s time from other business activities, any of which may adversely impact its results of operations, liquidity or financial condition.

Because Old Line Bancshares serves a limited market area in Maryland, an economic downturn in its market area could more adversely affect it than it affects Old Line Bancshares’ larger competitors that are more geographically diverse.  Old Line Bancshares’ current primary market area consists of the suburban Maryland (Washington, D.C. suburbs) Counties of Anne Arundel, Calvert, Charles, Montgomery, Prince George’s and St. Mary’s.  If the merger is consummated this market area will expand into Baltimore and Carroll Counties and Old Line Bancshares may expand further into contiguous northern and western Counties, such as Howard County, Maryland.  However, broad geographic diversification is not currently part of Old Line Bancshares’ community bank focus.  Overall, during and following the most recent recession, the business environment has negatively impacted many businesses and households in the United States and worldwide.  Although the economic decline has not impacted the suburban Maryland and Washington D.C. suburbs as adversely as other areas of the United States, it has caused an increase in unemployment and business failures and a decline in property values.  As a result, if Old Line Bancshares’ market area should suffer another economic downturn, it may more severely affect its business and financial condition than it affects larger bank competitors.  In particular, due to the proximity of Old Line Bancshares’ primary market area to Washington, D.C., decreases in spending by the Federal government could impact Old Line Bancshares more than banking companies that serve a larger or a different geographical area.  Old Line Bancshares’ larger competitors, for example, serve more geographically diverse market areas, parts of which may not be affected by the same economic conditions that may exist in Old Line Bancshares’ market area.  Further, unexpected changes in the national and local economy may adversely affect Old Line Bancshares’ ability to attract deposits and to make loans.  Such risks are beyond Old Line Bancshares’ control and may have a material adverse effect on its financial condition and results of operations and, in turn, the value of its common stock.

Old Line Bancshares originates and retains in its portfolio residential mortgage loans.  A downturn in the local real estate market and economy could adversely affect its earnings.  Old Line Bancshares’ loan portfolio includes residential mortgage loans that it originates.  Although the local real estate market and economy in Old Line Bancshares’ primary market areas have performed better than many other markets, a downturn could cause higher unemployment, more delinquencies, and could adversely affect the value of properties securing its loans.  In addition, the real estate market may take longer to recover or it may fail to recover to previous levels.  These risks increase the probability of an adverse impact on Old Line Bancshares’ financial results as fewer borrowers would be eligible to borrow and property values could be below necessary levels required for adequate coverage on the requested loan.

Old Line Bancshares may not have adequately assessed the fair value of the acquired assets and liabilities.  Current accounting guidance requires that Old Line Bancshares record assets and liabilities at their estimated fair values on the purchase date.  The determination of fair value requires that Old Line Bancshares consider a number of factors including the remaining life of the acquired loans and deposits, estimated prepayments or withdrawals, estimated loss ratios, estimated value of the underlying collateral, and the net present value of expected cash flows.  Actual deviations from these predicted cash flows, maturities or repayments or the underlying value of the collateral may mean that Old Line Bancshares’ present value determination is inaccurate.  This may cause fluctuations in interest income, non‑interest income, provision expense, interest expense and non‑interest expense and negatively impact Old Line Bancshares’ results of operations.

New regulations restrict Old Line Bancshares’ ability to originate residential real estate loans.  A CFPB rule, effective January 10, 2014, is designed to clarify for lenders how they can avoid legal liability under the Dodd‑Frank Act, which would otherwise hold lenders accountable for ensuring a borrower’s ability to repay a mortgage.  Loans that meet this “qualified mortgage” definition set forth in the rule will be presumed to have complied with the new ability‑to‑repay standard.  Under the rule, a “qualified mortgage” loan must not contain certain specified features.

The rule also establishes general underwriting criteria for qualified mortgages, including that the consumer must have a total (or “back end”) debt-to-income ratio that is less than or equal to 43%.  Lenders must also verify and document the income and financial resources relied upon to qualify the borrower on the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments.  The CFPB’s rule on qualified mortgages limits Old Line Bank’s ability to make residential mortgage loans that include a balloon payment, and may cause us to decide to limit certain types of other loans or loans to

certain borrowers, and would make it more costly and/or time consuming to make these loans, which could limit Old Line Bancshares’ growth or profitability.

In addition, the Dodd-Frank Act requires the regulatory agencies to issue regulations that require securitizers of loans to retain “not less than 5% of the credit risk for any asset that is not a qualified residential mortgage.”  The regulatory agencies issued a final rule to implement this requirement on October 21, 2014.  The final rule aligns the definition of “qualified residential mortgage” with the definition of “qualified mortgage” issued by the CFPB for purposes of its regulations.  The final rule was effective February 23, 2015.  Compliance with the final rule is required beginning December 24, 2015 with respect to asset-backed securities collateralized by residential mortgages, and beginning December 24, 2016 with respect to all other classes of asset-backed securities.  The final rule could have a significant effect on the secondary market for loans and the types of loans Old Line Bancshares originates, and restrict its ability to make loans.

Old Line Bancshares depends on the services of key personnel.  The loss of any of these personnel could disrupt its operations and its business could suffer.  Old Line Bancshares’ success depends substantially on the skills and abilities of its executive management team, including James W. Cornelsen, its President and Chief Executive Officer, Joseph E. Burnett, its Executive Vice President and Chief Lending Officer, John Miller, its Executive Vice President and Chief Credit Officer, and Mark A. Semanie, its Executive Vice President and Chief Operating Officer.  Although Old Line Bank has entered into employment agreements with Messrs. Cornelsen, Burnett, Miller and Semanie, the existence of such agreements does not assure that Old Line Bancshares and Old Line Bank will retain their services.  These executives provide valuable services and would be difficult to replace.

Also, Old Line Bancshares’ growth and success and its anticipated future growth and success, in a large part, is due and it anticipates will be due to the relationships maintained by its banking executives with its customers.  The loss of services of one or more of these executives or of other key employees could have a material adverse effect on Old Line Bancshares’ operations and its business could suffer.  The experienced commercial lenders that Old Line Bancshares has hired are not a party to any employment agreement with Old Line Bancshares or Old Line Bank and they could terminate their employment at any time and for any reason.

Old Line Bancshares’ growth and expansion strategy may not be successful.  Old Line Bancshares’ ability to grow depends upon its ability to attract new deposits, identify loan and investment opportunities and maintain adequate capital levels.  Old Line Bancshares may also grow through acquisitions of existing financial institutions or branches thereof, as it is doing with the proposed merger with Regal Bancorp.  There are no guarantees, however, that Old Line Bancshares’ expansion strategies will be successful.  Also, in order to effectively manage its anticipated and/or actual loan growth Old Line Bancshares has made and may continue to make additional investments in equipment and personnel, which also will increase its non-interest expense.  If Old Line Bancshares grows too quickly and is not able to control costs and maintain asset quality, growth could materially and adversely affect its financial performance.

If Old Line Bancshares’ allowance for loan losses is not sufficient to cover actual loan losses, its earnings will decrease.  Old Line Bancshares maintains an allowance for loan losses that it believes is adequate for absorbing any potential losses in its loan portfolio.  Old Line Bancshares’ management, through a periodic review and consideration of its loan portfolio, determines the amount of the allowance for loan losses.  Although Old Line Bancshares believes that the allowance for loan losses is adequate to absorb probable losses in its loan portfolio, even under normal economic conditions, it cannot predict such losses with certainty.  The unprecedented volatility experienced in the financial and capital markets during the last several years makes this determination even more difficult as processes Old Line Bancshares uses to estimate the allowance for loan losses may no longer be dependable because they rely on complex judgments, including forecasts of economic conditions that may not be accurate.  As a result, Old Line Bancshares cannot be sure that its allowance is or will be adequate in the future.  If management’s assumptions and judgments prove to be incorrect and the allowance for loan losses is inadequate to absorb future losses, Old Line Bancshares’ earnings will suffer.

As of June 30, 2015, commercial and commercial real estate mortgage loans comprise approximately 75% of Old Line Bancshares’ loan portfolio.  These types of loans are generally viewed as having more risk of default than residential real estate or consumer loans and typically have larger balances than residential real estate loans and consumer loans.  A deterioration of one or a few of these loans could cause a significant increase in non-performing loans.  Such an increase could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan

charge-offs, all of which could have a material adverse effect on Old Line Bancshares’ financial condition and results of operations.

Old Line Bancshares’ profitability depends on interest rates and changes in monetary policy may impact it.  Old Line Bancshares’ results of operations depend to a large extent on its “net interest income,” which is the difference between the interest expense incurred in connection with its interest bearing liabilities, such as interest on deposit accounts, and the interest income received from its interest earning assets, such as loans and investment securities.  Interest rates, because they are influenced by, among other things, expectations about future events, including the level of economic activity, federal monetary and fiscal policy, and geopolitical stability, are not predictable or controllable.  Additionally, competitive factors heavily influence the interest rates Old Line Bancshares can earn on its loan and investment portfolios and the interest rates Old Line Bank pays on its deposits. Community banks are often at a competitive disadvantage in managing their cost of funds compared to the large regional, super regional or national banks that have access to the national and international capital markets.  These factors influence Old Line Bancshares’ ability to maintain a stable net interest margin.

Old Line Bancshares seeks to maintain a neutral position in terms of the volume of assets and liabilities that mature or reprice during any period so that it may reasonably predict its net interest margin.  However, interest rate fluctuations, loan prepayments, loan production and deposit flows are constantly changing and influence Old Line Bancshares’ ability to maintain this neutral position.  Generally speaking, Old Line Bancshares’ earnings are more sensitive to fluctuations in interest rates the greater the variance in the volume of assets and liabilities that mature and reprice in any period.  The extent and duration of the sensitivity will depend on the cumulative variance over time, the velocity and direction of interest rates, and whether Old Line Bancshares is more asset than liability sensitive.  Accordingly, Old Line Bancshares may not be successful in maintaining this neutral position and, as a result, its net interest margin may suffer.

The market value of Old Line Bancshares’ investments could negatively impact stockholders’ equity.  Old Line Bancshares has designated all of its investment securities portfolio (or 11.5% of total assets) at June 30, 2015 as available for sale.  Old Line Bancshares “marks to market” temporary unrealized gains and losses in the estimated value of the available for sale portfolio and reflect this adjustment as a separate item in stockholders’ equity, net of taxes.  As of June 30, 2015, Old Line Bancshares had temporary unrealized losses in its available for sale portfolio of $254 thousand (net of taxes).  As a result of the most recent economic recession and the continued economic slowdown, several municipalities continue to report budget deficits and companies continue to report lower earnings.  These budget deficits and lower earnings could cause temporary and other than temporary impairment charges in Old Line Bancshares’ investment securities portfolio and cause it to report lower net income and a decline in stockholders’ equity.

Any future issuances of common stock in connection with acquisitions or otherwise could dilute your ownership of Old Line Bancshares.  Old Line Bancshares may use its common stock to acquire other companies or to make investments in banks and other complementary businesses in the future.  Old Line Bancshares may also issue common stock, or securities convertible into common stock, through public or private offerings, in order to raise additional capital in connection with future acquisitions, to satisfy regulatory capital requirements or for general corporate purposes.  Any such stock issuances would dilute your ownership interest in Old Line Bancshares and may dilute the per-share value of its common stock.

Old Line Bancshares future acquisitions, if any, may cause it to become more susceptible to adverse economic events.  While Old Line Bancshares currently has no definitive plans to acquire additional financial institutions (other than Regal Bancorp), it may do so in the future if an attractive acquisition opportunity arises that is consistent with its business plan.  Any future business acquisitions could be material to Old Line Bancshares, and the degree of success achieved in acquiring and integrating these businesses into Old Line Bancshares could have a material effect on the value of its common stock.  In addition, any acquisition could require Old Line Bancshares to use substantial cash or other liquid assets or to incur debt.  In those events, Old Line Bancshares could become more susceptible to future economic downturns and competitive pressures.

Old Line Bank faces limits on its ability to lend.  The amount of Old Line Bank’s capital limits the amount that it can loan to a single borrower.  Generally, under current law, Old Line Bank may lend up to 15% of its unimpaired capital and surplus to any one borrower.  As of June 30, 2015, Old Line Bank was able to lend approximately $18.6 million to any one borrower.  This amount is significantly less than that of many of Old Line Bancshares’ larger competitors and may

discourage potential borrowers who have credit needs in excess of Old Line Bank’s legal lending limit from doing business with Old Line Bank.  Old Line Bank generally tries to accommodate larger loans by selling participations in those loans to other financial institutions, but this strategy is not always available.  Old Line Bank may not be able to attract or maintain customers seeking larger loans and may not be able to sell participations in such loans on terms it considers favorable.

Additional capital may not be available when needed or required by regulatory authorities.  Federal and state regulatory authorities require Old Line Bancshares to maintain adequate levels of capital to support its operations.  In addition, Old Line Bancshares may elect to raise additional capital to support its business or to finance future acquisitions, if any, or it may otherwise elect or its regulators may require that it raise additional capital.  Old Line Bancshares’ ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside its control.  Then-current conditions in the capital markets may be such that traditional sources of capital may not be available to Old Line Bancshares on reasonable terms if it needed to raise additional capital.  Accordingly, Old Line Bancshares may not be able to raise additional capital if needed or on terms that are favorable or otherwise not dilutive to its existing stockholders.  If Old Line Bancshares cannot raise additional capital when needed, or on desirable terms, this may have a material adverse effect on its financial condition, results of operations and prospects.

Old Line Bancshares faces substantial competition that could adversely affect its growth and operating results.  Old Line Bancshares operates in a competitive market for financial services and faces intense competition from other financial institutions both in making loans and in attracting deposits.  Many of these financial institutions have been in business for many years, are significantly larger, have established customer bases, have greater financial resources and lending limits than Old Line Bancshares does, and are able to offer certain services that Old Line Bancshares is not able to offer.  If Old Line Bancshares cannot attract deposits and make loans at a sufficient level, its operating results will suffer, as will its opportunities for growth.

Consumers may decide not to use banks to complete their financial transactions.  Technology and other changes are allowing consumers to complete financial transactions through alternative methods that historically have involved banks.  For example, consumers can now maintain funds that they have historically held as bank deposits in brokerage accounts, mutual funds or general‑purpose reloadable prepaid cards.  Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks.  The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.  The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on Old Line Bancshares’ financial condition and results of operations.

Additional Risk Factors Associated with Regal Bancorp Related to the Merger

Regal Bancorp has entered into a written agreement with the Federal Reserve Bank that may result in adverse results to Regal Bancorp’s operations.  On June 29, 2012, Regal Bancorp entered into a written agreement with the Federal Reserve Bank.  The written agreement, which is a formal enforcement action initiated by the Federal Reserve Bank, requires Regal Bancorp to take certain measures to maintain its financial soundness so that it may serve as a source of strength to Regal Bank.  The written agreement sets forth the actions that Regal Bancorp and its subsidiaries and its board of directors must undertake to address the issues outlined in the written agreement.  The written agreement includes timeframes to implement the compliance provisions contained therein and a requirement to regularly report to the Federal Reserve Bank.  The written agreement will remain in effect until stayed, modified, terminated or suspended by the Federal Reserve Bank.

The impact of the written agreement on Regal Bancorp’s operations may have an adverse impact on the financial condition and operations, including maintaining acceptable liquidity levels, and may negatively impact the financial condition, results of operations, and business operations of the combined company after the merger.  While Old Line Bancshares does not believe that it will be subject to this agreement after the merger is completed, it cannot assure you that the written agreement will be terminated after the merger.

Risk Factors as they Relate to Regal Bancorp Stockholders in Connection with the Merger

Regal Bancorp’s directors and executive officers have financial interests in the merger that are different from, or in addition to, the interests of Regal Bancorp stockholders.  In considering the information contained in this proxy

statement/prospectus, you should be aware that Regal Bancorp’s directors and executive officers have financial interests in the merger that are different from, or in addition to, the interests of Regal Bancorp stockholders.  The Regal Bancorp and Regal Bank directors who collectively hold approximately 77.23% of the outstanding shares of Regal Bancorp common stock have agreed to vote in favor of the merger proposal.  These voting agreements may have the effect of discouraging persons from making a proposal to acquire Regal Bancorp.  Further, certain executive officers of Regal Bancorp may be entitled to payments in connection with the merger under existing or new arrangements.  Finally, Old Line Bancshares agreed to offer employment to Regal Bancorp’s President and Chief Executive Officer pursuant to the terms of an employment agreement negotiated by the parties.  These and certain other additional interests of Regal Bancorp’s directors and executive officers are described in detail in “The Merger Agreement and the Merger – Interests of Directors and Officers in the Merger.”  These circumstances may cause some of Regal Bancorp directors and executive officers to view the proposed transaction differently than you view it.

Regal Bancorp stockholders who elect to receive cash in the merger may not receive the form of merger consideration that they elect.  Depending on the elections made by all Regal Bancorp stockholders, certain Regal Bancorp stockholders who elect to receive the cash consideration may instead receive shares of Old Line Bancshares common stock for all or a portion of their shares of Regal Bancorp common stock.

If Regal Bancorp stockholders oversubscribe for the cash portion of the merger consideration, those Regal Bancorp stockholders electing to receive cash will have the amount of cash they selected reduced and will receive a portion of their consideration in the form of shares of Old Line Bancshares common stock.  The allocation process will be administered by Old Line Bancshares’ exchange agent as set forth in the merger agreement, and any such allocations will be made on a pro rata basis.  Accordingly, at the time Regal Bancorp stockholders vote on the proposal to approve the merger agreement and the merger, they will not know the form of merger consideration that they will receive if they intend to elect to receive cash for all or a portion of their shares of Regal Bancorp common stock.  In addition, because Regal Bancorp stockholders that elect to receive cash in the merger may instead receive a portion of the merger consideration in shares of Old Line Bancshares common stock, such stockholders will not know the tax consequences that will result upon the exchange of their shares of Regal Bancorp common stock at the time they vote on the merger agreement and the merger or elect which form of consideration they prefer to receive.  See “The Merger Agreement and the Merger – Certain Federal Income Tax Consequences.”

The merger agreement limits Regal Bancorp’s ability to pursue alternative transactions to the merger and requires Regal Bancorp to pay a termination fee if it does.  The merger agreement prohibits Regal Bancorp and its directors, officers, representatives and agents, subject to narrow exceptions, from initiating, encouraging, soliciting or entering into discussions with any third party regarding alternative acquisition proposals.  The prohibition limits Regal Bancorp’s ability to pursue offers from other possible acquirers that may be superior from a financial point of view.  If Regal Bancorp receives an unsolicited proposal from a third party that is superior from a financial point of view to that made by Old Line Bancshares and the merger agreement is terminated, Regal Bancorp would be required to pay a termination fee of $450,000.  This fee makes it less likely that a third party will make an alternative acquisition proposal.

The federal income tax consequences of the merger for Regal Bancorp’s stockholders will be dependent upon the merger consideration received.  The federal income tax consequences of the merger to you will depend upon the merger consideration you receive.  In general, if you exchange your shares of Regal Bancorp common stock solely for cash, you will recognize gain or loss for federal income tax purposes in an amount equal to the difference between the cash you receive and your adjusted tax basis in your Regal Bancorp common stock.  If you receive solely Old Line Bancshares common stock in exchange for your Regal Bancorp common stock, you generally will not recognize any gain or loss for federal income tax purposes.  However, you generally will have to recognize gain or loss in connection with cash received in lieu of fractional shares of Old Line Bancshares common stock.  If you receive a combination of cash and Old Line Bancshares common stock in the transaction, you generally will not recognize loss but will recognize gain, if any, to the extent of any cash received.  For a more detailed discussion of the federal income tax consequences of the transaction to you, see “The Merger Agreement and the Merger – Certain Federal Income Tax Consequences.” 

After the merger is completed, Regal Bancorp stockholders who receive Old Line Bancshares common stock for some or all of their shares of Regal Bancorp common stock will become Old Line Bancshares stockholders and will have different rights that may be less advantageous than their current rights.  Upon completion of the merger, Regal Bancorp stockholders who receive Old Line Bancshares common stock for some or all of their shares of Regal Bancorp common stock will become Old Line Bancshares stockholders.  Differences in Regal Bancorp’s articles of incorporation

and bylaws and Old Line Bancshares’ articles of incorporation and bylaws will result in changes to the rights of Regal Bancorp stockholders who become Old Line Bancshares stockholders.  For more information, see “Comparison of Stockholder Rights.”  A stockholder of Regal Bancorp may conclude that his, her or its current rights under Regal Bancorp’s articles of incorporation and bylaws are more advantageous than the rights they may have as an Old Line Bancshares stockholder under Old Line Bancshares’ articles of incorporation and bylaws.

Regal Bancorp’s stockholders will have less influence as stockholders of Old Line Bancshares than as stockholders of Regal Bancorp.  Regal Bancorp stockholders currently have the right to vote in the election of the board of directors of Regal Bancorp and on other matters affecting Regal Bancorp.  The stockholders of Regal Bancorp as a group will own approximately 1.63% to 3.26% of the combined organization (Old Line Bancshares and Regal Bancorp), assuming Old Line Bancshares does not exercise its option to increase the merger consideration to avoid termination of the merger agreement based on recent trading prices of Old Line Bancshares common stock prior to the merger.  When the merger occurs, each stockholder that receives shares of Old Line Bancshares common stock will become a stockholder of Old Line Bancshares with a percentage ownership of the combined organization much smaller than such stockholder’s percentage ownership of Regal Bancorp.  Because of this, stockholders of Regal Bancorp will have less influence on the management and policies of Old Line Bancshares than they now have on the management and policies of Regal Bancorp.

 

SELECTED FINANCIAL DATA OF OLD LINE BANCSHARES, INC.

The following table summarizes Old Line Bancshares’ selected financial information and other financial data.  The selected balance sheet and statement of income data are derived from Old Line Bancshares’ audited financial statements.  You should read this information together Old Line Bancshares’ financial statements and the related notes and its “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discussion in its Annual Report on Form 10-K for the year ended December 31, 2014, incorporated by reference into this proxy statement/prospectus.  See “Incorporation of Certain Documents By Reference” and “Where You Can Find More Information.”  Results for past periods are not necessarily indicative of results that may be expected for any future period.

 

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operating—Reconciliation of Non‑GAAP Measures” in the Old Line Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2014.  See ”Incorporation of Certain Documents by Reference.”

COMPARATIVE PER-SHARE MARKET PRICE

The following table sets forth the market value per share of Old Line Bancshares common stock, the market value per share of Regal Bancorp common stock and the equivalent market value per share of Regal Bancorp common stock on August 4, 2015 (the last business day preceding public announcement of the merger) and October 6, 2015 (the latest practicable trading day before the date of this proxy statement/prospectus).  The historical market values per share of Old Line Bancshares common stock and Regal Bancorp common stock and the historical market value of Old Line Bancshares common stock used to determine the equivalent market value per share of Regal Bancorp common stock are the per share closing sales prices on August 4, 2015 and October 6, 2015, respectively, as reported on the OTC Markets Group with respect to Regal Bancorp common stock and on the Nasdaq Capital Market with respect to Old Line Bancshares common stock.  The equivalent market value per share of Regal Bancorp common stock indicated in the table is derived by multiplying 0.7718 shares of Old Line Bancshares common stock by the closing sales price of Old Line Bancshares common stock on such date. 

 

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus, including the information incorporated into this proxy statement/prospectus, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such forward-looking statements include statements regarding the financial condition, results of operations, earnings outlook, businesses and prospects of Old Line Bancshares and Regal Bancorp, and the potential combined company, as well as statements applicable to the period following the completion of the merger and those items listed below: 

(1) The anticipated effects and benefits of the merger, including: (a) the expected consummation of the merger including the timing thereof; (b) the expected financial effects and benefits of the merger, including that Old Line Bancshares’ expectation that the merger will be accretive to its earnings, including merger expenses, within the first year, with a payback period of about half a year; and (c) the expectation that Old Line Bancshares will not be subject to Regal Bancorp’s written agreement with the Federal Reserve Bank after the merger.

(2) With respect to Old Line Bancshares, statements regarding (i) its growth strategy, including potential future acquisitions, (i) additional investment in equipment and personnel, and potential increases in non-interest expenses, and (iii) the statement with respect to the adequacy of its allowance for loan losses.  Forward-looking statements are also included in documents incorporated by reference into this proxy statement/prospectus, and are or will be identified in such documents. 

(3) With respect to Regal Bancorp, statements regarding the explanation of the reasoning of Regal Bancorp’s board of directors for recommending the Merger and the other potential benefits of the merger as discussed in “The Merger Agreement and the Merger and Recommendation of the Board of Directors.”

You can identify forward-looking statements because they are not historical facts and often include the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “will,” “should,” “anticipates,” “plans” or similar terminology.  Such statements are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Actual results could differ materially from those currently anticipated due to a number of factors, including, but not limited to:

Forward-looking statements speak only as of the date they are made.  You should not place undue reliance on any forward-looking statements.  Old Line Bancshares undertakes no obligation to update or clarify these forward-looking statements to reflect factual assumptions, circumstances or events that have changed after such a forward-looking statement was made.

THE REGAL BANCORP SPECIAL MEETING

Date, Time and Place

Regal Bancorp will hold its special meeting of stockholders at Regal Bancorp’s corporate headquarters located at 11436 Cronhill Drive, Suite 1, Owings Mills, Maryland 21117 at 10:00 a.m. on November 20, 2015.

Purpose of the Special Meeting

At the special meeting, Regal Bancorp’s stockholders will be asked to consider and vote upon proposals to:

Recommendation of the Board of Directors of Regal Bancorp

The Regal Bancorp board of directors has unanimously approved the merger agreement and the merger, has unanimously declared them to be advisable and in the best interests of Regal Bancorp’s stockholders, and unanimously recommends that Regal Bancorp’s stockholders vote “FOR” the approval of the merger agreement and the merger.

The Regal Bancorp board of directors also recommends that Regal Bancorp’s stockholders vote “FOR” the approval of the adjournment of the special meeting if necessary to solicit additional proxies. 

Record Date; Stockholders Entitled to Vote

Stockholders of record at the close of business on October 9, 2015, which the Regal Bancorp board of directors has set as the record date, are entitled to notice of and to vote at the special meeting.  As of the close of business on that date, there were [_____] shares of common stock, $0.01 par value per share, outstanding and entitled to vote, each of which is entitled to one vote.

Quorum

The presence, in person or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast at the special meeting (or 221,794 shares of Regal Bancorp common stock) will be necessary to constitute a quorum for the transaction of business at the special meeting.  Abstentions are counted for purposes of determining the presence or absence of a quorum for the transaction of business at the special meeting.

Under Maryland law, broker non-votes are also counted for purposes of determining the presence or absence of a quorum for the transaction of business at the special meeting.  If your shares are held in the name of a bank, brokerage firm or other similar holder of record (referred to as “in street name”), you will receive instructions from the holder of record that you must follow for you to specify how your shares will be voted.  In general, under the rules of the various national and regional securities exchanges, holders of record have the authority to vote shares for which their customers do not provide voting instructions on certain routine, uncontested items, but not on non-routine proposals.  In the case of non-routine items for which specific voting instructions have not been provided, the institution holding street name shares cannot vote those shares.  These are considered to be “broker non-votes.”

Vote Required

The proposal at the Regal Bancorp special meeting to approve the merger agreement and the merger requires the affirmative vote of holders of two-thirds of the outstanding shares of Regal Bancorp common stock entitled to vote on the proposal.

The approval of the proposal to adjourn the special meeting to solicit additional proxies, if necessary, requires the affirmative vote of the majority of shares present in person or represented by proxy at the special meeting and entitled to vote on the matter.

Directors of Regal Bancorp and Regal Bank and their affiliates, who beneficially own approximately [___]% of Regal Bancorp common stock as of the record date, have agreed in writing to vote for approval of the merger agreement and the merger.  Therefore, assuming the directors comply with the terms of these agreements, approval of the merger agreement and the merger is assured.

Abstentions and Failure to Vote

Because approval of the merger agreement and the merger requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Regal Bancorp common stock entitled to vote at the special meeting, abstentions, the failure to vote and broker non-votes will have the same effect as votes against this matter.  In other words, if you are a Regal Bancorp stockholder and fail to vote, fail to instruct your broker or nominee to vote, or vote to abstain, it will have the effect of a vote against the proposal to approve the merger agreement and the merger.  Accordingly, the Regal Bancorp board of directors urges you to submit your proxy to vote as instructed below.

As noted above, approval of the proposal to adjourn the special meeting to solicit additional proxies, if necessary, requires the affirmative vote of at least a majority of all votes cast on the matter at the special meeting.  Abstentions, the failure to vote and broker non-votes are not included in calculating votes cast with respect to this proposal and therefore will have no effect on the outcome of this proposal.

Voting of Proxies

The enclosed proxy with respect to the Regal Bancorp special meeting is solicited by the board of directors of Regal Bancorp.  The board of directors has selected [___________] and [________________], or either of them, to act as proxies with full power of substitution. 

Whether or not you plan to attend the special meeting, you may submit a proxy to vote your shares.  To do so, mark your vote on the proxy card, sign your name exactly as it appears on your proxy card, date your proxy card and return it in the envelope provided.

All proxies will be voted as directed by the stockholder on the proxy form.  A proxy, if executed and not revoked, will be voted in the following manner (unless it contains instructions to the contrary, in which event it will be voted in accordance with such instructions):

No other matters are intended to be brought before the special meeting by Regal Bancorp, and Regal Bancorp is not aware of any other matters to be brought before the special meeting by others.  If, however, any matters not described in this proxy statement/prospectus are properly presented at the special meeting, the persons named in the proxy card will vote your shares as directed by a majority of the board of directors.  If the special meeting is postponed or adjourned, your Regal Bancorp common stock may be voted by the persons named in the proxy card on the new special meeting date, provided that the new meeting occurs within 90 days of the record date for the special meeting, unless you have not revoked your proxy.  We do not know of any other matters to be presented at the special meeting.

Your vote is important.  Accordingly, please sign and return the enclosed proxy card as soon as possible whether or not you intend to attend the Regal Bancorp special meeting.

Shares Held in Street Name

If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in street name), you must provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted, unless your shares are held of record by a bank or other nominee and you have an arrangement with the nominee granting such nominee discretionary authority to vote your shares.  Please follow the voting instructions provided by your bank, broker or other nominee.  Please note that you may not vote shares held in street name by returning a proxy card directly to Regal Bancorp or by voting in person at the meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.  Further, brokers who hold shares of Regal Bancorp common stock on behalf of their customers may not give a proxy to Regal Bancorp to vote those shares without specific instructions from their customers.

If you are a Regal Bancorp stockholder and you do not instruct your broker on how to vote your shares, your broker may not vote your shares at the special meeting.

Your vote is important.  Accordingly, please sign and return your broker’s instructions whether or not you plan to attend the Regal Bancorp special meeting in person.

Revocability of Proxies

You may revoke your proxy at any time before the vote is taken at the meeting.  Unless so revoked, the shares represented by properly executed proxies will be voted at the special meeting and all adjournments thereof.  To revoke your proxy, you must send written notice to Lynda Stewart, Secretary of Regal Bancorp, at 11436 Cronhill Drive, Owings Mills, Maryland 21117, file a later-dated proxy before your common stock has been voted at the special meeting or attend the special meeting and vote in person.  Attendance at the special meeting will not in itself constitute revocation of your proxy. 

Solicitation of Proxies

Your proxy is being solicited by the board of directors of Regal Bancorp.  Regal Bancorp will pay the costs of soliciting proxies.  These costs may include reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners.  Regal Bancorp will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in sending proxy materials to beneficial owners of the common stock of Regal Bancorp and obtaining their proxies.

Directors, officers and employees of Regal Bancorp may solicit proxies personally, by telephone, facsimile or electronic mail.  Regal Bancorp will not specifically compensate these persons for soliciting such proxies, but may reimburse them for reasonable out-of-pocket expenses, if any.

 

OWNERSHIP OF REGAL BANCORP COMMON STOCK

The following table sets forth, as of September 30, 2015, unless otherwise noted, the number and percentage of shares of Regal Bancorp common stock that are beneficially owned by each executive officer and director of Regal Bancorp and all directors and executive officers of Regal Bancorp as a group, and each other person that Regal Bancorp is aware of that owns in excess of 5% of its outstanding common stock.  A person owns his shares directly as an individual unless otherwise indicated.

 

 

 

 

 

 

 

 

THE MERGER AGREEMENT AND THE MERGER

The following information describes the material terms and provisions of the merger agreement and the merger.  This discussion is subject, and qualified in its entirety by reference, to the merger agreement, as amended, which is incorporated herein by reference.

The merger agreement, as amended, attached as Annex A hereto, and the summary of its terms in this proxy statement/prospectus have been included only to provide you with information about the terms and conditions of the merger agreement.  The representations, warranties and covenants contained in the merger agreement were made solely for the purposes of such agreement and as of specific dates, and were qualified and subject to certain limitations and exceptions agreed to by Old Line Bancshares and Regal Bancorp in connection with negotiating the terms of the merger agreement.  In particular, in your review of the representations and warranties contained in the merger agreement and described herein, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the merger agreement and were negotiated for the purpose of allocating contractual risk among the parties to the merger agreement rather than to establish matters as facts. Stockholders of the parties are not third-party beneficiaries under the merger agreement.  The representations and warranties may also be subject to a contractual standard of materiality or material adverse effect different from those generally applicable to stockholders and reports and documents filed with the SEC, and, in some cases, they may be qualified by disclosures made by one party to the other, which are not necessarily reflected in the merger agreement or other public disclosures made by Old Line Bancshares or Regal Bancorp.  The representations and warranties contained in the merger agreement do not survive the effective time of the merger.  Moreover, information concerning the subject matter of the representations, warranties and covenants, which do not purport to be accurate as of the date of this document, may have changed since the date of the merger agreement, and subsequent developments or new information may not be fully reflected in public disclosures of Old Line Bancshares. 

For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone or relied upon as characterizations of the actual state of facts or condition of Old Line Bancshares or Regal Bancorp or any of their respective subsidiaries or affiliates.  Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this document or incorporated by reference into this document.  Please see the sections of this proxy statement/prospectus entitled “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information.”  Old Line Bancshares will provide additional disclosures in its public reports to the extent it becomes aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the terms and information contained in the merger agreement and will update such disclosure as required by federal securities laws.

General

The merger agreement provides that:

Assuming the requisite approval of Regal Bancorp’s stockholders and the satisfaction of other conditions to closing, we currently expect the merger to close in the fourth quarter of 2015.  The merger will result in an institution with pro forma assets of more than $1.4 million and 22 full-service branches serving seven counties.  Old Line Bancshares expects the merger to be accretive to its earnings, including merger expenses, within the first year, with a payback period of about half a year. 

Background of the Merger

In 2003, Regal Bancorp, seeing growth opportunities in its market area, set up a trust subsidiary, RegalMD Statutory Trust I (“Trust I”), that issued $4.0 million of preferred securities, commonly known as “trust preferred securities.”  Regal Bancorp set up a second trust subsidiary, Regal MD Statutory Trust II (‘Trust II”), that issued $2.5 million of trust preferred securities.  Trust I and Trust II are referred to collectively herein as the “Trusts.”  Each Trust’s payment of dividends on the trust preferred securities it issued were funded through payments of interest on subordinated debentures issued by Regal Bancorp to the Trust.  The documents governing the trust preferred securities permitted Regal Bancorp to defer the payment of interest on the subordinated debentures for up to 20 quarters before Regal Bancorp would be deemed to have caused an event of default under the relevant documents.  Regal Bancorp guaranteed the payment of all amounts owed to holders of the trust preferred securities.

In addition, in 2008, Regal Bancorp borrowed approximately $3.2 million from another financial institution.  This indebtedness was secured by the stock of its wholly owned subsidiary and primary asset, Regal Bank.  Regal Bancorp used the proceeds of this loan to bolster Regal Bank’s capital.

Subsequently and primarily as a result of the onset of loan losses following significantly deteriorating economic conditions nationally and in its market area, Regal Bank experienced operating losses beginning in 2008, and Regal Bancorp’s financial condition began to deteriorate.  In order to preserve capital, beginning with the interest payment due on December 15, 2010, Regal Bancorp began deferring interest and dividend payments on its subordinated debentures and trust preferred securities.  On June 29, 2012, Regal Bancorp entered into a written agreement with the FRB.  Pursuant to the written agreement, among other requirements, Regal Bancorp was prohibited from making any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the FRB and the Director of the Division of Banking Supervision and Regulation of the FRB.  The written agreement also required that Regal Bancorp serve as a source of strength to Regal Bank.

In December 2011, Regal Bancorp’s indebtedness was purchased by an entity, S.A.B., LLC (“SAB”), whose members consisted of certain Regal Bancorp directors and two additional individuals.  At that time, 50% of the debt was forgiven, resulting in a reduction of indebtedness to $1.5 million plus accrued interest, and the due date on this indebtedness was October 2012.  This due date subsequently was extended to May 31, 2013 and later to July 1, 2014. 

In September 2012, the board of directors of Regal Bancorp established a special committee (the “Finance Committee”), comprised of the three directors who did not have loans to, and were not members of, SAB.  The Finance Committee, which had authority to retain its own legal and financial advisors, was given authority by the board of directors to, among other things, raise capital, incur additional debt and explore and to undertake as appropriate other strategic transactions, including without limitation a sale Regal Bancorp or one or more of its subsidiaries.

To increase capital and enable Regal Bancorp to serve as a source of strength to Regal Bank, and to enable Regal Bancorp to pay off its note to SAB, the Finance Committee sought to raise capital.  Regal Bancorp’s articles of incorporation require that stock issuances be approved by Regal Bancorp’s stockholders.  At its 2013 annual meeting of stockholders, Regal Bancorp’s board of directors sought stockholder approval to issue common stock for aggregate consideration not to exceed $2,000,000 at a sale price of no less than $2.00 per share.  The stockholders did not approve this proposal.

Unable to raise capital, the Finance Committee determined to seek a merger partner and retained Feldman a firm with substantial experience in mergers and acquisitions involving financial institutions.  At the direction of the Finance Committee, Feldman contacted six parties in the summer of 2013 who might have an interest in acquiring Regal Bancorp.  However, while four parties signed a confidentiality agreement, none of those parties elected to proceed to negotiate a definitive agreement.

Thereafter, the Finance Committee suspended its efforts to locate a merger partner, and Regal Bancorp management and the board of directors focused on improving Regal Bancorp’s financial condition and results of operations.  During this time, the Finance Committee continued to engage in discussions with SAB, and in February 2015, Regal Bancorp and the members of SAB completed a transaction whereby the SAB loan was divided into seven loans, with each member of SAB having a loan to Regal based on his or its pro rata membership interest in SAB.  Immediately upon the subdivision of the loan, two members of SAB, Mr. Daniel A. Hirschfeld and Mr. Thomas J. Faust, who collectively owned 52.9% of the outstanding indebtedness, exchanged their notes for perpetual, non-cumulative preferred stock issued by Regal Bancorp, and the maturity of the remaining indebtedness was extended to June 30, 2017.  In connection with this process, Mr. Hirschfeld and Mr. Faust, along with a third individual, Mr. Charles J. Ilardo, had negotiated with certain stockholders of Regal Bancorp to acquire their stock, and in January 2015, Messrs. Hirschfeld, Faust and Ilardo completed their acquisition of approximately 62% of Regal Bancorp’s outstanding stock.  On

February 24, 2015, Messrs. Hirschfeld, Faust and Ilardo were elected as directors of Regal Bancorp and Regal Bank.

Throughout this time, Regal Bancorp continued to not make any interest payments on its outstanding indebtedness and to defer dividend and interest payments on its trust preferred securities and the related subordinated debentures.  By February 2015, Regal Bancorp was getting closer to the end of the 20-quarter deferral period on its subordinated debentures and trust preferred securities, which period ends for Trust II with the interest payment due on December 15, 2015.  If by that time Regal Bancorp failed to bring current all deferred interest owed on the subordinated debentures issued to Trust II, it would trigger an event of default under the indenture.  Upon the occurrence of an event of default, the indenture trustee, on behalf of the holders of the trust preferred securities, may declare all amounts of principal and deferred interest owing on the subordinated debentures immediately due and payable and may pursue remedies to collect such amounts, including enforcing the guarantee of Regal Bancorp.

At a meeting of the Regal Bancorp Board of Directors on February 24, 2015, Regal Bancorp’s special legal counsel, Kilpatrick Townsend & Stockton, LLP (“Kilpatrick Townsend”) was present, and the board of directors discussed the strategic alternatives it might pursue to avoid a potential event of default with respect to its trust preferred securities.  Following this discussion, the board of directors determined to interview financial advisors to assist it in reviewing its strategic alternatives.  The board of directors also disbanded the Finance Committee and established a special committee (the “Capital Committee”) to evaluate Regal Bancorp’s strategic alternatives.

At the March 11, 2015 meeting of the Capital Committee, representatives of Feldman, along with another prospective financial advisor, were invited to discuss with the board of directors potential strategic alternatives that Regal might wish to consider.  Also in attendance was Kilpatrick Townsend.   Among other things, Feldman and the other prospective financial advisor discussed with the Capital Committee the present bank merger and acquisition environment and the possibility of a business combination transaction and reviewed publicly available business, financial and stock market information of certain financial institutions that might have potential interest in acquiring Regal Bancorp. 

Following discussion and deliberation, it was the consensus of the Capital Committee that it would be in the best interest of Regal Bancorp’s stockholders to solicit indications of interest for a potential business combination, and the Capital Committee determined to retain Feldman to contact parties that were identified, in conjunction with management’s input, as having potential interest in pursuing a potential business combination transaction with Regal Bancorp.

Feldman contacted Old Line Bancshares and 22 other parties during the month of March 2015.  Old Line Bancshares, as well as nine other financial institutions, executed confidentiality agreements, with Old Line Bancshares executing its confidentiality agreement on April 2, 2015.  Parties who executed confidentiality agreements were provided access to a confidential information memorandum prepared by Regal, with the assistance of Feldman, as well as an online data room that contained additional confidential due diligence information regarding Regal.  Interested parties, including Old Line Bancshares, were instructed to submit their preliminary indications of interest by April 17, 2015. 

On April 17, 2015, Old Line Bancshares sent Feldman a preliminary written indication of interest for the acquisition of Regal Bancorp.  In its letter, Old Line Bancshares proposed a transaction with an aggregate consideration of $6,643,000 for Regal Bancorp’s common and preferred stockholders.  Of such consideration, up to $1.0 million would be payable in cash, with the remainder payable in shares of Old Line Bancshares common stock, with an exchange ratio to be fixed closer to the signing of a definitive agreement.  Old Line Bancshares also proposed to repay Regal Bancorp’s secured debt and to assume Regal Bancorp’s obligations under its trust preferred securities.  Old Line Bancshares also proposed to consider inviting one member of Regal Bancorp’s Board of Directors to join Old Line Bancshares’ Board of Directors.  On April 21, 2015, in response to questions from Feldman, Old Line Bancshares submitted a revised indication of interest in which it indicated that it was flexible as to the amount of cash or stock included in the transaction. 

On April 17, 2015, Regal received written indications of interest from three additional depository institutions.  “Company A” proposed an all cash transaction at a price of $7.50 per Regal common share, which would amount to total consideration of approximately $3.3 million for the common stockholders.  “Company B” proposed an all stock transaction with an aggregate consideration of $4,533,000 for Regal Bancorp’s common stockholders, representing $10.22 per share of Regal Bancorp common stock.  Shares of Company B common stock issued to Regal Bancorp common stockholders in the merger would be valued at 150% of Company B’s tangible book value at March 31, 2015.  Company B’s proposal contained certain price adjustments requiring Regal Bancorp’s securities and Federal Home Loan Bank advances to be adjusted to fair value at closing, as well as further possible adjustment related to Company’s B’s assessment following due diligence of the risk of loss in Regal Bancorp’s loan portfolio.  “Company C” proposed an all stock transaction with an aggregate consideration of $5.1 million for Regal Bancorp’s common stockholders.  Company C further indicated that if a cash portion was desired, it would raise up to $2 million

of additional capital from its Board members.  Company C also proposed to invite two independent member of Regal Bancorp’s board of directors to join Company C’s board of directors.  The common stocks of Company B and Company C were extremely illiquid.  Under any of the proposed transactions, each of Old Line Bancshares, Company A, Company B and Company C would have been required to repay Regal Bancorp’s secured debt, redeem Regal Bancorp’s preferred stock for cash in the amount of $2.00 per share and to assume Regal Bancorp’s obligations under its trust preferred securities.

Messrs. Cornelsen and Sanner met on April 21, 2015 to discuss the potential transaction including the proposed terms of any transaction.

On April 27, 2015, the Capital Committee held a special meeting that was also attended by representatives from Feldman and Kilpatrick Townsend.  Feldman reviewed with the board the four preliminary indications of interest that had been received.  After discussion, the board of directors instructed Feldman to invite Old Line Bancshares and Company A to perform due diligence on Regal Bancorp so that they might submit revised indications of interest.  The board of directors also instructed Feldman to advise Company B and Company C that they were not being invited to perform additional due diligence at this time.

Old Line Bancshares and Company A conducted on-site due diligence reviews of Regal Bancorp in late May and early June 2015, including interviews of various members of Regal Bancorp’s management team.  Additional due diligence review was conducted through the online data room.

On June 12, 2015, the Strategic Opportunities Committee held a meeting at which it decided to continue moving forward with the Regal Bancorp acquisition. 

Old Line Bancshares submitted a revised indication of interest, as requested by Feldman at Regal Bancorp’s direction, on June 16, 2015.  In its revised indication of interest, Old Line Bancshares reaffirmed its earlier proposal, clarified that up to 50% of the proposed value to common stockholders would be payable in cash and indicated that Old Line Bancshares could accommodate an all cash transaction if Regal Bancorp was so interested. 

After completing due diligence, Company A advised Feldman that it had determined not to proceed with a potential transaction.

On June 23, 2015, Old Line Bancshares formally engaged Ambassador as its financial advisor with respect to the merger.

On June 23, 2015, Regal Bancorp’s board of directors, with Capital Committee members present, held a special meeting, which was also attended by representatives from Feldman and legal counsel.  The board of directors reviewed and discussed the revised indication of interest that had been received from Old Line Bancshares.  Following discussion and deliberation, the board of directors determined that it would negotiate exclusively with Old Line Bancshares a definitive merger agreement based on the terms outlined in the revised indication of interest.  The Board of Directors also authorized management to conduct a detailed due diligence review of Old Line Bancshares.

Regal Bancorp conducted an on-site due diligence review of Old Line Bancshares on July 13, 2015, during which Regal Bancorp representatives met with Old Line Bancshares management to discuss Old Line Bancshares’ financial condition and results of operations.

In July and continuing through August 5, 2015, Regal Bancorp and Old Line Bancshares negotiated the terms of the merger agreement and the ancillary documents appearing as exhibits to the merger agreement.  During this time, Regal Bancorp and Old Line Bancshares also continued their due diligence investigations of each other.

On July 15, 2015, Old Line Bancshares’ board of directors held a regular meeting at which it considered the then-current draft of the merger agreement and ancillary documents, and at which representatives of Ambassador and Mr. Bonaventure of Ober|Kaler were also present.  Mr. Bonaventure presented the board with an overview of the material terms of the merger agreement and related documents, copies of which were provided to each director before the meeting, and the regulatory process relating thereto, and the board asked questions of Mr. Bonaventure about those terms and process.  Mr. Bonaventure also answered questions about the fiduciary duties of the Old Line Bancshares board of directors in connection with evaluating the proposed acquisition of Regal Bancorp.  Also at this meeting, Ambassador reviewed the financial aspects of the proposed merger.  At the conclusion of these presentations and discussion and deliberation, and after considering all of the factors that it deemed relevant, the Old Line Bancshares’ board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement, up to and including the merger, approved the related support agreements, declared the merger advisable, and

authorized Old Line Bancshares’ President and Chief Executive Officer to execute and deliver the definitive merger agreements and the support agreements.

During the morning of August 5, 2015, Regal Bancorp’s board of directors held a special meeting to consider the definitive merger agreement and ancillary documents, which meeting was also attended by representatives of Feldman and legal counsel.  At this meeting, Feldman reviewed the financial aspects of the proposed merger and rendered an opinion to the board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Feldman as set forth in such opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of Regal Bancorp common stock.  In addition, representatives of Kilpatrick Townsend reviewed in detail with the board of directors the definitive merger agreement and all related documents, copies of which were delivered to each director before the meeting.  Following extensive review and discussion, the board of directors unanimously approved the merger agreement and authorized and directed management to execute and deliver the merger agreement and ancillary documents, subject to confirmation that Old Line Bancshares’ board of directors also had approved the merger agreement and authorized the execution and delivery of the merger agreement and ancillary documents.

Also on August 5, 2015, Old Line Bancshares’ board of directors held a special meeting by conference call to consider the definitive merger agreement and ancillary documents, at which Mr. Bonaventure and representatives of Ambassador were present.  Mr. Bonaventure presented the board by phone with an overview of material changes made to the agreements since the July 15, 2015 board meeting, and the Ambassador representative presented an update to its July 15, 2015 presentation.  At the conclusion of these presentations and discussions and deliberations, and after considering all of the factors that it deemed relevant, the Old Line Bancshares’ board of directors again unanimously approved the definitive merger agreement and the transactions contemplated thereby, up to and including the merger, approved the related support agreements, declared the merger advisable, and again authorized Old Line Bancshares’ President and Chief Executive Officer to execute and deliver the definitive merger agreements and the support agreements.

Following the close of trading markets on August 5, 2015, Regal Bancorp and Old Line Bancshares issued a joint press release announcing the approval, adoption and execution of the merger agreement.

Old Line Bancshares’ Reasons for the Merger  

In evaluating acquisition opportunities, Old Line Bancshares looks for financial institutions with business philosophies that are similar to those of Old Line Bancshares and that operate in markets that geographically complement its operations.  In evaluating acquisition opportunities, Old Line Bancshares also considers its long-range strategies, including financial, customer and employee strategies.  Old Line Bancshares, from time to time, reviews its strategic plan to analyze its geographic scope, financial performance and growth opportunities.  Since its acquisition of Maryland Bankcorp in 2011 and WSB in 2013, Old Line Bancshares has considered a number of opportunities to expand its presence in its primary market areas; however management and the Strategic Opportunities Committee concluded that the acquisition of Regal Bancorp was the best current opportunity to further this business objective.  In connection with its approval of the merger with Regal Bancorp, Old Line Bancshares’ board of directors reviewed the terms of the proposed acquisition and definitive agreements and their potential impact to Old Line Bancshares’ constituencies.  In reaching its decision to approve the merger agreement and the merger, Old Line Bancshares’ board of directors considered a number of factors, including the following:  

All business combinations, including the merger, also include certain risks and disadvantages.  The material potential risks and disadvantages to Old Line Bancshares and its stockholders that Old Line Bancshares’ board of directors and management identified and the board of directors considered include the following material matters, the order of which does not necessarily reflect their relative significance:

The discussion and factors considered by Old Line Bancshares’ board of directors is not intended to be exhaustive, but includes all material factors considered.  Old Line Bancshares’ board of directors considered these factors as a whole, and considered them to be favorable to, and supportive of, its determination.  Old Line Bancshares’ board of directors did not consider it practical, nor did it attempt, to quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision.  In considering the factors described above, individual members of Old Line Bancshares’ board of directors may have given different weights or priority to different factors.  Old Line Bancshares’ board of directors realized there can be no assurance about future results, including results expected or considered in the factors listed above.  However, the board concluded that the potential positive factors outweighed the potential risks of completing the merger.

After deliberating with respect to the proposed merger with Regal Bancorp, considering, among other things, the factors discussed above and the opinion of Ambassador discussed below, the Old Line Bancshares board of directors approved the merger agreement and the merger with Regal Bancorp and declared the merger advisable.

There can be no certainty that the above benefits of the merger anticipated by the Old Line Bancshares board of directors will occur.  Actual results may vary materially from those anticipated.  For more information on the factors that could affect actual results, see “Caution Regarding Forward-Looking Statements” and “Risk Factors.”

Regal Bancorp’s Reasons for the Merger and Recommendation of the Board of Directors 

 

In approving the merger agreement, Regal Bancorp’s board of directors consulted with Feldman regarding the financial aspects of the transaction and with Regal Bancorp’s legal counsel as to the board of directors’ fiduciary duties and the terms of the merger agreement.  In arriving at its decision to approve the merger agreement, the board of directors also considered a number of factors, including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regal Bancorp’s board of directors also considered potential risks associated with the merger in connection with its decision to approve the merger agreement, including that other parties that might be interested in proposing a transaction with Regal Bancorp could be discouraged from doing so given the terms of the merger agreement generally prohibiting Regal Bancorp from soliciting, engaging in discussions or providing information regarding an alternative transaction, requiring Regal Bancorp to pay a termination fee to Old Line Bancshares under certain circumstances, and requiring Regal Bancorp’s directors to execute

agreements requiring them to vote in favor of the merger with Old Line Bancshares, all of which Old Line Bancshares required in order that it agree to enter into the merger agreement.

 

The foregoing discussion of the information and factors considered by Regal Bancorp’s board of directors is not exhaustive, but includes the material factors that the board of directors considered and discussed in approving and recommending the merger.  In view of the wide variety of factors considered and discussed by Regal Bancorp’s board of directors in connection with its evaluation of the merger and the complexity of these factors, the board of directors did not quantify, rank or assign any relative or specific weight to the foregoing factors.  Rather, it considered all of the factors as a whole.  The board of directors discussed the foregoing factors, including asking questions of Regal Bancorp’s management and legal and financial advisors, and reached general consensus that the merger was in the best interests of Regal Bancorp and its stockholders.  In considering the foregoing factors, individual directors may have assigned different weights to different factors.  The board of directors did not undertake to make any specific determination as to whether any factor, or particular aspect of any factor, supported or did not support its ultimate decision to approve the merger agreement and the merger.  The foregoing explanation of the reasoning of Regal Bancorp’s board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the cautionary statements set forth in “Caution Regarding Forward-Looking Statements” on page 26.

Opinion of Regal Bancorp’s Financial Advisor

Regal Bancorp engaged Feldman Financial Advisors, Inc. to render financial advisory and investment banking services to Regal Bancorp, including an opinion to the Regal Bancorp board of directors as to the fairness, from a financial point of view, to the holders of Regal Bancorp common stock of the merger consideration to be received by such stockholders in the proposed merger of Regal Bancorp with and into Old Line Bancshares.  Regal Bancorp selected Feldman because Feldman is a nationally recognized firm with substantial experience in transactions similar to the merger.  As part of its business, Feldman is regularly engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of Feldman attended the meeting of the Regal Bancorp board held on August 5, 2015, at which the Regal Bancorp board evaluated the proposed merger.  At this meeting, Feldman reviewed the financial aspects of the proposed merger and rendered an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Feldman as set forth in such opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of Regal Bancorp common stock.  The Regal Bancorp board approved the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Feldman in preparing the opinion.

Feldman’s opinion is directed to the Regal Bancorp board of directors and addresses only the fairness of the merger consideration to the holders of Regal Bancorp common stock from a financial point of view.  The opinion does not address the underlying business decision of Regal Bancorp to engage in the merger and does not constitute a recommendation to any holder of Regal Bancorp common stock as to how to vote at the special meeting with respect to the merger or any other matter.  The summary of Feldman’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion.

In arriving at its opinion, Feldman reviewed the merger agreement as well as certain publicly available business and financial information relating to Regal Bancorp and Old Line Bancshares.  Feldman also reviewed certain other information related to Regal Bancorp, and met with the senior management of Regal Bancorp to discuss the future prospects of Regal Bancorp.  Feldman also considered certain financial and stock data of Regal Bancorp and Old Line Bancshares and compared that data with similar data for other publicly held companies in businesses similar to those of Regal Bancorp and Old Line Bancshares, and considered the financial terms of other merger and acquisition transactions that were recently effected.  Feldman also considered such other information, studies, analyses and examinations, and general financial, economic and market criteria, which it deemed relevant.

 

With respect to certain financial forecasts of Regal Bancorp and Old Line Bancshares, Feldman discussed financial projections with the senior management of Regal Bancorp and Old Line Bancshares for the purpose of reviewing the future prospects of Regal Bancorp and Old Line Bancshares.  Feldman assumed that, as of the date such forecasts were prepared, they

were reasonably prepared reflecting the best estimates and judgements of the management of Regal Bancorp and Old Line Bancshares as to the future operating and financial performance of Regal Bancorp and Old Line Bancshares.  Further, there will usually be differences between prospective and actual results because events and circumstances frequently do not occur as expected and those differences may be material.  Feldman also reviewed analyst reports provided to it by Old Line Bancshares and discussed such performance estimates with the senior management of Old Line Bancshares.  The projections reviewed were based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions, and accordingly, actual results could vary significantly from those set forth in such projections. 

 

In preparing its opinion, Feldman assumed and relied upon the accuracy and completeness of all financial and other information that it received, reviewed, or discussed.  Feldman did not assume any responsibility for independently verifying such information, did not undertake an independent evaluation or appraisal of the assets or liabilities of Regal Bancorp or Old Line Bancshares, and was not furnished with any such appraisal or evaluation.  Feldman was not retained to and did not review any individual loan credit files.  Feldman is not an expert in the evaluation of allowances for loan losses, and it has not made an independent evaluation of the adequacy of the allowance for loan losses of Regal Bancorp or Old Line Bancshares.  Feldman has assumed that the respective allowances for loan losses of both Regal Bancorp and Old Line Bancshares are adequate to cover losses both independently and on a combined basis.  Feldman’s opinion was necessarily based upon financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion.  Feldman did not express any opinion as to the value of Regal Bancorp or Old Line Bancshares common stock or the prices at which Regal Bancorp or Old Line Bancshares common stock may be sold at any time.

 

In formulating its opinion to the Regal Bancorp board, Feldman prepared a variety of financial and comparative analyses, including those described below.  The following is a summary of the material financial analyses performed by Feldman but is not a comprehensive description of the analyses underlying Feldman’s opinion.  The preparation of a fairness opinion is a complex process involving various determinations as to the most relevant and appropriate methods of financial analyses and the application of these methods to the particular circumstances.  Therefore, such an opinion is not readily susceptible to partial analysis or summary description.  Accordingly, Feldman believes that its analyses must be considered as a whole and selecting portions of the analyses and factors, without considering all factors and analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

 

Transaction Summary.  Feldman reviewed the financial terms of the proposed merger.  Based upon the closing price of $15.76 for Old Line Bancshares common stock on August 4, 2015 and assuming that 50% of the currently outstanding shares of Regal Bancorp common stock are converted to Old Line Bancshares common stock based on 0.7718 shares of Old Line Bancshares common stock for each share of Regal Bancorp common stock and 50% of the shares of Regal Bancorp common stock are exchanged for cash of $12.68 per share, the implied merger consideration amounts to $12.42 per Regal Bancorp common share outstanding, or an implied aggregate value of approximately $5.5 million based upon 443,586 outstanding shares of Regal Bancorp common stock.  Based upon this analysis and the June 30, 2015 financial statements for Regal Bancorp, the following transaction ratios were calculated by Feldman.

 

 

(1) Expressed as non-meaningful or “NM” due to negative earnings results.

Selected Companies Analysis.  Feldman performed comparative analyses involving Regal Bancorp, Old Line Bancshares, and various public company comparative groups.  The discussion of these comparisons below provide only selected financial data and are not meant to be an extensive comparison of Regal Bancorp or Old Line Bancshares with any group as a whole or any individual company.  No company used in the selected companies analysis is identical to Regal Bancorp, Old Line Bancshares, or the merger.  Accordingly, an analysis of the results involves complex considerations and judgments concerning differences in financial and operating characteristics of the various companies as well as other factors that may affect trading values or announced merger values of Regal Bancorp or the Regal Bancorp selected companies.

 

Feldman compared certain financial performance and market valuation data of Regal Bancorp with corresponding publicly available information of 13 publicly traded financial institutions with total assets less than $500 million and tangible common equity greater than 2% and less than 6% of tangible assets (“Comparative Capital Group”).  Feldman also prepared financial performance and market valuation comparisons of Regal Bancorp with 12 publicly traded financial institutions based in Maryland with total assets less than $400 million (“Maryland Group”).  To perform this analysis, Feldman utilized financial information as of or for the latest 12 months (“LTM”) through June 30, 2015 and market price data as of August 4, 2015 as reported by SNL Financial.

 

 

 

 

Feldman also compared certain financial performance and market valuation data of Old Line Bancshares with corresponding publicly available information of 21 publicly traded banking institutions headquartered in selected Mid-Atlantic and Southeastern states with market capitalizations between $100 million and $250 million.