Run out of memory

I have some code here

   private void Run()
    {
        MyClass c = new MyClass();
        c.Load(somepath1);
        using (StreamReader sr = new StreamReader(filepath))
        {
            string line = string.Empty;
            while ((line = sr.ReadLine()) != null)
            {
                using (Bitmap B = new Bitmap(line))
                {
                    Point p = SomeMethod(ref c, new Point());
                    using (MemoryStream ms = new MemoryStream())
                    {
                        B.Save(ms, System.Drawing.Imaging.ImageFormat.Bmp);
                        using (Bitmap T = new Bitmap(new Bitmap(Image.FromStream(ms))))
                        using (Graphics g = Graphics.FromImage(T))
                        {
                            g.DrawEllipse(new Pen(Brushes.Red, 4), p.X - 5, p.Y - 5, 10, 10);
                            FileInfo fi = new FileInfo(somepath2);
                            T.Save(Path.Combine(somepath3, fi.Name));
                        }
                    }
                }
            }
        }
    } 

and the Function SomeMethod is:

    Point SomeMethod(ref MyClass c, Point mid)
    {
        float[] Mat = new float[9];
        Point p;

        c.Method1(Mat);
        c.Method2(Mat, out p);

        return p;
    }

MyClass is :

public class MyClass
{
    public void Method1(float[] Mat, out Point point)
    {
        //calculation point from values in Mat
    }

    public void Method2(float[] Mat)
    {
        //Do some Operation in Mat
    }

    public void Load(string FileName)
    {
        //Do Some Data Loading From a small file about 400 byte
    }
}

StreamReader sr Opens a file in filepath that has about 400 line of image locations, I read them and draw something on them base on my calculations, I have not used any external library or any unsafe code. the question is why I run out of memory ??

-------------EDIT--------------------

when the program starts it uses about 20mb of memory, after calling Run the memory usage start increasing, if I run it for about 200 images the memory goes around 1.7Gb and Run function finished the work and memory usage get back to 20mb

------------EDIT------------ saving Bitmap B in MemoryStream is becuase graphic can not use Indexed pixel format images. The main question is what is garbage collector doing here?? I have no objects that should remained in memory.

----------EDIT----------------

the exception is :

System.OutOfMemoryException was unhandled
  Message=Out of memory.
  Source=System.Drawing
  StackTrace:
       at System.Drawing.Graphics.CheckErrorStatus(Int32 status)
       at System.Drawing.Graphics.DrawImage(Image image, Int32 x, Int32 y, Int32 width, Int32 height)
       at System.Drawing.Bitmap..ctor(Image original, Int32 width, Int32 height)
       at System.Drawing.Bitmap..ctor(Image original)
       at WindowsFormsApplication1.Form1.buttonrun1_Click(Object sender, EventArgs e) in C:\Users\hamidp\Desktop\WindowsFormsApplication1\WindowsFormsApplication1\Form1.cs:line 115
       at System.Windows.Forms.Control.OnClick(EventArgs e)
       at System.Windows.Forms.Button.OnClick(EventArgs e)
       at System.Windows.Forms.Button.OnMouseUp(MouseEventArgs mevent)
       at System.Windows.Forms.Control.WmMouseUp(Message& m, MouseButtons button, Int32 clicks)
       at System.Windows.Forms.Control.WndProc(Message& m)
       at System.Windows.Forms.ButtonBase.WndProc(Message& m)
       at System.Windows.Forms.Button.WndProc(Message& m)
       at System.Windows.Forms.Control.ControlNativeWindow.OnMessage(Message& m)
       at System.Windows.Forms.Control.ControlNativeWindow.WndProc(Message& m)
       at System.Windows.Forms.NativeWindow.DebuggableCallback(IntPtr hWnd, Int32 msg, IntPtr wparam, IntPtr lparam)
       at System.Windows.Forms.UnsafeNativeMethods.DispatchMessageW(MSG& msg)
       at System.Windows.Forms.Application.ComponentManager.System.Windows.Forms.UnsafeNativeMethods.IMsoComponentManager.FPushMessageLoop(Int32 dwComponentID, Int32 reason, Int32 pvLoopData)
       at System.Windows.Forms.Application.ThreadContext.RunMessageLoopInner(Int32 reason, ApplicationContext context)
       at System.Windows.Forms.Application.ThreadContext.RunMessageLoop(Int32 reason, ApplicationContext context)
       at System.Windows.Forms.Application.Run(Form mainForm)
       at WindowsFormsApplication1.Program.Main() in C:\Users\hamidp\Desktop\WindowsFormsApplication1\WindowsFormsApplication1\Program.cs:line 17
       at System.AppDomain._nExecuteAssembly(Assembly assembly, String[] args)
       at System.AppDomain.ExecuteAssembly(String assemblyFile, Evidence assemblySecurity, String[] args)
       at Microsoft.VisualStudio.HostingProcess.HostProc.RunUsersAssembly()
       at System.Threading.ThreadHelper.ThreadStart_Context(Object state)
       at System.Threading.ExecutionContext.Run(ExecutionContext executionContext, ContextCallback callback, Object state)
       at System.Threading.ThreadHelper.ThreadStart()
  InnerException: 

and the exception thrown at line :

using (Bitmap T = new Bitmap(new Bitmap(Image.FromStream(ms))))

-------------------EDIT-----------------------

I also add the line GC.Collect(); after

while ((line = sr.ReadLine()) != null)

the same error happened again.