EX-99.1 3 v034922_ex99-1.htm Unassociated Document
Exhibit 99.1
 
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-822-1400

PRESS RELEASE

Shore Bancshares Reports Fourth Quarter and 2005 Earnings

Easton, Maryland (02/07/2006)- Shore Bancshares, Inc. (NASDAQ - SHBI) reported fourth quarter earnings of $3.1 million or $0.56 per diluted share, an increase of 43.6% over the $2.1 million or $0.39 per diluted share for the fourth quarter of 2004. Net income for the year ended December 31, 2005 was $12.9 million or $2.32 per diluted share, representing a 26.1% increase over the $10.2 million or $1.84 per diluted share earned during 2004.

“This has been a very good year for our Company, as we reported substantial increases in net income for both the final quarter and the full twelve months,” said W. Moorhead Vermilye, President and CEO of Shore Bancshares, Inc. “There was good growth in our local economy and loan demand remained strong throughout 2005. The net interest margin at year-end was solid at 4.69%, up from 4.1% at the end of 2004. Our efficiency ratio (GAAP-based) was 54.13% at year-end, a 5% improvement over the prior year. These factors enabled us to continue to expand our core community banking business and we believe we are well-positioned for 2006.”

“Our Board is confident in the ongoing strength of our markets, as well as our ability to sustain the momentum we have developed via healthy organic growth,” said Vermilye. “We are the leading independent community banking organization headquartered on the Del-Mar-Va Peninsula. As we manage the organization for growth and profitability to further build the franchise, we also intend to focus on efforts aimed at improving shareholder value during the coming year.”

The Company’s return on average assets for the year ended December 31, 2005 was 1.51%, compared to 1.32% for the year ended December 31, 2004. The return on average stockholders’ equity was 13.20% for the year ended December 31, 2005, compared to 11.17% for the prior year.

Return on average assets was 1.48% for the fourth quarter of 2005, compared to 1.10% for the fourth quarter of 2004. Return on Average stockholders’ equity was 12.48% for the fourth quarter of 2005, compared to 9.29% for the fourth quarter of 2004.

At December 31, 2005, total assets were $851.6 million, total deposits were $705 million, and total stockholders’ equity was $101.4 million. The increase in total assets of 7.7% since December 31, 2004 was related primarily to loan growth. Loans increased 5.4% during 2005 totaling $627.5 million at December 31, 2005. Deposit growth was the primary funding source for asset growth during the year, although the Company utilized federal home loan bank borrowings during the fourth quarter of 2005 to fund asset growth in excess of deposit growth.

The provision for credit losses for the three- and twelve-month periods ended December 31, 2005 was $230,000 and $810,000, respectively, compared to $561,000 and $931,000, respectively, for the same periods in 2004. Net charge-offs were $266,000 and $725,000 for the years ended December 31, 2005 and 2004, respectively. Management believes that the provision for credit losses and the resulting allowance are adequate at December 31, 2005.

Financial Results for the Fourth Quarter

Net interest income for the fourth quarter of 2005 was $9.4 million, which represents an increase of 16.7 % over the $8.1 million earned during the same period last year. Higher loan yields resulted in an increase in the net interest margin from 4.09% in 2004 to 4.41% in 2005. The market for deposits remained competitive throughout the fourth quarter resulting in higher rates paid for interest bearing deposits.

Noninterest income for the fourth quarter of 2005 increased $761,000 when compared to the fourth quarter of 2004. In 2004, the Company recorded an impairment loss of $658,000 related to certain securities held in the investment portfolio. Excluding the impairment loss, noninterest income for the fourth quarter of 2005 increased $103,000 over the income for the fourth quarter of 2004 as a result of increased service charges on deposit accounts.

Noninterest expense for the fourth quarter of 2005 increased $616,000 when compared to the fourth quarter of 2004. The increase is primarily the result of increased salaries and benefits costs of $482,000. Salary and benefit increases are the result of higher incentive compensation cost and increased staffing for a new branch and trust operations that began in July 2005. Other operating cost increases totaling $133,000 were related to overall growth of the Company.

Financial Results for the Year

Net interest income for the year ended December 31, 2005 totaled $35.5 million, an increase of 21.2% or $6.2 million when compared to the same period of last year. The increases in net interest income resulted from increases in the volume of and yield on earning assets.

Interest expense for the year ended December 31, 2005 increased $2.9 million or 32.1% when compared to the year ended December 31, 2004. The increases are attributable to both an increase in the volume of interest bearing deposits when compared to the same period last year and an increase in the rate paid for interest bearing deposits. The overall rate paid for interest bearing deposits was 1.94% and 1.55% for the years ended December 31, 2005 and 2004, respectively.

The Company’s net interest margin was 4.69% for the year ended December 31, 2005, compared to 4.1% for the same period in 2004. The Company increased its volume of earning assets to $763.2 million during the year ended December 31, 2005, compared to $722.5 million for 2004. The average yield on earning assets for 2005 was 6.25%, compared to 5.35% for 2004.

Noninterest income was $11.5 million for the year ended December 31, 2005, compared to $10.2 million for the year ended December 31, 2004, an increase of $1.3 million or 12.5%. Excluding the effect of an impairment loss of $658,000 on certain equity securities in 2004, noninterest income increased $617,000. An increase in service charges on deposit accounts of $408,000 was the primary reason for the increase.

Noninterest expenses totaled $25.4 million for 2005, compared to $22.5 for 2004, an increase of $2.9 million or 12.9%. The primary component of the increase is a $2 million increase in salaries and benefits resulting from increased staffing costs for new branches opened in 2004 and 2005, the full year effect of Felton Bank, which was acquired on April 1, 2004, general increases associated with growth of the Company and incentive compensation paid during the year. Other noninterest expenses, including occupancy and equipment expense and data processing have increased due to the overall growth of the Company.

Shore Bancshares Information

Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore. It is the parent company of three banks, The Talbot Bank of Easton, Maryland, The Centreville National Bank of Maryland, and The Felton Bank; two insurance producer firms, The Avon-Dixon Agency, LLC and Elliott Wilson Insurance, LLC; an insurance premium finance company, Mubell Finance, LLC; and a registered investment adviser firm, Wye Financial Services, LLC.

Forward-Looking Statements

This press release may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements present management's expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in Exhibit 99.1 to the Annual Report of Shore Bancshares, Inc. on Form 10-K for the year ended December 31, 2004.

For further information contact: W. Moorhead Vermilye, President and CEO
 

Shore Bancshares, Inc.
Financial Highlights
            
 
(Dollars in thousands, except per share data)
  
 
Three Months Ended
  
 
Year Ended
  
   
December 31,
  
December 31,
  
 
  
2005
  
2004
  
% Change
  
2005
  
2004
  
% Change
  
PROFITABILITY FOR THE PERIOD:
                                      
Net interest income
  
$
9,413
  
$
8,068
    
16.7
%
$
35,485
  
$
29,281
    
21.2
%
Provision for loan and lease losses
    
230
    
561
    
-59.0
%
  
810
    
931
    
-13.0
%
Noninterest income
    
2,740
    
1,979
    
38.5
%
  
11,498
    
10,223
    
12.5
%
Noninterest expense
    
6,667
    
6,051
    
10.2
%
  
25,431
    
22,534
    
12.9
%
Income before income taxes
    
5,256
    
3,435
    
53.0
%
  
20,742
    
16,039
    
29.3
%
Net income
  
$
3,138
  
$
2,147
    
46.2
%
$
12,888
  
$
10,198
    
26.4
%
                                       
Return on average assets
    
1.48
%
  
1.10
%
  
35.0
%
  
1.51
%
  
1.32
%
  
18.9
%
Return on average equity
    
12.48
%
  
9.29
%
  
34.4
%
  
13.20
%
  
11.17
%
  
18.1
%
Net interest margin
    
4.41
%
  
4.09
%
  
7.8
%
  
4.69
%
  
4.10
%
  
14.1
%
Efficiency ratio - GAAP based
    
54.86
%
  
60.23
%
  
-8.9
%
  
54.13
%
  
57.04
%
  
-5.1
%
                                       
                                       
PER SHARE DATA:
                                      
Basic net income
  
$
0.57
  
$
0.39
    
46.2
%
$
2.33
  
$
1.86
    
25.3
%
Diluted net income
  
$
0.56
  
$
0.39
    
43.6
%
$
2.32
  
$
1.84
    
26.1
%
Dividends declared
  
$
0.21
  
$
0.18
    
16.7
%
$
0.80
  
$
0.72
    
11.1
%
Book Value
  
$
18.26
  
$
16.86
    
8.3
%
$
18.26
  
$
16.86
    
8.3
%
Tangible book value
  
$
15.76
  
$
14.29
    
10.3
%
$
15.76
  
$
14.29
    
10.3
%
Average fully diluted shares
    
5,575,462
   
5,561,261
   
0.3
%
  
5,561,756
   
5,530,158
   
0.6
%
                                       
AT PERIOD-END:
                                      
Assets
  
$
851,638
  
$
790,598
    
7.7
%
$
851,638
  
$
790,598
    
7.7
%
Deposits
  
$
704,958
  
$
658,672
    
7.0
%
$
704,958
  
$
658,672
    
7.0
%
Loans and leases
  
$
627,463
  
$
595,458
    
5.4
%
$
627,463
  
$
595,458
    
5.4
%
Securities
  
$
121,070
  
$
119,096
    
1.7
%
$
121,070
  
$
119,096
    
1.7
%
Stockholders' equity
  
$
101,448
  
$
92,976
    
9.1
%
$
101,448
  
$
92,976
    
9.1
%
                                       
CAPITAL AND CREDIT QUALITY RATIOS:
                              
Average equity to average assets
    
11.86
%
  
11.81
%
        
11.86
%
  
11.79
%
      
Allowance for loan and lease losses to loans and leases
    
0.83
%
  
0.79
%
        
0.83
%
  
0.79
%
      
Nonperforming assets to total assets
    
0.13
%
  
0.24
%
        
0.13
%
  
0.24
%
      
Annualized net (charge-offs) recoveries to average loans
    
0.02
%
  
(0.19
)%
        
(0.04
)%
  
(0.13
)%
      
 
 
Shore Bancshares, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
 
   
December 31,
  
 
  
2005
  
2004
  
ASSETS
              
Cash and due from banks
  
$
28,990
  
$
22,051
  
Federal funds sold
    
25,401
   
20,539
 
Interest-bearing deposits with banks
    
13,068
   
961
 
Investments available-for-sale (at fair value)
    
106,160
   
103,434
 
Investments held-to-maturity
    
14,911
   
15,662
 
               
Total loans and leases
    
627,463
   
595,458
 
Less: allowance for loan and lease losses
    
(5,236
)
  
(4,692
)
Net loans and leases
    
622,227
   
590,766
 
               
Premises and equipment, net
    
15,187
   
13,070
 
Accrued interest receivable
    
3,897
   
3,275
 
Goodwill
    
11,939
   
11,939
 
Other intangible assets, net
    
1,906
   
2,242
 
Other assets
    
7,952
   
6,659
 
               
Total assets
  
$
851,638
  
$
790,598
  
               
LIABILITIES
              
Noninterest-bearing deposits
  
$
113,244
  
$
102,672
  
Interest-bearing deposits
    
591,714
   
556,000
 
Total deposits
    
704,958
   
658,672
 
               
Short-term borrowings
    
35,848
   
27,106
 
Other long-term borrowings
    
4,000
   
5,000
 
Accrued interest payable and other liabilities
    
5,384
   
6,844
 
Total liabilities
    
750,190
   
697,622
 
               
STOCKHOLDER'S EQUITY
              
Common stock -- par value $.01; shares authorized 35,000,000;
shares issued and outstanding (2005) 5,556,985, (2004) 5,515,198
    
56
   
55
 
Additional paid in capital
    
29,013
   
28,017
 
Retained earnings
    
73,642
   
65,182
 
Accumulated other comprehensive income
    
(1,263
)
  
(278
)
Total stockholder's equity
    
101,448
   
92,976
 
               
Total liabilities and stockholder's equity
  
$
851,638
  
$
790,598
  


Shore Bancshares, Inc.
Consolidated Statements of Income
(Dollars in thousand, except per share data)


   
Three Months Ended
  
Twelve Months Ended
  
   
December 31,
  
December 31,
  
 
  
2005
  
2004
  
2005
  
2004
  
Interest Income:
                          
Interest and fees on loans and leases
  
$
11,275
  
$
9,215
  
$
41,848
  
$
33,034
  
Interest on deposits with banks
    
91
   
1
   
111
   
46
 
Interest and dividends on securities:
                          
Taxable
    
1,002
   
974
   
3,790
   
4,354
 
Exempt from federal income taxes
    
142
   
152
   
577
   
602
 
Interest on federal funds sold
    
341
   
73
   
1,058
   
255
 
                           
Total interest income
    
12,851
   
10,415
   
47,384
   
38,291
 
                           
Interest expense:
                          
Interest on deposits
    
3,176
   
2,205
   
11,103
   
8,542
 
Interest on short-term borrowings
    
221
   
79
   
692
   
215
 
Interest on long-term borrowings
    
41
   
63
   
104
   
253
 
                           
Total interest expense
    
3,438
   
2,347
   
11,899
   
9,010
 
 
                          
Net interest income
    
9,413
   
8,068
   
35,485
   
29,281
 
Provision for loan and lease losses
    
230
   
561
   
810
   
931
 
Net interest income after provision for loan and lease losses
    
9,183
   
7,507
   
34,675
   
28,350
 
                           
Noninterest income:
                          
Securities gains (losses)
    
(54
)
  
42
   
4
   
41
 
Recognized loss on impairment of securities
    
0
   
(658
)
  
0
   
(658
)
Service charges on deposit accounts
    
801
   
659
   
2,878
   
2,470
 
Insurance agency commissions
    
1,390
   
1,398
   
6,384
   
6,383
 
Other income
    
603
   
538
   
2,232
   
1,987
 
Total noninterest income
    
2,740
   
1,979
   
11,498
   
10,223
 
                   
Noninterest expenses:
                          
Salaries and employee benefits
    
4,075
   
3,593
   
15,755
   
13,760
 
Occupancy expense of premises
    
394
   
381
   
1,542
   
1,448
 
Equipment expenses
    
272
   
288
   
1,110
   
979
 
Data processing
    
363
   
322
   
1,414
   
1,310
 
Directors' fees
    
153
   
135
   
590
   
553
 
Amortization of intangible assets
    
84
   
84
   
337
   
306
 
Other expenses
    
1,326
   
1,248
   
4,683
   
4,178
 
                           
Total noninterest expense
    
6,667
   
6,051
   
25,431
   
22,534
 
                           
Income before income taxes
    
5,256
   
3,435
   
20,742
   
16,039
 
Income tax expense
    
2,118
   
1,288
   
7,854
   
5,841
 
                           
Net income
  
$
3,138
  
$
2,147
  
$
12,888
  
$
10,198
  
                           
Basic net income per share
  
$
0.57
  
$
0.39
  
$
2.33
  
$
1.86
  
Diluted net income per share
  
$
0.56
  
$
0.39
  
$
2.32
  
$
1.84
  
Dividends declared per share
  
$
0.21
  
$
0.18
  
$
0.80
  
$
0.72