EX-99.1 2 v041741_ex99-1.htm
Exhibit 99.1
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-822-1400

PRESS RELEASE

 
Shore Bancshares Reports 14.3 Percent Increase in First Quarter Earnings
 

Easton, Maryland (04/26/2006)- Shore Bancshares, Inc. (NASDAQ - SHBI) reported first quarter earnings of $3.6 million or $0.64 per diluted share, an increase of 14.3% over the $3.1 million or $0.56 per diluted share for the first quarter of 2005.

“We are pleased with our financial performance for the first quarter. We continued to experience strong loan demand throughout the quarter. Despite a very competitive market for deposits, the combination of robust loan growth plus increased loan yields produced a net interest margin of 4.80%,” said W. Moorhead Vermilye, President and CEO of Shore Bancshares, Inc. “The local economy remains strong, and our performance is a direct result. Our efficiency ratio (GAAP-based) was 54.05% at the end of the quarter compared to 55.01% for the first quarter of 2005.”

“We have recently expanded our secondary market mortgage program with the recruitment of three proven producers who are well-known in our local market. Wye Mortgage, a division of Centreville National Bank, should now be able to cover a much larger geographic reach than is currently being served. We continue to focus efforts on the core banking business of the Company as we look for additional products and services to offer to our customers,” said Vermilye.

The Company’s return on average assets for the quarter ended March 31, 2006 was 1.67%, compared to 1.56% for the quarter ended March 31, 2005. The return on average stockholders’ equity was 13.7% for the quarter ended March 31, 2006, compared to 13.29% for the same quarter last year.
At March 31, 2006, total assets were $855.4 million, total deposits were $708.7 million, and total stockholders’ equity was $104.1 million. The increase in total assets of $3.8 million since December 31, 2005 was related to loan growth. Loans increased $14.4 million during the first quarter of 2006 totaling $641.9 million at March 31, 2006. Loan growth during the quarter was funded by a reduction in federal funds sold and interest bearing deposits of the Company and deposit growth of $3.8 million.

Financial Results for the Quarter

Net interest income for the first quarter of 2006 was $9.4 million, which represents an increase of 13.7 % over the $8.3 million earned during the same period last year. Higher loan yields resulted in an increase in the net interest margin from 4.51% in 2005 to 4.80% in 2006. The market for deposits remained competitive throughout the first quarter resulting in higher rates paid for interest bearing deposits.

The provision for credit losses for the three-month periods ended March 31, 2006 and 2005 was $311,000 and $180,000, respectively. Net charge-offs were $130,000 and $114,000 for the three months ended March 31, 2006 and 2005, respectively. The increase in the provision for the first quarter of 2006 when compared to the same period last year reflects the continued growth in the Company’s loan portfolio. Management believes that the provision for credit losses and the resulting allowance are adequate at March 31, 2006.
 
 
Noninterest income for the first quarter of 2006 increased $544,000 when compared to the first quarter of 2005. Increases in service charges, insurance agency commissions and other noninterest income all contributed to the growth.

Noninterest expense for the first quarter of 2006 increased $798,000 when compared to the first quarter of 2005. The increase is primarily the result of increased salaries and benefits costs of $489,000. 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 $309,000 were related to 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 do not represent historical facts, but statements about management’s beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objections. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the Risk Factors contained in Item 1A of Part I of the Annual Report of Shore Bancshares, Inc. on Form 10-K for the year ended December 31, 2005.

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

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Financial Highlights
              
(dollars in thousands, except per share data)
  
Three Months Ended
  
   
March 31,
  
 
  
2006
  
2005
  
% Change
  
   
(unaudited)
  
PROFITABILITY FOR THE PERIOD:
                    
Net interest income
  
$
9,414
  
$
8,277
    
13.7
%
Provision for loan and lease losses
    
311
    
180
    
72.8
%
Noninterest income
    
3,706
    
3,162
    
17.2
%
Noninterest expense
    
7,091
    
6,293
    
12.7
%
Income before income taxes
    
5,718
    
4,966
    
15.1
%
Net income
    
2,167
    
1,860
    
16.5
%
     
3,551
    
3,106
    
14.3
%
Return on average assets
    
1.67
%
  
1.56
%
  
6.8
%
Return on average equity
    
13.70
%
  
13.29
%
  
3.1
%
Net interest margin
    
4.80
%
  
4.51
%
  
6.2
%
Efficiency ratio - GAAP based
    
54.05
%
  
55.01
%
  
-1.8
%
                     
                     
PER SHARE DATA:
                    
Basic net income
  
$
0.64
  
$
0.56
    
14.3
%
Diluted net income
  
$
0.64
  
$
0.56
    
14.3
%
Dividends declared
  
$
0.21
  
$
0.19
    
10.5
%
Book Value
  
$
18.67
  
$
17.12
    
9.0
%
Tangible book value
  
$
16.20
  
$
14.57
    
11.2
%
Average outstanding fully diluted shares
    
5,563,051
   
5,569,664
   
-0.1
%
                     
AT PERIOD-END:
                    
Assets
  
$
855,422
  
$
812,491
    
5.3
%
Deposits
  
$
708,723
  
$
678,782
    
4.4
%
Loans and leases
  
$
641,913
  
$
596,267
    
7.7
%
Securities
  
$
123,270
  
$
123,890
    
-0.5
%
Stockholders' equity
  
$
104,125
  
$
94,640
    
10.0
%
                     
CAPITAL AND CREDIT QUALITY RATIOS:
            
Average equity to average assets
    
12.16
%
  
11.73
%
      
Allowance for loan and lease losses to loans and leases
    
0.84
%
  
0.80
%
      
Nonperforming assets to total assets
    
0.12
%
  
0.19
%
      
Annualized net (charge-offs) recoveries to average loan and leases
    
0.08
%
  
0.08
%
      

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Consolidated Balance Sheets
                    
(dollars in thousands, except per share data)
          
March 31,
        
     
2006
        
2005
  
 
(unaudited)
ASSETS
                    
Cash and due from banks
  
$
27,231
        
$
22,495
  
Federal funds sold
    
21,908
         
34,939
 
Interest-bearing deposits with banks
    
5,501
         
898
 
Investments available-for-sale, at fair value
    
108,391
         
108,499
 
Investments held-to-maturity, at amortized cost -
(fair value of $14,798 and $15,374, respectively)
    
14,879
         
15,391
 
                     
Total loans and leases
    
641,913
         
596,267
 
Less: allowance for loan and lease losses
    
(5,417
)
        
(4,758
)
Net loans and leases
    
636,496
         
591,509
 
                     
Premises and equipment, net
    
15,560
         
13,595
 
Accrued interest receivable
    
4,109
         
3,561
 
Goodwill
    
11,939
         
11,939
 
Other intangible assets, net
    
1,821
         
2,158
 
Other assets
    
7,587
         
7,507
 
                     
Total assets
  
$
855,422
        
$
812,491
  
                     
LIABILITIES
                    
Noninterest-bearing deposits
    
110,748
         
103,414
 
Interest-bearing deposits
    
597,975
         
575,368
 
Total deposits
    
708,723
         
678,782
 
                     
Short-term borrowings
    
27,281
         
28,331
 
Other long-term borrowings
    
9,000
         
5,000
 
Accrued interest payable and other liabilities
    
6,293
         
5,738
 
Total liabilities
    
751,297
         
717,851
 
                     
STOCKHOLDER'S EQUITY
                    
Common stock -- par value $.01; shares authorized
35,000,000; shares issued and outstanding 5,577,435
and 5,527,120, respectively;
    
56
         
55
 
Additional paid in capital
    
29,411
         
28,426
 
Retained earnings
    
76,025
         
67,240
 
Accumulated other comprehensive income
    
(1,367
)
        
(1,081
)
Total stockholder's equity
    
104,125
         
94,640
 
                     
Total liabilities and stockholders’ equity
  
$
855,422
        
$
812,491
  

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Consolidated Statements of Income
              
(dollars in thousands, except per share data)
  
Three Months Ended
 
  
March 31,
 
    
2006
    
2005
  
 
(unaudited)
Interest Income:
              
Interest and fees on loans and leases
  
$
11,455
  
$
9,599
  
Interest on deposits with banks
    
171
   
5
 
Interest and dividends on securities:
              
Taxable
    
1,020
   
870
 
Exempt from federal income taxes
    
143
   
149
 
Interest on federal funds sold
    
276
   
184
 
Total interest income
    
13,065
   
10,807
 
           
Interest expense:
              
Interest on deposits
    
3,318
   
2,379
 
Interest on short-term borrowings
    
264
   
88
 
Interest on long-term borrowings
    
69
   
63
 
               
Total interest expense
    
3,651
   
2,530
 
Net interest income
    
9,414
   
8,277
 
Provision for loan and lease losses
    
311
   
180
 
Net interest income after provision for loan and lease losses
    
9,103
   
8,097
 
           
Noninterest income:
              
Securities gains (losses)
    
0
   
58
 
Service charges on deposit accounts
    
744
   
562
 
Insurance agency commissions
    
2,331
   
2,084
 
Other income
    
631
   
458
 
Total noninterest income
    
3,706
   
3,162
 
Noninterest expenses:
          
Salaries and employee benefits
    
4,468
   
3,979
 
Occupancy expense of premises
    
409
   
400
 
Equipment expenses
    
323
   
255
 
Data processing
    
377
   
354
 
Directors' fees
    
177
   
190
 
Amortization of intangible assets
    
84
   
84
 
Other expenses
    
1,253
   
1,031
 
Total noninterest expense
    
7,091
   
6,293
 
               
Income before income taxes
    
5,718
   
4,966
 
Income tax expense
    
2,167
   
1,860
 
               
Net income
  
$
3,551
  
$
3,106
  
               
Basic net income per share
  
$
0.64
  
$
0.56
  
Diluted net income per share
  
$
0.64
  
$
0.56
  
Dividends declared per share
  
$
0.21
  
$
0.19
  

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