EX-99.1 2 v101545_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 Earnings for 2007

Easton, Maryland (01/30/2008) - Shore Bancshares, Inc. (NASDAQ: SHBI) reported 2007 earnings of $13.45 million or $1.60 per diluted share, compared to $13.55 million or $1.61 per diluted share for 2006. Fourth quarter earnings were $3.34 million or $0.40 per diluted share, compared to $3.05 million or $0.36 per diluted share for the fourth quarter of 2006.

“Net income and earnings per share for the fourth quarter of 2007 improved over the fourth quarter of 2006, and the revenue numbers were essentially flat for the full year of 2007 when compared to 2006,” said W. Moorhead Vermilye, President and Chief Executive Officer. “Loan growth was solid throughout the final quarter and the year, loan demand continues to be very good, and we believe our pipelines remain full of high-quality lending opportunities. Deposit gathering has been challenging as pricing in all of our markets is very competitive, and we expect there will be continuing pressure on our margins as a result of ongoing interest rate cuts by the Federal Reserve Board. The Company’s various fee-based businesses are performing healthily and should provide an expanded noninterest revenue stream in 2008, especially as our two most recent insurance acquisitions ramp up.”

“We believe the underlying local Delmarva economy, including the residential and commercial real estate markets, continues to be both vibrant and resilient. While transaction volume has declined somewhat, real estate values across our region have held up quite well. The Company’s outstanding credit quality at year-end is attributable to the strength of our markets, our careful underwriting, our effective risk management and our historical ability to rapidly identify and mitigate potential problems that could affect our businesses. As we closed out the year we were pleased with the reduction in nonperforming assets. Our capital strength continues to be substantial.”

“At this point during a tough banking industry cycle, we believe we are now very well positioned to deliver further consistent growth and diversification as the leading publicly-traded financial institution on the Delmarva Peninsula,” Vermilye said.
 
The Company’s return on average assets for the year ended December 31, 2007 was 1.42%, compared to 1.52% for the same period last year. The return on average stockholders’ equity was 11.79% for the year ended December 31, 2007, compared to 12.66% for the year ended December 31, 2006.

At December 31, 2007, total assets were $956.9 million, total deposits were $765.9 million, and total stockholders’ equity was $120.2 million, compared to $945.6 million, $774.2 million, and $111.3 million, respectively, at December 31, 2006. The increase in total assets of $11.3 million since December 31, 2006 was primarily related to loan growth. Loans increased $76.6 million during 2007, totaling $776.4 million at December 31, 2007.

Review of Financial Results for the Quarter
Net interest income for the fourth quarter of 2007 was $10.4 million, an increase of 7.8% over the $9.7 million earned during the same period last year. An increased volume of earning assets, concentrated in loans, as well as higher overall yields were the reasons for the growth in net interest income. The Company’s net interest margin for the quarter ended December 31, 2007 increased to 4.70%, compared to 4.42% for the same period in 2006. The market for deposits remained competitive throughout the fourth quarter of 2007, resulting in higher rates paid for interest bearing deposits. The cost of interest bearing liabilities was 3.35% for the quarter ended December 31, 2007, compared to 3.33% for the same quarter in 2006. 

The provision for credit losses for the three-month periods ended December 31, 2007 and 2006 was $465,000 and $526,000, respectively. Net charge-offs were $135,000 for the three months ended December 31, 2007, compared to $69,000 for the same period last year. The decline in the provision for the fourth quarter of 2007 over the same period last year is the result of a decline in nonaccrual loans. Management believes that the provision for credit losses and the resulting allowance are adequate at December 31, 2007.

 
Noninterest income for the fourth quarter of 2007 increased $1.8 million primarily as a result of two insurance entities acquired in the fourth quarter of 2007. Increases in service charges totaling $137,000 also contributed to the growth.

Noninterest expense for the fourth quarter of 2007 increased $2.1 million to $9.3 million when compared to the fourth quarter of 2006. The increase was primarily attributable to the acquisition of two new insurance entities acquired in the fourth quarter of 2007.

Review of Full-Year Financial Results
Net interest income for the year ended December 31, 2007 increased 5.5% or $2.1 million to $41 million when compared to 2006. The increase is the result of growth in earning assets, concentrated in the loan portfolio. The yield on earning assets increased 36 basis points to 7.34% and the overall cost of interest bearing liabilities increased 50 basis points to 3.36% for the year ended December 31, 2007 when compared to 2006. The Company’s net interest margin remained relatively flat at 4.64% for the year when compared to last year.

The provision for credit losses for the years ended December 31, 2007 and 2006 was $1,724,000 and $1,493,000, respectively. Net charge-offs were $472,000 and $429,000 for the years ended December 31, 2007 and 2006, respectively. The increased provision relates to the overall growth of the loan portfolio.

Noninterest income for the year ended December 31, 2007 totaled $14.7 million, an increase of 14.3% when compared to $12.8 million for 2006. The increase is primarily the result of the acquisition of two new insurance entities during the fourth quarter of 2007. Service charge income increased $235,000, insurance agency commissions increased $954,000 and other noninterest income increased $649,000 for the year ended December 31, 2007 when compared to 2006.

Noninterest expense for the year ended December 31, 2007 increased $4 million or 14% to $32.5 million when compared to the 2006. The increase is primarily attributable to the operating costs of the two new insurance agencies that were acquired in the fourth quarter of 2007 ($1,714,000) and increased salaries and benefits costs for the Company’s other operations ($1,513,000). The salaries and benefits cost increases that are non-acquisition related are the results of the increased cost of operating two additional bank branches, increased commission expense related to the increased income from the trust and advisory services and secondary market mortgage programs, as well as additional cost associated with segregating the CEO positions at Shore Bancshares and The Talbot Bank of Easton, Maryland, and hiring a new CEO for The Talbot Bank in the third quarter of 2006.

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; three insurance producer firms, The Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and Associates, Inc.; a wholesale insurance company; Tri-State General Insurance Agency, Inc.; an insurance premium finance company, Mubell Finance, LLC; and a registered investment adviser firm, Wye Financial Services, LLC.

Forward-Looking Statements
This press release contains 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 section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.
 
For further information contact: W. Moorhead Vermilye, President and CEO     Ph: (410)822-1400
 
 
Financial Highlights
                          
(Dollars in thousands,
except per share data)
  
Three Months Ended
  
Twelve Months ended
  
   
December 31,
  
December 31,
  
 
  
2007
  
2006
  
%
Change
  
2007
  
2006
  
%
Change
  
PROFITABILITY FOR THE PERIOD:
                                      
Net interest income
  
$
10,426
  
$
9,671
    
7.8
%   
$
41,036
  
$
38,896
    
5.5
%
Provision for loan and lease losses
    
465
    
526
    
-11.6
%
$
1,724
    
1,493
    
15.5
%
Noninterest income
    
4,715
    
2,926
    
61.1
%
$
14,679
    
12,839
    
14.3
%
Noninterest expense
    
9,302
    
7,189
    
29.4
%
$
32,539
    
28,534
    
14.0
%
Income before income taxes
    
5,374
    
4,882
    
10.1
%
$
21,452
    
21,708
    
-1.2
%
Income taxes
    
2,034
    
1,829
    
11.2
%
$
8,002
    
8,154
    
-1.9
%
Net income
    
3,340
    
3,053
    
9.4
%
$
13,450
    
13,554
    
-0.8
%
Return on average assets
    
1.40
%   
  
1.30
%  
  
8.1
%
  
1.42
%   
  
1.52
%  
  
-6.4
%
Return on average equity
    
11.78
%
  
11.06
%
  
6.5
%
  
11.79
%
  
12.66
%
  
-6.9
%
Net interest margin
    
4.70
%
  
4.42
%
  
6.3
%
  
4.64
%
  
4.70
%
  
-1.3
%
Efficiency ratio - GAAP based
    
61.44
%
  
56.40
%
  
8.9
%
  
58.40
%
  
54.50
%
  
7.2
%
                                       
PER SHARE DATA:
                                      
Basic net income
  
$
0.40
  
$
0.36
    
11.1
%
$
1.61
  
$
1.62
    
-0.6
%
Diluted net income
  
$
0.40
  
$
0.36
    
11.1
%
$
1.60
  
$
1.61
    
-0.6
%
Dividends declared
  
$
0.16
  
$
0.15
    
6.7
%
$
0.64
  
$
0.59
    
8.5
%
Book Value
  
$
14.35
  
$
13.28
    
8.0
%
$
14.35
  
$
13.28
    
8.0
%
Tangible book value
  
$
11.68
  
$
11.67
    
0.1
%
$
11.68
  
$
11.67
    
0.1
%
                                       
Average fully diluted shares
    
8,390,832
   
8,399,666
   
-0.2
%
  
8,394,075
   
8,393,011
   
0.0
%
                                       
AT PERIOD-END:
                                      
Assets
  
$
956,911
  
$
945,649
    
1.2
%
$
956,911
  
$
945,649
    
1.2
%
Deposits
  
$
765,895
  
$
774,182
    
-1.1
%
$
765,895
  
$
774,182
    
-1.1
%
Loans and leases
  
$
776,350
  
$
699,719
    
11.0
%
$
776,350
  
$
699,719
    
11.0
%
Securities
  
$
110,033
  
$
130,246
    
-15.5
%
$
110,033
  
$
130,246
    
-15.5
%
Stockholders' equity
  
$
120,235
  
$
111,327
    
8.0
%
$
120,235
  
$
111,327
    
8.0
%
                                       
CAPITAL AND CREDIT QUALITY RATIOS:
                              
Average equity to average assets
    
11.91
%
  
11.72
%
        
12.04
%
  
11.98
%
      
Allowance for loan and lease losses  to loans and leases
    
0.97
%
  
0.90
%
        
0.97
%
  
0.90
%
      
Nonperforming assets to total assets
    
0.39
%
  
0.85
%
        
0.39
%
  
0.85
%
      
Annualized net (charge-offs)  recoveries to average loan and leases
    
0.06
%
  
0.06
%
        
0.06
%
  
0.06
%
      
 
 
         
(In thousands)
          
   
December 31,
  
December 31,
  
 
  
2007
  
2006
  
ASSETS
              
Cash and due from banks
  
$
17,198
  
$
26,511
  
Federal funds sold
    
6,646
   
19,622
 
Interest-bearing deposits with banks
    
3,036
   
33,540
 
Investments available-for-sale (at fair value)
    
97,137
   
116,275
 
Investments held-to-maturity
    
12,896
   
13,971
 
               
Total loans and leases
    
776,350
   
699,719
 
Less: allowance for loan and lease losses
    
(7,551
)
  
(6,300
)
Net loans and leases
    
768,799
   
693,419
 
               
Premises and equipment, net
    
15,617
   
15,974
 
Accrued interest receivable
    
5,008
   
4,892
 
Goodwill
    
15,954
   
11,939
 
Other intangible assets, net
    
6,436
   
1,569
 
Other assets
    
8,184
   
7,937
 
               
Total assets
  
$
956,911
  
$
945,649
  
               
LIABILITIES
              
Noninterest-bearing deposits
  
$
104,081
  
$
109,962
  
Interest-bearing deposits
    
661,814
   
664,220
 
           
Total deposits
    
765,895
   
774,182
 
               
Short-term borrowings
    
47,694
   
26,524
 
Other long-term borrowings
    
12,485
   
27,000
 
Accrued interest payable and other liabilities
    
10,602
   
6,616
 
           
Total liabilities
    
836,676
   
834,322
 
               
STOCKHOLDER'S EQUITY
              
Common stock
    
84
   
84
 
Additional paid in capital
    
29,539
   
29,688
 
Retained earnings
    
90,365
   
82,279
 
Accumulated other comprehensive income
    
247
   
(724
)
Total stockholders’ equity
    
120,235
   
111,327
 
               
Total liabilities and stockholders’ equity
  
$
956,911
  
$
945,649
  
 
 
Consolidated Statements of Income
                  
(Dollars in thousands, except per share data)
                  
   
Three Months Ended
  
Twelve Months Ended
  
   
December 31,
  
December 31,
  
 
  
2007
  
2006
  
2007
  
2006
  
Interest Income:
                          
Interest and fees on loans and leases
  
$
14,958
  
$
13,261
  
$
57,524
  
$
50,572
  
Interest on deposits with banks
    
46
   
445
   
893
   
939
 
Interest and dividends on securities:
    
-
                   
Taxable
    
1,205
   
1,227
   
5,105
   
4,452
 
Exempt from federal income taxes
    
124
   
133
   
511
   
549
 
Interest on federal funds sold
    
120
   
529
   
1,108
   
1,459
 
Total interest income
    
16,453
   
15,595
   
65,141
   
57,971
 
                   
Interest expense:
                          
Interest on deposits
    
5,429
   
5,311
   
21,692
   
17,129
 
Interest on short-term borrowings
    
364
   
265
   
1,107
   
1,034
 
Interest on long-term borrowings
    
234
   
348
   
1,306
   
912
 
                       
Total interest expense
    
6,027
   
5,924
   
24,105
   
19,075
 
Net interest income
    
10,426
   
9,671
   
41,036
   
38,896
 
Provision for loan and lease losses
    
465
   
526
   
1,724
   
1,493
 
Net interest income after provision for loan and lease losses
    
9,961
   
9,145
   
39,312
   
37,403
 
                   
Noninterest income:
                          
Securities gains (losses)
    
4
   
0
   
5
   
3
 
Service charges on deposit accounts
    
952
   
815
   
3,372
   
3,137
 
Insurance agency commissions
    
2,694
   
1,329
   
7,698
   
6,744
 
Other income
    
1,065
   
782
   
3,604
   
2,955
 
Total noninterest income
    
4,715
   
2,926
   
14,679
   
12,839
 
Noninterest expenses:
                  
Salaries and employee benefits
    
5,520
   
4,364
   
19,991
   
17,693
 
Occupancy expense of premises
    
518
   
421
   
1,962
   
1,655
 
Equipment expenses
    
324
   
285
   
1,312
   
1,293
 
Data processing
    
467
   
386
   
1,820
   
1,559
 
Directors' fees
    
178
   
129
   
605
   
536
 
Amortization of intangible assets
    
130
   
84
   
333
   
337
 
Other expenses
    
2,165
   
1,520
   
6,516
   
5,461
 
Total noninterest expense
    
9,302
   
7,189
   
32,539
   
28,534
 
                           
Income before income taxes
    
5,374
   
4,882
   
21,452
   
21,708
 
Income tax expense
    
2,034
   
1,829
   
8,002
   
8,154
 
                       
Net income
  
$
3,340
  
$
3,053
  
$
13,450
  
$
13,554
  
                           
Basic net income per share
  
$
0.40
  
$
0.36
  
$
1.61
  
$
1.62
  
Diluted net income per share
  
$
0.40
  
$
0.36
  
$
1.60
  
$
1.61
  
Dividends declared per share
  
$
0.16
  
$
0.15
  
$
0.64
  
$
0.59