8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 24, 2008

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland	0-22345	52-1974638
(State or other jurisdiction of	(Commission file number)	(IRS Employer
incorporation or organization)		Identification No.)

18 East Dover Street, Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (410) 822-1400

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

࿳Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

࿳Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

࿳Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

࿳Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.Results of Operation and Financial Condition.

On October 24, 2008, Shore Bancshares, Inc. issued a press release describing its financial results for the three and nine months ended September 30, 2008. A copy of the press release is furnished herewith as Exhibit 99.1.

The information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01.Financial Statements and Exhibits.

(d)Exhibits.

Exhibit 99.1Press release dated October 24, 2008 (furnished herewith).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SHORE BANCSHARES, INC.
Dated: October 27, 2008	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated October 24, 2008 (furnished herewith).

EX-99.1

Exhibit 99.1

Shore Bancshares, Inc.

18 E. Dover Street

Easton, Maryland 21601

Phone 410-822-1400

PRESS RELEASE

Shore Bancshares Reports Third Quarter and Nine-Month Results

Easton, Maryland (10/24/2008) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $3.1 million or $0.37 per diluted share for the third quarter of 2008, compared to $2.8 million or $0.33 per diluted share for the second quarter of 2008 and $3.4 million or $0.40 per diluted share for the third quarter of 2007. Net income for the first nine months of 2008 was $9.2 million or $1.10 per diluted share, compared to $10.1 million or $1.20 per diluted share for the first nine months of 2007.

“Overall, even though the banking climate did not improve, we are pleased with our third quarter results as net income increased 11% over the second quarter. Returns on average assets and equity also were higher than they were at the end of the second quarter of 2008,” said W. Moorhead Vermilye, president and chief executive officer. “Over the first nine months of this year, loans grew 11.5% and this growth was funded mainly by deposit growth (+9.6%), which is encouraging in such a competitive and rate-sensitive banking environment. The net interest margin did decline by 7 basis points to 4.10%, when compared to the second quarter of this year.”

“Our profitability and the strength of our balance sheet have enabled us to further build our solid capital position, which grew by 4.3% over the first nine months of 2008 to $125.4 million and results in a ratio of average equity to average assets of 12.33%.”

“We increased the provision for credit losses during the third quarter to $875 thousand bringing the total allowance for possible credit losses to 1% of total loans at quarter-end, which is up from 0.98% at June 30, 2008 and 0.96% a year ago. The ratio of annualized net charge-offs to average loans advanced to 0.25% and the ratio of nonperforming assets to total assets increased to 0.72% at quarter-end. We believe that our current loan-loss reserves are adequate and that our levels of charge-offs and nonperforming assets will compare favorably to our peers when third quarter results are in for the other Mid-Atlantic banking companies.”

“Credit quality in the existing loan portfolios is paramount -- we are working proactively to identify potential problems, establish rational values and build reserves accordingly, as evidenced by the increase in this quarter’s provision. Credit quality will also be an acute focus as we originate new loans. We recognize that continuing to grow our capital base is essential to our ability to expand organically and our ability to evaluate acquisition-related opportunities,” said Vermilye.

The Company’s return on average assets for the third quarter of 2008 was 1.19%, compared to 1.12% and 1.42% for the quarters ended June 30, 2008 and September 30, 2007, respectively. The return on average stockholders’ equity was 9.81% for the third quarter of 2008, compared to 8.98% for the second quarter of 2008 and 11.51% for the third quarter of 2007.

The Company’s return on average assets for the first nine months of 2008 was 1.23%, compared to 1.43% for the first nine months of 2007. The return on average stockholders’ equity was 9.95% for the first nine months of 2008, compared to 11.76% for the same period in 2007.

Page 2 of 8

At September 30, 2008, total assets were $1.037 billion, total deposits were $839.2 million, and total stockholders’ equity was $125.4 million, an increase of 8.4%, 9.6% and 4.3%, respectively, when compared to the same amounts at December 31, 2007.The increase in total assets of $80.1 million since December 31, 2007 related mainly to loan growth, funded primarily by deposit growth. The growth in loans was $89.1 million, or 11.5%, during the first nine months of 2008, with period-end loans totaling $865.4 million at September 30, 2008.

Review of Quarterly Financial Results

Net interest income for the third quarter of 2008 was $9.9 million, an increase of 2.9% from the second quarter of 2008 and a decrease of 5.3% from the same period last year. Higher loan volume was the primary reason for the increase from the second quarter of 2008 and lower yields on earning assets was the primary reason for the decrease from the third quarter of 2007. The Company’s net interest margin was 4.10% for the third quarter of 2008, a decrease of 7 basis points when compared to the second quarter of 2008 and a decrease of 64 basis points when compared to the third quarter of 2007.

The provision for credit losses was $875 thousand for the three months ended September 30, 2008. The comparable amounts were $615 thousand and $604 thousand for the three months ended June 30, 2008 and September 30, 2007, respectively. The increased provision for the third quarter of 2008 when compared to the second quarter of 2008 and the third quarter of 2007 reflected the continued growth in the loan portfolio, an increase in nonperforming assets and charge-offs, as well as overall economic conditions. Net charge-offs were $539 thousand for the third quarter of 2008, $259 thousand for the second quarter of 2008 and $268 thousand for the third quarter of 2007. Quarter-to-date annualized net charge-offs to average loans was 0.25% for the third quarter of 2008, 0.13% for the second quarter of 2008 and 0.15% for the third quarter of 2007. Nonperforming assets to total assets was 0.72% at September 30, 2008. The comparable nonperforming asset ratio was 0.47% at both June 30, 2008 and September 30, 2007. The allowance for credit losses to period-end loans was 1.00% at September 30, 2008, 0.98% at June 30, 2008 and 0.96% at September 30, 2007. Management believes that the provision for credit losses and the resulting allowance were adequate at September 30, 2008.

Total noninterest income for the third quarter of 2008 increased $2.2 million when compared to the third quarter of 2007. Service charge income decreased $26 thousand, insurance agency commissions increased $1.4 million and other noninterest income increased $775 thousand for the third quarter of 2008 when compared to the third quarter of 2007. The increase in insurance agency commissions was primarily the result of the acquisition of two insurance agencies during the fourth quarter of 2007. Included in other noninterest income was a $1.3 million gain on the sale of a bank branch to the State of Maryland as part of a road widening project. This gain was partially offset by a $371 thousand write-down of Freddie Mac Preferred Stock and a $337 thousand loss on the sale of the Company’s investment in Delmarva Bank Data Processing Center, Inc., an unconsolidated subsidiary. Total noninterest income increased $52 thousand from the second quarter of 2008 primarily due to an increase in other noninterest income of $420 thousand, which included the $1.3 million gain on the land and bank building sale and the $708 thousand investment write-down and loss, partially offset by a decrease in insurance agency commissions of $374 thousand.

Noninterest expense for the third quarter of 2008 increased $1.8 million when compared to the third quarter of 2007. The increase was primarily attributable to the operating expenses of the two insurance agencies acquired during the fourth quarter of 2007. Salaries and benefits increased $979 thousand and other noninterest expenses increased $662 thousand for the third quarter of 2008 when compared to the third quarter of 2007. Noninterest expense decreased $300 thousand from the second quarter of 2008 primarily due to a decrease in other noninterest expenses, including lower professional fees of $124 thousand and lower insurance commission expense of $170 thousand.

Page 3 of 8

Review of Nine-Month Financial Results

Net interest income for the first nine months of 2008 was $29.6 million, a decrease of 3.4% when compared to the first nine months of 2007. The decrease was primarily the result of lower yields on earning assets. The net interest margin declined 40 basis points from 4.62% for the first nine months of 2007 to 4.22% for the first nine months of 2008.

The provisions for credit losses for the nine months ended September 30, 2008 and 2007 were $2.0 million and $1.3 million, respectively. The increased provision in 2008 reflected the overall growth of the loan portfolio, an increase in nonperforming loans and charge-offs, and overall economic conditions. Net charge-offs were $885 thousand and $338 thousand for the nine months ended September 30, 2008 and 2007, respectively. Year-to-date annualized net charge-offs to average loans was 0.14% for the first nine months of 2008 and 0.06% for the same period in 2007.

Total noninterest income for the nine months ended September 30, 2008 totaled $15.9 million, an increase of $6.0 million when compared to the same period in 2007. Service charge income increased $291 thousand, insurance agency commissions increased $4.6 million and other noninterest income increased $1.1 million for the first nine months of 2008 when compared to the same period last year. The increase in insurance agency commissions was primarily due to the acquisition of the two insurance agencies during the fourth quarter of 2007. Other noninterest income included the previously mentioned $1.3 million gain on the land and bank building sale and the $708 thousand investment write-down and loss.

Noninterest expense for the nine months ended September 30, 2008 was $28.7 million, an increase of $5.5 million when compared to the same period in 2007. The increase was primarily attributable to the operating expenses of the two insurance agencies acquired during the fourth quarter of 2007. Salaries and benefits increased $3.1 million and other noninterest expenses increased $2.2 million for the first nine months of 2008 when compared to the same period in 2007.

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, TSGIA, Inc; two insurance premium finance companies, Mubell Finance, LLC and ESFS, Inc; a registered investment adviser firm, Wye Financial Services, LLC; and a mortgage broker subsidiary, Wye Mortgage Group, 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. 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

Page 4 of 8

Shore Bancshares, Inc.
Financial Highlights
(Dollars in thousands, except per share data)
	For the Three Months Ended									For the Nine Months Ended
	September 30,									September 30,
	2008			2007			% Change			2008			2007			% Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	9,909		$	10,463			(5.3	)%	$	29,571		$	30,610			(3.4	)%
Provision for credit losses		875			604			44.9			1,952			1,259			55.0
Noninterest income		5,246			3,055			71.7			15,942			9,964			60.0
Noninterest expense		9,429			7,599			24.1			28,749			23,237			23.7
Income before income taxes		4,851			5,315			(8.7	)		14,812			16,078			(7.9	)
Income tax expense		1,780			1,964			(9.4	)		5,603			5,968			(6.1	)
Net income	$	3,071		$	3,351			(8.4	)	$	9,209		$	10,110			(8.9	)
Return on average assets		1.19	%		1.42	%		(16.2	)%		1.23	%		1.43	%		(14.0	)%
Return on average equity		9.81			11.51			(14.8	)		9.95			11.76			(15.4	)
Net interest margin		4.10			4.74			(13.5	)		4.22			4.62			(8.7	)
Efficiency ratio - GAAP based		62.22			56.21			10.7			63.17			57.27			10.3
PER SHARE DATA
Basic net income	$	0.37		$	0.40			(7.5	)%	$	1.10		$	1.21			(9.1	)%
Diluted net income		0.37			0.40			(7.5	)		1.10			1.20			(8.3	)
Dividends paid		0.16			0.16			-			0.48			0.48			-
Book value at period end		14.92			14.05			6.2
Tangible book value at period end		12.30			12.46			(1.3	)
Market value at period end		25.70			24.14			6.5
Market range:
High		27.25			27.05			0.7			27.25			30.76			(11.4	)
Low		18.00			20.52			(12.3	)		18.00			20.52			(12.3	)
AT PERIOD END
Loans	$	865,437		$	750,457			15.3	%
Securities		93,149			122,773			(24.1	)
Assets		1,037,026			939,877			10.3
Deposits		839,217			760,123			10.4
Stockholders' equity		125,401			117,736			6.5
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		12.12	%		12.30	%					12.33	%		12.13	%
Annualized net charge-offs to average loans		0.25			0.15						0.14			0.06
Allowance for credit losses to period-end loans		1.00			0.96
Nonperforming assets to total assets		0.72			0.47

Page 5 of 8

Shore Bancshares, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
										Sep. 30, 2008			Sep. 30, 2008
	Sep. 30,			Dec. 31,			Sep. 30,			compared to			compared to
	2008			2007			2007			Dec. 31, 2007			Sep. 30, 2007
ASSETS
Cash and due from banks	$	21,883		$	17,198		$	19,972			27.2	%		9.6	%
Interest-bearing deposits with other banks		513			3,036			3,642			(83.1	)		(85.9	)
Federal funds sold		15,416			6,646			7,039			132.0			119.0
Investments available-for-sale (at fair value)		82,235			97,137			109,873			(15.3	)		(25.2	)
Investments held-to-maturity		10,914			12,896			12,900			(15.4	)		(15.4	)
Loans		865,437			776,350			750,457			11.5			15.3
Less: allowance for credit losses		(8,618	)		(7,551	)		(7,221	)		14.1			19.3
Loans, net		856,819			768,799			743,236			11.4			15.3
Premises and equipment, net		14,097			15,617			15,651			(9.7	)		(9.9	)
Accrued interest receivable		5,023			5,008			5,840			0.3			(14.0	)
Goodwill		15,954			15,954			11,939			-			33.6
Other intangible assets, net		6,050			6,436			1,366			(6.0	)		342.9
Other real estate owned		-			176			745			(100.0	)		(100.0	)
Other assets		8,122			8,008			7,674			1.4			5.8
Total assets	$	1,037,026		$	956,911		$	939,877			8.4			10.3
LIABILITIES
Noninterest-bearing deposits	$	118,049		$	104,081		$	110,496			13.4			6.8
Interest-bearing deposits		721,168			661,814			649,627			9.0			11.0
Total deposits		839,217			765,895			760,123			9.6			10.4
Short-term borrowings		53,078			47,694			39,389			11.3			34.8
Long-term debt		8,485			12,485			16,000			(32.0	)		(47.0	)
Accrued interest payable and other liabilities		10,845			10,602			6,629			2.3			63.6
Total liabilities		911,625			836,676			822,141			9.0			10.9
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares		84			84			84			-			-
Additional paid in capital		29,744			29,539			29,518			0.7			0.8
Retained earnings		95,224			90,365			88,367			5.4			7.8
Accumulated other comprehensive income (loss)		349			247			(233	)		41.3			249.8
Total stockholders' equity		125,401			120,235			117,736			4.3			6.5
Total liabilities and stockholders' equity	$	1,037,026		$	956,911		$	939,877			8.4			10.3
Period-end shares outstanding		8,405			8,381			8,380			0.3			0.3
Book value per share	$	14.92		$	14.35		$	14.05			4.0			6.2

Page 6 of 8

Shore Bancshares, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
	For the Three Months Ended							For the Nine Months Ended
	September 30,							September 30,
	2008		2007		% Change			2008		2007		% Change
INTEREST INCOME
Interest and fees on loans	$	14,179	$	14,732		(3.8	)%	$	42,700	$	42,566		0.3	%
Interest and dividends on investment securities:
Taxable		924		1,325		(30.3	)		2,949		3,900		(24.4	)
Tax-exempt		95		128		(25.8	)		327		387		(15.5	)
Interest on federal funds sold		79		178		(55.6	)		284		988		(71.3	)
Interest on deposits with other banks		21		180		(88.3	)		88		847		(89.6	)
Total interest income		15,298		16,543		(7.5	)		46,348		48,688		(4.8	)
INTEREST EXPENSE
Interest on deposits		4,955		5,493		(9.8	)		15,295		16,263		(6.0	)
Interest on short-term borrowings		344		279		23.3			1,026		838		22.4
Interest on long-term debt		90		308		(70.8	)		456		977		(53.3	)
Total interest expense		5,389		6,080		(11.4	)		16,777		18,078		(7.2	)
NET INTEREST INCOME		9,909		10,463		(5.3	)		29,571		30,610		(3.4	)
Provision for credit losses		875		604		44.9			1,952		1,259		55.0
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		9,034		9,859		(8.4	)		27,619		29,351		(5.9	)
NONINTEREST INCOME
Service charges on deposit accounts		923		949		(2.7	)		2,711		2,420		12.0
Investment securities gains (losses)		-		-		-			-		1		(100.0	)
Insurance agency commissions		2,845		1,403		102.8			9,595		5,004		91.7
Other noninterest income		1,478		703		110.2			3,636		2,539		43.2
Total noninterest income		5,246		3,055		71.7			15,942		9,964		60.0
NONINTEREST EXPENSE
Salaries and employee benefits		5,802		4,823		20.3			17,545		14,471		21.2
Occupancy expense		558		460		21.3			1,594		1,444		10.4
Furniture and equipment expense		310		318		(2.5	)		894		988		(9.5	)
Data processing		486		454		7.0			1,396		1,353		3.2
Directors' fees		131		136		(3.7	)		426		427		(0.2	)
Amortization of intangible assets		128		56		128.6			386		203		90.1
Other noninterest expenses		2,014		1,352		49.0			6,508		4,351		49.6
Total noninterest expense		9,429		7,599		24.1			28,749		23,237		23.7
Income before income taxes		4,851		5,315		(8.7	)		14,812		16,078		(7.9	)
Income tax expense		1,780		1,964		(9.4	)		5,603		5,968		(6.1	)
NET INCOME	$	3,071	$	3,351		(8.4	)	$	9,209	$	10,110		(8.9	)
Weighted average shares outstanding - basic		8,388		8,380		0.1			8,382		8,380		0.0
Weighted average shares outstanding - diluted		8,395		8,392		0.0			8,390		8,394		(0.0	)
Basic net income per share	$	0.37	$	0.40		(7.5	)	$	1.10	$	1.21		(9.1	)
Diluted net income per share		0.37		0.40		(7.5	)		1.10		1.20		(8.3	)
Dividends paid per share		0.16		0.16		-			0.48		0.48		-

Page 7 of 8

Shore Bancshares, Inc.
Financial Highlights By Quarter
(Dollars in thousands, except per share data)
	3rd quarter			2nd quarter			1st quarter			4th quarter			3rd quarter			3Q 08			3Q 08
	2008			2008			2008			2007			2007			compared to			compared to
	(3Q 08)			(2Q 08)			(1Q 08)			(4Q 07)			(3Q 07)			2Q 08			3Q 07
PROFITABILITY FOR THE PERIOD
Net interest income	$	9,909		$	9,632		$	10,030		$	10,426		$	10,463			2.9	%		(5.3	)%
Provision for credit losses		875			615			462			465			604			42.3			44.9
Noninterest income		5,246			5,194			5,502			4,715			3,055			1.0			71.7
Noninterest expense		9,429			9,729			9,591			9,302			7,599			(3.1	)		24.1
Income before income taxes		4,851			4,482			5,479			5,374			5,315			8.2			(8.7	)
Income tax expense		1,780			1,716			2,107			2,034			1,964			3.7			(9.4	)
Net income	$	3,071		$	2,766		$	3,372		$	3,340		$	3,351			11.0			(8.4	)
Return on average assets		1.19	%		1.12	%		1.38	%		1.40	%		1.42	%		6.2	%		(16.2	)%
Return on average equity		9.81			8.98			10.96			11.78			11.51			9.2			(14.8	)
Net interest margin		4.10			4.17			4.42			4.70			4.74			(1.7	)		(13.5	)
Efficiency ratio - GAAP based		62.22			65.62			61.75			61.44			56.21			(5.2	)		10.7
PER SHARE DATA
Basic net income	$	0.37		$	0.33		$	0.40		$	0.40		$	0.40			12.1	%		(7.5	)%
Diluted net income		0.37			0.33			0.40			0.40			0.40			12.1			(7.5	)
Dividends paid		0.16			0.16			0.16			0.16			0.16			-			-
Book value at period end		14.92			14.65			14.62			14.35			14.05			1.8			6.2
Tangible book value at period end		12.30			12.01			11.96			11.68			12.46			2.4			(1.3	)
Market value at period end		25.70			18.72			21.45			21.95			24.14			37.3			6.5
Market range:
High		27.25			26.47			23.40			24.72			27.05			2.9			0.7
Low		18.00			18.52			20.00			20.00			20.52			(2.8	)		(12.3	)
AT PERIOD END
Loans	$	865,437		$	841,600		$	808,583		$	776,350		$	750,457			2.8	%		15.3	%
Securities		93,149			91,842			99,062			110,033			122,773			1.4			(24.1	)
Assets		1,037,026			1,019,463			1,003,836			956,911			939,877			1.7			10.3
Deposits		839,217			818,656			808,917			765,895			760,123			2.5			10.4
Stockholders' equity		125,401			123,038			122,699			120,235			117,736			1.9			6.5
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		12.12	%		12.41	%		12.56	%		11.91	%		12.30	%
Annualized net charge-offs to average loans		0.25			0.13			0.04			0.06			0.15
Allowance for credit losses to period-end loans		1.00			0.98			0.98			0.97			0.96
Nonperforming assets to total assets		0.72			0.47			0.34			0.39			0.47

Page 8 of 8

Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter
(Dollars in thousands, except per share data)
											3Q 08			3Q 08
											compared to			compared to
	3Q 08		2Q 08		1Q 08		4Q 07		3Q 07		2Q 08			3Q 07
INTEREST INCOME
Interest and fees on loans	$	14,179	$	13,961	$	14,560	$	14,958	$	14,732		1.6	%		(3.8	)%
Interest and dividends on investment securities:
Taxable		924		945		1,080		1,205		1,325		(2.2	)		(30.3	)
Tax-exempt		95		109		123		124		128		(12.8	)		(25.8	)
Interest on federal funds sold		79		83		122		120		178		(4.8	)		(55.6	)
Interest on deposits with other banks		21		29		38		46		180		(27.6	)		(88.3	)
Total interest income		15,298		15,127		15,923		16,453		16,543		1.1			(7.5	)
INTEREST EXPENSE
Interest on deposits		4,955		4,997		5,343		5,430		5,493		(0.8	)		(9.8	)
Interest on short-term borrowings		344		316		366		426		279		8.9			23.3
Interest on long-term debt		90		182		184		171		308		(50.5	)		(70.8	)
Total interest expense		5,389		5,495		5,893		6,027		6,080		(1.9	)		(11.4	)
NET INTEREST INCOME		9,909		9,632		10,030		10,426		10,463		2.9			(5.3	)
Provision for credit losses		875		615		462		465		604		42.3			44.9
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		9,034		9,017		9,568		9,961		9,859		0.2			(8.4	)
NONINTEREST INCOME
Service charges on deposit accounts		923		917		871		952		949		0.7			(2.7	)
Investment securities gains (losses)		-		-		-		4		-		-			-
Insurance agency commissions		2,845		3,219		3,531		2,694		1,403		(11.6	)		102.8
Other noninterest income		1,478		1,058		1,100		1,065		703		39.7			110.2
Total noninterest income		5,246		5,194		5,502		4,715		3,055		1.0			71.7
NONINTEREST EXPENSE
Salaries and employee benefits		5,802		5,759		5,984		5,520		4,823		0.7			20.3
Occupancy expense		558		537		499		518		460		3.9			21.3
Furniture and equipment expense		310		298		286		324		318		4.0			(2.5	)
Data processing		486		440		470		467		454		10.5			7.0
Directors' fees		131		130		165		178		136		0.8			(3.7	)
Amortization of intangible assets		128		129		129		130		56		(0.8	)		128.6
Other noninterest expenses		2,014		2,436		2,058		2,165		1,352		(17.3	)		49.0
Total noninterest expense		9,429		9,729		9,591		9,302		7,599		(3.1	)		24.1
Income before income taxes		4,851		4,482		5,479		5,374		5,315		8.2			(8.7	)
Income tax expense		1,780		1,716		2,107		2,034		1,964		3.7			(9.4	)
NET INCOME	$	3,071	$	2,766	$	3,372	$	3,340	$	3,351		11.0			(8.4	)
Weighted average shares outstanding - basic		8,388		8,381		8,391		8,380		8,380		0.1			0.1
Weighted average shares outstanding - diluted		8,395		8,388		8,400		8,391		8,392		0.1			0.0
Basic net income per share	$	0.37	$	0.33	$	0.40	$	0.40	$	0.40		12.1			(7.5	)
Diluted net income per share		0.37		0.33		0.40		0.40		0.40		12.1			(7.5	)
Dividends paid per share		0.16		0.16		0.16		0.16		0.16		-			-