EX-99.1 2 v129771_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 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
   
-
   
-