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):  January 28, 2009

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:

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

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

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))

ITEM 2.02. Results of Operation and Financial Condition.

On January 28, 2009, Shore Bancshares, Inc. issued a press release describing its financial results for the three and 12 months ended December 31, 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 99.1 Press release dated January 28, 2009 (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:  January 30, 2009	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

-2-

EXHIBIT INDEX

Exhibit

Number Description

99.1 Press release dated January 28, 2009 (furnished herewith).

-3-

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 2008 Earnings Results

Easton, Maryland (01/28/2009) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $2.3 million or $0.27 per diluted share for the fourth quarter of 2008, compared to $3.1  million or $0.37 per diluted share for the third quarter of 2008 and $3.3 million or $0.40 per diluted share for the fourth quarter of 2007.  Net income for 2008 was $11.5 million or $1.37 per diluted share, compared to $13.4 million or $1.60 per diluted share for 2007.

“In spite of the current economy, we produced good net income and, even during this tough operating environment for all banks, we think several of the main measures of our performance are encouraging and will turn out to be above peer averages. For instance, our net interest margin has held up well and was 4.24% and 4.23%, for the fourth quarter and full year, respectively,” said W. Moorhead Vermilye, president and chief executive officer.

“Loans grew 14.4% and deposits grew 10.4% during 2008. Stockholders’ equity increased by nearly 6% during the year.  Noninterest revenue advanced 38.6% for 2008 compared to the previous year.”

“We believe overall credit quality is fundamentally sound, although there was predictable deterioration. Our ratio of nonperforming assets to total assets was 0.79% at December 31, 2008. Although year-to-date annualized net charge-offs as a percentage of average loans amounted to 0.19%, we maintained our loan-loss reserve coverage at 1.05% of period-end loans.”

“We believe these statistics are the product of our conservative balance sheet management and a focus on consistent performance. It’s also evidence of the determined efforts of our people to further grow our leadership position across the company’s Delmarva footprint. Even in this unprecedented banking environment, we think we’ve done a good job of solidifying our reputation as the bank of choice for area customers and the employer of choice for the top bankers here,” according to Vermilye.

The Company’s return on average assets for the fourth quarter of 2008 was 0.87%, compared to 1.19% and 1.40% for the quarters ended September 30, 2008 and December 31, 2007, respectively.  The return on average stockholders’ equity was 7.11% for the fourth quarter of 2008, compared to 9.81% for the third quarter of 2008 and 11.78% for the fourth quarter of 2007.

The Company’s return on average assets for 2008 was 1.13%, compared to 1.42% for 2007.  The return on average stockholders’ equity was 9.22% for 2008, compared to 11.79% for 2007.

Page 2 of 8

At December 31, 2008, total assets were $1.045 billion, total deposits were $845.4 million, and total stockholders’ equity was $127.4 million, an increase of 9.2%, 10.4% and 5.9%, respectively, when compared to the same amounts at December 31, 2007. The increase in total assets of $87.7 million since December 31, 2007 related mainly to loan growth, funded primarily by deposit growth.  The growth in loans was $112.2 million, or 14.4%, during 2008, with period-end loans totaling $888.5 million at December 31, 2008.

Review of Quarterly Financial Results

Net interest income for the fourth quarter of 2008 was $10.3 million, an increase of 4.4% from the third quarter of 2008 and a slight decrease from the same period last year.  Higher loan volume and lower cost of funds were the primary reasons for the increase from the third quarter of 2008.  Lower yields on earning assets was the primary reason for the decrease from the fourth quarter of 2007.  The Company’s net interest margin was 4.24% for the fourth quarter of 2008, an increase of 14 basis points when compared to the third quarter of 2008 and a decrease of 46 basis points when compared to the fourth quarter of 2007.

The provision for credit losses was $1.4 million for the three months ended December 31, 2008. The comparable amounts were $875 thousand and $465 thousand for the three months ended September 30, 2008 and December 31, 2007, respectively. The increased provision for the fourth quarter of 2008 when compared to the third quarter of 2008 and the fourth quarter of 2007 reflected the continued growth in the loan portfolio, an increase in nonperforming assets and loan charge-offs, as well as overall economic conditions.  Net charge-offs were $683 thousand for the fourth quarter of 2008, $539 thousand for the third quarter of 2008 and $135 thousand for the fourth quarter of 2007.  Quarter-to-date annualized net charge-offs to average loans was 0.31% for the fourth quarter of 2008, 0.25% for the third quarter of 2008 and 0.06% for the fourth quarter of 2007. Nonperforming assets to total assets was 0.79% at December 31, 2008.  The comparable nonperforming asset ratio was 0.72% at  September 30, 2008 and 0.39% at December 31, 2007.  The allowance for credit losses to period-end loans increased to 1.05% at December 31, 2008, compared to 1.00% at September 30, 2008 and 0.97% at December 31, 2007. Management believes that the provision for credit losses and the resulting allowance were adequate at December 31, 2008.

Total noninterest income for the fourth quarter of 2008 decreased $307 thousand when compared to the fourth quarter of 2007 primarily due to a decline in insurance agency commissions.  Total noninterest income decreased $838 thousand from the third quarter of 2008.  Included in noninterest income for the third quarter of 2008 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.  The branch remains open and the bank will move the branch operations to a new facility in the future. The gain on the branch sale was partially offset by a $371 thousand impairment loss 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.  Also contributing to the decrease in noninterest income from the third quarter of 2008 was a $350 thousand decrease in insurance agency commissions.

Total noninterest expense for the fourth quarter of 2008 increased $319 thousand when compared to the fourth quarter of 2007 primarily due to increased salaries and benefits. Total noninterest expense increased $192 thousand from the third quarter of 2008 due to an increase in general operating costs.

Page 3 of 8

Review of 2008 Financial Results

Net interest income for 2008 was $39.9 million, a decrease of 2.7% when compared to 2007.  The decrease was primarily the result of lower yields on earning assets.  The net interest margin declined 41 basis points from 4.64% for 2007 to 4.23% for 2008.

The provisions for credit losses for 2008 and 2007 were $3.3 million and $1.7 million, respectively.  The increased provision in 2008 reflected the overall growth of the loan portfolio, an increase in nonperforming assets and loan charge-offs, and a deterioration in overall economic conditions.  Net charge-offs were $1.6 million and $473 thousand for 2008 and 2007, respectively.  Net charge-offs to average loans was 0.19% for 2008 and 0.06% for 2007.

Total noninterest income for 2008 was $20.3 million, an increase of $5.7 million when compared to 2007.  The increase was primarily due to an increase in insurance agency commissions and other noninterest income.  The increase in insurance agency commissions was primarily due to the acquisition of two insurance agencies during the fourth quarter of 2007.   Noninterest income included the previously mentioned $1.3 million gain on the land and bank building sale, a $371 thousand impairment loss on Freddie Mac Preferred stock and the $337 thousand investment loss.

Total noninterest expense for 2008 was $38.4 million, an increase of $5.8 million when compared to the previous year.  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 $3.3 million and other noninterest expenses increased $2.2 million for 2008 when compared to 2007.   The majority of the increase in noninterest expenses, including salaries and benefits, related to the new insurance agencies.

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 – 410/819-3047.

Page 4 of 8

Shore Bancshares, Inc.

Financial Highlights

(Dollars in thousands, except per share data)

	For the Three Months Ended									For the Twelve Months Ended
	December 31,									December 31,
	2008			2007			% Change			2008			2007			% Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,348		$	10,426			(0.7	) %	$	39,919		$	41,036			(2.7	) %
Provision for credit losses		1,385			465			197.8			3,337			1,724			93.6
Noninterest income		4,408			4,715			(6.5	)		20,350			14,679			38.6
Noninterest expense		9,621			9,302			3.4			38,370			32,539			17.9
Income before income taxes		3,750			5,374			(30.2	)		18,562			21,452			(13.5	)
Income tax expense		1,489			2,034			(26.8	)		7,092			8,002			(11.4	)
Net income	$	2,261		$	3,340			(32.3	)	$	11,470		$	13,450			(14.7	)
Return on average assets		0.87	%		1.40	%		(37.9	) %		1.13	%		1.42	%		(20.4	) %
Return on average equity		7.11			11.78			(39.6	)		9.22			11.79			(21.8	)
Net interest margin		4.24			4.70			(9.8	)		4.23			4.64			(8.8	)
Efficiency ratio - GAAP based		65.20			61.44			6.1			63.66			58.40			9.0
PER SHARE DATA
Basic net income	$	0.27		$	0.40			(32.5	) %	$	1.37		$	1.61			(14.9	) %
Diluted net income		0.27			0.40			(32.5	)		1.37			1.60			(14.4	)
Dividends paid		0.16			0.16			-			0.64			0.64			-
Book value at period end		15.16			14.35			5.6
Tangible book value at period end		12.55			11.68			7.4
Market value at period end		23.99			21.95			9.3
Market range:
High		25.97			24.72			5.1			27.25			30.76			(11.4	)
Low		17.50			20.00			(12.5	)		17.50			20.00			(12.5	)
AT PERIOD END
Loans	$	888,528		$	776,350			14.4	%
Securities		89,456			110,033			(18.7	)
Assets		1,044,641			956,911			9.2
Deposits		845,371			765,895			10.4
Stockholders' equity		127,385			120,235			5.9
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		12.22	%		11.91	%					12.30	%		12.04	%
Annualized net charge-offs to average loans		0.31			0.06						0.19			0.06
Allowance for credit losses to period-end loans		1.05			0.97
Nonperforming assets to total assets		0.79			0.39

Page 5 of 8

Shore Bancshares, Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

							Dec. 31, 2008
	Dec. 31,			Dec. 31,			compared to
	2008			2007			Dec. 31, 2007
ASSETS
Cash and due from banks	$	16,803		$	17,198			(2.3	) %
Interest-bearing deposits with other banks		481			3,036			(84.2	)
Federal funds sold		10,010			6,646			50.6
Investments available-for-sale (at fair value)		79,204			97,137			(18.5	)
Investments held-to-maturity		10,252			12,896			(20.5	)
Loans		888,528			776,350			14.4
Less: allowance for credit losses		(9,320	)		(7,551	)		23.4
Loans, net		879,208			768,799			14.4
Premises and equipment, net		13,855			15,617			(11.3	)
Accrued interest receivable		4,606			5,008			(8.0	)
Goodwill		15,954			15,954			-
Other intangible assets, net		5,921			6,436			(8.0	)
Other real estate owned		148			176			(15.9	)
Other assets		8,199			8,008			2.4
Total assets	$	1,044,641		$	956,911			9.2
LIABILITIES
Noninterest-bearing deposits	$	102,584		$	104,081			(1.4	)
Interest-bearing deposits		742,787			661,814			12.2
Total deposits		845,371			765,895			10.4
Short-term borrowings		52,969			47,694			11.1
Long-term debt		7,947			12,485			(36.3	)
Accrued interest payable and other liabilities		10,969			10,602			3.5
Total liabilities		917,256			836,676			9.6
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares		84			84			-
Additional paid in capital		29,768			29,539			0.8
Retained earnings		96,140			90,365			6.4
Accumulated other comprehensive income (loss)		1,393			247			464.0
Total stockholders' equity		127,385			120,235			5.9
Total liabilities and stockholders' equity	$	1,044,641		$	956,911			9.2
Period-end shares outstanding		8,405			8,381			0.3
Book value per share	$	15.16		$	14.35			5.6

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 Twelve Months Ended
	December 31,								December 31,
	2008			2007		% Change			2008			2007		% Change
INTEREST INCOME
Interest and fees on loans	$	14,166		$	14,958		(5.3	)  %	$	56,866		$	57,524		(1.1	)  %
Interest and dividends on investment securities:
Taxable		839			1,205		(30.4	)		3,788			5,105		(25.8	)
Tax-exempt		93			124		(25.0	)		420			511		(17.8	)
Interest on federal funds sold		24			120		(80.0	)		308			1,108		(72.2	)
Interest on deposits with other banks		4			46		(91.3	)		92			893		(89.7	)
Total interest income		15,126			16,453		(8.1	)		61,474			65,141		(5.6	)
INTEREST EXPENSE
Interest on deposits		4,582			5,430		(15.6	)		19,877			21,693		(8.4	)
Interest on short-term borrowings		121			426		(71.6	)		1,147			1,264		(9.3	)
Interest on long-term debt		75			171		(56.1	)		531			1,148		(53.7	)
Total interest expense		4,778			6,027		(20.7	)		21,555			24,105		(10.6	)
NET INTEREST INCOME		10,348			10,426		(0.7	)		39,919			41,036		(2.7	)
Provision for credit losses		1,385			465		197.8			3,337			1,724		93.6
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		8,963			9,961		(10.0	)		36,582			39,312		(6.9	)
NONINTEREST INCOME
Service charges on deposit accounts		889			952		(6.6	)		3,600			3,372		6.8
Investment securities gains (losses)		(15	)		4		(475.0	)		(15	)		5		(400.0	)
Other than temporary impairment of securities		-			-		-			(371	)		-		-
Insurance agency commissions		2,495			2,694		(7.4	)		12,090			7,698		57.1
Other noninterest income		1,039			1,065		(2.4	)		5,046			3,604		40.0
Total noninterest income		4,408			4,715		(6.5	)		20,350			14,679		38.6
NONINTEREST EXPENSE
Salaries and employee benefits		5,776			5,520		4.6			23,321			19,991		16.7
Occupancy expense		585			518		12.9			2,179			1,962		11.1
Furniture and equipment expense		291			324		(10.2	)		1,185			1,312		(9.7	)
Data processing		476			467		1.9			1,872			1,820		2.9
Directors' fees		132			178		(25.8	)		558			605		(7.8	)
Amortization of intangible assets		129			130		(0.8	)		515			333		54.7
Other noninterest expenses		2,232			2,165		3.1			8,740			6,516		34.1
Total noninterest expense		9,621			9,302		3.4			38,370			32,539		17.9
Income before income taxes		3,750			5,374		(30.2	)		18,562			21,452		(13.5	)
Income tax expense		1,489			2,034		(26.8	)		7,092			8,002		(11.4	)
NET INCOME	$	2,261		$	3,340		(32.3	)	$	11,470		$	13,450		(14.7	)
Weighted average shares outstanding - basic		8,388			8,380		0.1			8,384			8,380		-
Weighted average shares outstanding - diluted		8,394			8,391		-			8,391			8,394		-
Basic net income per share	$	0.27		$	0.40		(32.5	)	$	1.37		$	1.61		(14.9	)
Diluted net income per share		0.27			0.40		(32.5	)		1.37			1.60		(14.4	)
Dividends paid per share		0.16			0.16		-			0.64			0.64		-

Page 7 of 8

Shore Bancshares, Inc.

Financial Highlights By Quarter

(Dollars in thousands, except per share data)

	4th quarter			3rd quarter			2nd quarter			1st quarter			4th quarter				4Q 08			4Q 08
	2008			2008			2008			2008			2007			compared to			compared to
	(4Q 08)			(3Q 08)			(2Q 08)			(1Q 08)			(4Q 07)			3Q 08			4Q 07
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,348		$	9,909		$	9,632		$	10,030		$	10,426			4.4	%		(0.7	) %
Provision for credit losses		1,385			875			615			462			465			58.3			197.8
Noninterest income		4,408			5,246			5,194			5,502			4,715			(16.0	)		(6.5	)
Noninterest expense		9,621			9,429			9,729			9,591			9,302			2.0			3.4
Income before income taxes		3,750			4,851			4,482			5,479			5,374			(22.7	)		(30.2	)
Income tax expense		1,489			1,780			1,716			2,107			2,034			(16.3	)		(26.8	)
Net income	$	2,261		$	3,071		$	2,766		$	3,372		$	3,340			(26.4	)		(32.3	)
Return on average assets		0.87	%		1.19	%		1.12	%		1.38	%		1.40	%		(26.9	) %		(37.9	) %
Return on average equity		7.11			9.81			8.98			10.96			11.78			(27.5	)		(39.6	)
Net interest margin		4.24			4.10			4.17			4.42			4.70			3.4			(9.8	)
Efficiency ratio - GAAP based		65.20			62.22			65.62			61.75			61.44			4.8			6.1
PER SHARE DATA
Basic net income	$	0.27		$	0.37		$	0.33		$	0.40		$	0.40			(27.0	) %		(32.5	) %
Diluted net income		0.27			0.37			0.33			0.40			0.40			(27.0	)		(32.5	)
Dividends paid		0.16			0.16			0.16			0.16			0.16			-			-
Book value at period end		15.16			14.92			14.65			14.62			14.35			1.6			5.6
Tangible book value at period end		12.55			12.30			12.01			11.96			11.68			2.0			7.4
Market value at period end		23.99			25.70			18.72			21.45			21.95			(6.7	)		9.3
Market range:
High		25.97			27.25			26.47			23.40			24.72			(4.7	)		5.1
Low		17.50			18.00			18.52			20.00			20.00			(2.8	)		(12.5	)
AT PERIOD END
Loans	$	888,528		$	865,437		$	841,600		$	808,583		$	776,350			2.7	%		14.4	%
Securities		89,456			93,149			91,842			99,062			110,033			(4.0	)		(18.7	)
Assets		1,044,641			1,037,026			1,019,463			1,003,836			956,911			0.7			9.2
Deposits		845,371			839,217			818,656			808,917			765,895			0.7			10.4
Stockholders' equity		127,385			125,401			123,038			122,699			120,235			1.6			5.9
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		12.22	%		12.12	%		12.41	%		12.56	%		11.91	%
Annualized net charge-offs to average loans		0.31			0.25			0.13			0.04			0.06
Allowance for credit losses to period-end loans		1.05			1.00			0.98			0.98			0.97
Nonperforming assets to total assets		0.79			0.72			0.47			0.34			0.39

Page 8 of 8

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter

(Dollars in thousands, except per share data)

													4Q 08			4Q 08
													compared to			compared to
	4Q 08			3Q 08			2Q 08		1Q 08		4Q 07		3Q 08			4Q 07
INTEREST INCOME
Interest and fees on loans	$	14,166		$	14,179		$	13,961	$	14,560	$	14,958		(0.1	) %		(5.3	) %
Interest and dividends on investment securities:
Taxable		839			924			945		1,080		1,205		(9.2	)		(30.4	)
Tax-exempt		93			95			109		123		124		(2.1	)		(25.0	)
Interest on federal funds sold		24			79			83		122		120		(69.6	)		(80.0	)
Interest on deposits with other banks		4			21			29		38		46		(81.0	)		(91.3	)
Total interest income		15,126			15,298			15,127		15,923		16,453		(1.1	)		(8.1	)
INTEREST EXPENSE
Interest on deposits		4,582			4,955			4,997		5,343		5,430		(7.5	)		(15.6	)
Interest on short-term borrowings		121			344			316		366		426		(64.8	)		(71.6	)
Interest on long-term debt		75			90			182		184		171		(16.7	)		(56.1	)
Total interest expense		4,778			5,389			5,495		5,893		6,027		(11.3	)		(20.7	)
NET INTEREST INCOME		10,348			9,909			9,632		10,030		10,426		4.4			(0.7	)
Provision for credit losses		1,385			875			615		462		465		58.3			197.8
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		8,963			9,034			9,017		9,568		9,961		(0.8	)		(10.0	)
NONINTEREST INCOME
Service charges on deposit accounts		889			923			917		871		952		(3.7	)		(6.6	)
Investment securities gains (losses)		(15	)		-			-		-		4		-			(475.0	)
Other than temporary impairment of securities		-			(371	)		-		-		-		(100.0	)		-
Insurance agency commissions		2,495			2,845			3,219		3,531		2,694		(12.3	)		(7.4	)
Other noninterest income		1,039			1,849			1,058		1,100		1,065		(43.8	)		(2.4	)
Total noninterest income		4,408			5,246			5,194		5,502		4,715		(16.0	)		(6.5	)
NONINTEREST EXPENSE
Salaries and employee benefits		5,776			5,802			5,759		5,984		5,520		(0.4	)		4.6
Occupancy expense		585			558			537		499		518		4.8			12.9
Furniture and equipment expense		291			310			298		286		324		(6.1	)		(10.2	)
Data processing		476			486			440		470		467		(2.1	)		1.9
Directors' fees		132			131			130		165		178		0.8			(25.8	)
Amortization of intangible assets		129			128			129		129		130		0.8			(0.8	)
Other noninterest expenses		2,232			2,014			2,436		2,058		2,165		10.8			3.1
Total noninterest expense		9,621			9,429			9,729		9,591		9,302		2.0			3.4
Income before income taxes		3,750			4,851			4,482		5,479		5,374		(22.7	)		(30.2	)
Income tax expense		1,489			1,780			1,716		2,107		2,034		(16.3	)		(26.8	)
NET INCOME	$	2,261		$	3,071		$	2,766	$	3,372	$	3,340		(26.4	)		(32.3	)
Weighted average shares outstanding - basic		8,388			8,388			8,381		8,391		8,380		-			0.1
Weighted average shares outstanding - diluted		8,394			8,395			8,388		8,400		8,391		-			-
Basic net income per share	$	0.27		$	0.37		$	0.33	$	0.40	$	0.40		(27.0	)		(32.5	)
Diluted net income per share		0.27			0.37			0.33		0.40		0.40		(27.0	)		(32.5	)
Dividends paid per share		0.16			0.16			0.16		0.16		0.16		-			-