EX-99.1 2 v147100_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 First Quarter 2009 Earnings Results

Easton, Maryland (04/23/2009) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $2.5 million or $0.30 per diluted common share for the first quarter of 2009, compared to $2.3 million or $0.27 per diluted common share for the fourth quarter of 2008 and $3.4 million or $0.40 per diluted common share for the first quarter of 2008.
 
“Credit demand was strong across our markets, as evidenced by nearly $20 million in loan growth during the quarter. New loans were originated with an intense focus on careful underwriting and overall quality. Deposit growth was steady and appears to be driven in part by market disruption from ongoing consolidation efforts of the large national competitors,” said W. Moorhead Vermilye, President and Chief Executive Officer.

“We do not see prospects for meaningful near-term improvement in the difficult operating environment for community banks in our region. Thus, maintaining consistent and acceptable levels of credit quality in our loan portfolios is clearly the main challenge we face over the coming quarters. We expect to continue our elevated emphasis on early identification of potential problem loans and we intend to remain conservative as we build our loan-loss reserves.”

“On January 9, 2009, we sold 25,000 shares of our Series A Preferred Stock to the U.S. Treasury under its TARP Capital Purchase Plan for $25 million. On April 15, 2009, we repurchased all of the Preferred Stock from Treasury at a repurchase price of $25 million, plus accrued dividends of $208,333.33. It is important to note that we were well-capitalized according to regulatory definitions prior to receiving the TARP funds, and we remain well-capitalized after the repurchase,” stated Vermilye.

The Company’s return on average assets for the quarter ended March 31, 2009 was 0.97%, compared to 0.87% and 1.38% for the quarters ended December 31, 2008 and March 31, 2008, respectively.  The return on average stockholders’ equity was 6.84% for the first quarter of 2009, compared to 7.11% for the fourth quarter of 2008 and 10.96% for the first quarter of 2008.
 
At March 31, 2009, total assets were $1.077 billion, total deposits were $873.1 million, and total stockholders’ equity was $153.4 million, an increase of 3.1%, 3.3% and 20.5%, respectively, when compared to the same amounts at December 31, 2008.  The increase in total assets of $32 million since December 31, 2008 related mainly to loan growth, funded primarily by deposit growth.  Loans increased $19.6 million, or 2.2%, during the first quarter of 2009, with loans totaling $908.1 million at March 31, 2009.  The increase in stockholder’s equity during the first quarter was primarily related to the Company’s sale of $25 million in Preferred Stock under the Treasury’s Capital Purchase Program.  As noted above, the Preferred Stock was repurchased on April 15, 2009.
 
 
 
 
Page 2 of 8
 
Review of Quarterly Financial Results
 
Net interest income for the first quarter of 2009 was $10.1 million, a decline of 2.8% from the fourth quarter of 2008 and an increase of 0.3% from the same period last year.  Lower overall yields on loans caused the decline in net interest income in the first quarter of 2009 when compared to the fourth quarter of 2008, despite a $22 million increase in average loan volume and a lower overall cost of funds.  When compared to the first quarter of 2008, the increased volume of loans and reduction in cost of funds was sufficient to offset the decline in loan yields.  The Company’s net interest margin was 4.09% for the first quarter of 2009, a decrease of 15 basis points when compared to the fourth quarter of 2008 and a decrease of 33 basis points when compared to the first quarter of 2008.
 
The provision for credit losses was $912 thousand for the three months ended March 31, 2009. The comparable amounts were $1.4 million and $462 thousand for the three months ended December 31, 2008 and March 31, 2008, respectively.  The increased level of provision expense was primarily in response to continued growth in the loan portfolio, the overall increase in nonperforming assets and loan charge-offs, as well as overall economic conditions.  Net charge-offs were $546 thousand for the first quarter of 2009, $683 thousand for the fourth quarter of 2008 and $87 thousand for the first quarter of 2008.  Annualized net charge-offs to average loans was 0.25% for the first quarter of 2009, 0.31% for the fourth quarter of 2008 and 0.04% for the first quarter of 2008. Nonperforming assets to total assets was 0.85% at March 31, 2009.  The comparable nonperforming asset ratio was 0.79% at December 31, 2008 and 0.34% at March 31, 2008.  The allowance for credit losses to period-end loans increased to 1.07% at March 31, 2009, compared to 1.05% at December 31, 2008 and 0.98% at March 31, 2008. Management believes that the provision for credit losses and the resulting allowance were adequate at March 31, 2009.
 
Total noninterest income for the first quarter of 2009 increased $942 thousand when compared to the fourth quarter of 2008 and declined $152 thousand when compared to the first quarter of 2008. The increase when compared to fourth quarter of 2008 was primarily a result of an increase in insurance agency commissions and contingency payments of $840 thousand.  Contingency payments are typically received in the first quarter of each year and are based on the prior year’s performance. The first quarter of 2009 included investment securities gains of $49 thousand compared to securities losses of $15 thousand in the fourth quarter of 2008.  The decline in noninterest income during the first quarter of 2009 when compared to the first quarter of 2008 was primarily due to a decline in insurance agency commissions of $196 thousand.
 
Total noninterest expense for the first quarter of 2009 increased $262 thousand when compared to the fourth quarter of 2008 and increased $292 thousand when compared to the first quarter of 2008.  A significant portion of the increase was due to increased FDIC insurance premium expense of $97 thousand when compared to the fourth quarter of 2008 and $230 thousand when compared to the first quarter of 2008.  The balance of the increase related to higher general operating costs.
 
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.
 
 
 
 
Page 3 of 8
 

 
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
  
   
March 31,
  
   
2009
    
2008
    
% Change
  
PROFITABILITY FOR THE PERIOD
                  
Net interest income
   $ 10,058     $ 10,030       0.3 %
Provision for credit losses
     912       462       97.4  
Noninterest income
     5,350       5,502       (2.8 )
Noninterest expense
     9,883       9,591       3.0  
Income before income taxes
     4,613       5,479       (15.8 )
Income tax expense
     1,735       2,107       (17.7 )
Net income
     2,878       3,372       (14.7 )
Preferred stock dividends and discount accretion
     337       -       -  
Net income available to common shareholders
   $ 2,541     $ 3,372       (24.6 )
 
                       
                         
Return on average assets (1)
     0.97 %     1.38 %     (29.7 ) %
Return on average equity (1)
     6.84       10.96       (37.6 )
Net interest margin
     4.09       4.42       (7.5 )
Efficiency ratio - GAAP based
     64.14       61.75       3.9  
                         
                         
PER SHARE DATA
                        
Basic net income per share
   $ 0.34     $ 0.40       (15.0 ) %
Basic net income per common share
     0.30       0.40       (25.0 )
Diluted net income per share
     0.34       0.40       (15.0 )
Diluted net income per common share
     0.30       0.40       (25.0 )
Dividends paid per common share
     0.16       0.16       -  
Book value per common share at period end
     15.46       14.62       5.7  
Tangible book value per common share at period end
     12.87       11.96       7.6  
Market value at period end
     16.75       21.45       (21.9 )
Market range:
                        
High
     24.43       23.40       4.4  
Low
     11.00       20.00       (45.0 )
                         
                         
AT PERIOD END
                        
Loans
   $ 908,118     $ 808,583       12.3 %
Securities
     78,953       99,062       (20.3 )
Assets
     1,076,599       1,003,836       7.2  
Deposits
     873,089       808,917       7.9  
Stockholders' equity
     153,446       122,699       25.1  
                         
                         
CAPITAL AND CREDIT QUALITY RATIOS
                        
Average equity to average assets
     14.23 %     12.56 %        
Annualized net charge-offs to average loans
     0.25       0.04          
Allowance for credit losses to period-end loans
     1.07       0.98          
Nonperforming assets to total assets
     0.85       0.34          
 
(1) Calculation uses net income available to common shareholders.
 
 
 
 
Page 5 of 8
 
Shore Bancshares, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
 
                     
Mar. 31, 2009
    
Mar. 31, 2009
  
   
Mar. 31,
    
Dec. 31,
    
Mar. 31,
    
compared to
    
compared to
  
   
2009
    
2008
    
2008
    
Dec. 31, 2008
    
Mar. 31, 2008
  
ASSETS
                              
Cash and due from banks
   $ 17,765     $ 16,803     $ 17,236       5.7 %     3.1 %
Interest-bearing deposits with other banks
     6,838       481       6,928       1,321.6       (1.3 )
Federal funds sold
     24,496       10,010       28,313       144.7       (13.5 )
Investments available-for-sale (at fair value)
     70,137       79,204       86,056       (11.4 )     (18.5 )
Investments held-to-maturity
     8,816       10,252       13,006       (14.0 )     (32.2 )
 
                                       
Loans
     908,118       888,528       808,583       2.2       12.3  
Less: allowance for credit losses
     (9,686 )     (9,320 )     (7,926 )     3.9       22.2  
Loans, net
     898,432       879,208       800,657       2.2       12.2  
                                         
Premises and equipment, net
     13,941       13,855       15,408       0.6       (9.5 )
Accrued interest receivable
     4,672       4,606       5,048       1.4       (7.4 )
Goodwill
     15,954       15,954       15,954       -       -  
Other intangible assets, net
     5,792       5,921       6,307       (2.2 )     (8.2 )
Other real estate owned
     1,463       148       -       888.5       -  
Other assets
     8,293       8,199       8,923       1.1       (7.1 )
                                         
Total assets
   $ 1,076,599     $ 1,044,641     $ 1,003,836       3.1       7.2  
                                         
LIABILITIES
                                        
Noninterest-bearing deposits
   $ 108,017     $ 102,584     $ 103,328       5.3       4.5  
Interest-bearing deposits
     765,072       742,787       705,589       3.0       8.4  
Total deposits
     873,089       845,371       808,917       3.3       7.9  
                                         
Short-term borrowings
     31,057       52,969       42,712       (41.4 )     (27.3 )
Long-term debt
     7,947       7,947       15,485       -       (48.7 )
Accrued interest payable and other liabilities
     11,060       10,969       14,023       0.8       (21.1 )
Total liabilities
     923,153       917,256       881,137       0.6       4.8  
                                         
STOCKHOLDERS' EQUITY
                                        
Preferred stock, par value $0.01; authorized
                                  
25,000 shares
     23,514       -       -       -       -  
Common stock, par value $0.01; authorized
                                  
35,000,000 shares
     84       84       84       -       -  
Warrants
     1,543       -       -       -       -  
Additional paid in capital
     29,790       29,768       29,578       0.1       0.7  
Retained earnings
     97,492       96,140       92,076       1.4       5.9  
Accumulated other comprehensive income
     1,023       1,393       961       (26.6 )     6.5  
Total stockholders' equity
     153,446       127,385       122,699       20.5       25.1  
                                         
Total liabilities and stockholders' equity
   $ 1,076,599     $ 1,044,641     $ 1,003,836       3.1       7.2  
                                         
Period-end preferred shares outstanding
     25,000       -       -       -       -  
Discount on preferred stock
   $ 1,486     $ -     $ -       -       -  
                                         
Period-end common shares outstanding
     8,404,709       8,404,684       8,395,450       -       0.1  
Book value per common share
   $ 15.46     $ 15.16     $ 14.62       2.0       5.7  
 
 
 
 
Page 6 of 8
 
Shore Bancshares, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
 
   
For the Three Months Ended
  
   
March 31,
  
   
2009
    
2008
    
% Change
  
INTEREST INCOME
                  
Interest and fees on loans
   $ 13,617     $ 14,560       (6.5 )  %
Interest and dividends on investment securities:
                  
Taxable
     756       1,080       (30.0 )
Tax-exempt
     85       123       (30.9 )
Interest on federal funds sold
     7       122       (94.3 )
Interest on deposits with other banks
     1       38       (97.4 )
Total interest income
     14,466       15,923       (9.2 )
                         
INTEREST EXPENSE
                        
Interest on deposits
     4,285       5,343       (19.8 )
Interest on short-term borrowings
     49       366       (86.6 )
Interest on long-term debt
     74       184       (59.8 )
Total interest expense
     4,408       5,893       (25.2 )
                         
NET INTEREST INCOME
     10,058       10,030       0.3  
Provision for credit losses
     912       462       97.4  
                         
NET INTEREST INCOME AFTER PROVISION
                  
FOR CREDIT LOSSES
     9,146       9,568       (4.4 )
                         
NONINTEREST INCOME
                        
Service charges on deposit accounts
     809       871       (7.1 )
Investment securities gains (losses)
     49       -       -  
Insurance agency commissions
     3,335       3,531       (5.6 )
Other noninterest income
     1,157       1,100       5.2  
Total noninterest income
     5,350       5,502       (2.8 )
                         
NONINTEREST EXPENSE
                        
Salaries and employee benefits
     5,920       5,984       (1.1 )
Occupancy expense
     549       499       10.0  
Furniture and equipment expense
     314       286       9.8  
Data processing
     438       470       (6.8 )
Directors' fees
     168       165       1.8  
Amortization of intangible assets
     129       129       -  
Other noninterest expenses
     2,365       2,058       14.9  
Total noninterest expense
     9,883       9,591       3.0  
                         
Income before income taxes
     4,613       5,479       (15.8 )
Income tax expense
     1,735       2,107       (17.7 )
                         
NET INCOME
     2,878       3,372       (14.7 )
Preferred stock dividends and discount accretion
     337       -       -  
Net income available to common shareholders
   $ 2,541     $ 3,372       (24.6 )
                         
Weighted average shares outstanding - basic
     8,405       8,391       0.2  
Weighted average shares outstanding - diluted
     8,408       8,400       0.1  
                         
Basic net income per share
   $ 0.34     $ 0.40       (15.0 )
Basic net income per common share
     0.30       0.40       (25.0 )
Diluted net income per share
     0.34       0.40       (15.0 )
Diluted net income per common share
     0.30       0.40       (25.0 )
Dividends paid per common share
     0.16       0.16       -  
 
 
 
 
Page 7 of 8
 
Shore Bancshares, Inc.
Financial Highlights By Quarter
(Dollars in thousands, except per share data)
 
   
1st quarter
    
4th quarter
    
3rd quarter
    
2nd quarter
    
1st quarter
    
1Q 09
    
1Q 09
  
   
2009
    
2008
    
2008
    
2008
    
2008
    
compared to
    
compared to
  
   
(1Q 09)
    
(4Q 08)
    
(3Q 08)
    
(2Q 08)
    
(1Q 08)
    
4Q 08
    
1Q 08
  
PROFITABILITY FOR THE PERIOD
                                                  
Net interest income
   $ 10,058     $ 10,348     $ 9,909     $ 9,632     $ 10,030       (2.8 ) %     0.3 %
Provision for credit losses
     912       1,385       875       615       462       (34.2 )     97.4  
Noninterest income
     5,350       4,408       5,246       5,194       5,502       21.4       (2.8 )
Noninterest expense
     9,883       9,621       9,429       9,729       9,591       2.7       3.0  
Income before income taxes
     4,613       3,750       4,851       4,482       5,479       23.0       (15.8 )
Income tax expense
     1,735       1,489       1,780       1,716       2,107       16.5       (17.7 )
Net income
     2,878       2,261       3,071       2,766       3,372       27.3       (14.7 )
Preferred stock dividends and discount accretion
     337       -       -       -       -       -       -  
Net income available to common shareholders
   $ 2,541     $ 2,261     $ 3,071     $ 2,766     $ 3,372       12.4       (24.6 )
                                                         
                                                         
Return on average assets (1)
     0.97 %     0.87 %     1.19 %     1.12 %     1.38 %     11.5 %     (29.7 ) %
Return on average equity (1)
     6.84       7.11       9.81       8.98       10.96       (3.8 )     (37.6 )
Net interest margin
     4.09       4.24       4.10       4.17       4.42       (3.5 )     (7.5 )
Efficiency ratio - GAAP based
     64.14       65.20       62.22       65.62       61.75       (1.6 )     3.9  
                                                         
                                                         
PER SHARE DATA
                                                        
Basic net income per share
   $ 0.34     $ 0.27     $ 0.37     $ 0.33     $ 0.40       25.9 %     (15.0 ) %
Basic net income per common share
     0.30       0.27       0.37       0.33       0.40       11.1       (25.0 )
Diluted net income per share
     0.34       0.27       0.37       0.33       0.40       25.9       (15.0 )
Diluted net income per common share
     0.30       0.27       0.37       0.33       0.40       11.1       (25.0 )
Dividends paid per common share
     0.16       0.16       0.16       0.16       0.16       -       -  
Book value per common share at period end
     15.46       15.16       14.92       14.65       14.62       2.0       5.7  
Tangible book value per common share at period end
     12.87       12.55       12.30       12.01       11.96       2.5       7.6  
Market value at period end
     16.75       23.99       25.70       18.72       21.45       (30.2 )     (21.9 )
Market range:
                                                        
High
     24.43       25.97       27.25       26.47       23.40       (5.9 )     4.4  
Low
     11.00       17.50       18.00       18.52       20.00       (37.1 )     (45.0 )
                                                         
                                                         
AT PERIOD END
                                                        
Loans
   $ 908,118     $ 888,528     $ 865,437     $ 841,600     $ 808,583       2.2 %     12.3 %
Securities
     78,953       89,456       93,149       91,842       99,062       (11.7 )     (20.3 )
Assets
     1,076,599       1,044,641       1,037,026       1,019,463       1,003,836       3.1       7.2  
Deposits
     873,089       845,371       839,217       818,656       808,917       3.3       7.9  
Stockholders' equity
     153,446       127,385       125,401       123,038       122,699       20.5       25.1  
                                                         
                                                         
CAPITAL AND CREDIT QUALITY RATIOS
                                                  
Average equity to average assets
     14.23 %     12.22 %     12.12 %     12.41 %     12.56 %                
Annualized net charge-offs to average loans
     0.25       0.31       0.25       0.13       0.04                  
Allowance for credit losses to period-end loans
     1.07       1.05       1.00       0.98       0.98                  
Nonperforming assets to total assets
     0.85       0.79       0.72       0.47       0.34                  
 
(1) Calculation uses net income available to common shareholders.
 
 
 
 
Page 8 of 8
 
Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter
(In thousands, except per share data)
 
                                 
1Q 09
    
1Q 09
  
                                 
compared to
    
compared to
  
   
1Q 09
    
4Q 08
    
3Q 08
    
2Q 08
    
1Q 08
    
4Q 08
    
1Q 08
  
INTEREST INCOME
                                                        
Interest and fees on loans
   $ 13,617     $ 14,166     $ 14,179     $ 13,961     $ 14,560       (3.9 ) %     (6.5 ) %
Interest and dividends on investment securities:
                                          
Taxable
     756       839       924       945       1,080       (9.9 )     (30.0 )
Tax-exempt
     85       93       95       109       123       (8.6 )     (30.9 )
Interest on federal funds sold
     7       24       79       83       122       (70.8 )     (94.3 )
Interest on deposits with other banks
     1       4       21       29       38       (75.0 )     (97.4 )
Total interest income
     14,466       15,126       15,298       15,127       15,923       (4.4 )     (9.2 )
                                                         
INTEREST EXPENSE
                                                        
Interest on deposits
     4,285       4,582       4,955       4,997       5,343       (6.5 )     (19.8 )
Interest on short-term borrowings
     49       121       344       316       366       (59.5 )     (86.6 )
Interest on long-term debt
     74       75       90       182       184       (1.3 )     (59.8 )
Total interest expense
     4,408       4,778       5,389       5,495       5,893       (7.7 )     (25.2 )
                                                         
NET INTEREST INCOME
     10,058       10,348       9,909       9,632       10,030       (2.8 )     0.3  
Provision for credit losses
     912       1,385       875       615       462       (34.2 )     97.4  
                                                         
NET INTEREST INCOME AFTER PROVISION
                                          
FOR CREDIT LOSSES
     9,146       8,963       9,034       9,017       9,568       2.0       (4.4 )
                                                         
NONINTEREST INCOME
                                                        
Service charges on deposit accounts
     809       889       923       917       871       (9.0 )     (7.1 )
Investment securities gains (losses)
     49       (15 )     -       -       -       426.7       -  
Other than temporary impairment of securities
     -       -       (371 )     -       -       -       -  
Insurance agency commissions
     3,335       2,495       2,845       3,219       3,531       33.7       (5.6 )
Other noninterest income
     1,157       1,039       1,849       1,058       1,100       11.4       5.2  
Total noninterest income
     5,350       4,408       5,246       5,194       5,502       21.4       (2.8 )
                                                         
NONINTEREST EXPENSE
                                                        
Salaries and employee benefits
     5,920       5,776       5,802       5,759       5,984       2.5       (1.1 )
Occupancy expense
     549       585       558       537       499       (6.2 )     10.0  
Furniture and equipment expense
     314       291       310       298       286       7.9       9.8  
Data processing
     438       476       486       440       470       (8.0 )     (6.8 )
Directors' fees
     168       132       131       130       165       27.3       1.8  
Amortization of intangible assets
     129       129       128       129       129       -       -  
Other noninterest expenses
     2,365       2,232       2,014       2,436       2,058       6.0       14.9  
Total noninterest expense
     9,883       9,621       9,429       9,729       9,591       2.7       3.0  
                                                         
Income before income taxes
     4,613       3,750       4,851       4,482       5,479       23.0       (15.8 )
Income tax expense
     1,735       1,489       1,780       1,716       2,107       16.5       (17.7 )
                                                         
NET INCOME
     2,878       2,261       3,071       2,766       3,372       27.3       (14.7 )
Preferred stock dividends and discount accretion
     337       -       -       -       -       -       -  
Net income available to common shareholders
   $ 2,541     $ 2,261     $ 3,071     $ 2,766     $ 3,372       12.4       (24.6 )
                                                         
Weighted average shares outstanding - basic
     8,405       8,405       8,405       8,398       8,391       -       0.2  
Weighted average shares outstanding - diluted
     8,408       8,410       8,411       8,405       8,400       -       0.1  
                                                         
Basic net income per share
   $ 0.34     $ 0.27     $ 0.37     $ 0.33     $ 0.40       25.9       (15.0 )
Basic net income per common share
     0.30       0.27       0.37       0.33       0.40       11.1       (25.0 )
Diluted net income per share
     0.34       0.27       0.37       0.33       0.40       25.9       (15.0 )
Diluted net income per common share
     0.30       0.27       0.37       0.33       0.40       11.1       (25.0 )
Dividends paid per share
     0.16       0.16       0.16       0.16       0.16       -       -