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 26, 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:

¨ 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 26, 2009, Shore Bancshares, Inc. issued a press release describing its financial results for the three and nine months ended September 30, 2009.  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 October 26, 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:  October 27, 2009	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

EXHIBIT INDEX

Exhibit  Number	Description
99.1	Press release dated October 26, 2009 (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 (10/26/2009) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income available to common stockholders of $1.951 million or $0.23 per diluted common share for the third quarter of 2009, compared to $354 thousand or $0.04 per diluted common share for the second quarter of 2009 and $3.1 million or $0.37 per diluted common share for the third quarter of 2008.  Net income available to common stockholders for the first nine months of 2009 was $4.2 million or $0.50 per diluted common share, compared to $9.2 million or $1.10 per diluted common share for the first nine months of 2008.

Net income available to common stockholders was negatively impacted by dividends and discount accretion associated with the sale and subsequent repurchase of preferred stock under the U.S. Department of the Treasury’s Troubled Asset Relief Program Capital Purchase Program.  Although there was no impact from the dividends and accretion during the third quarter of 2009, the impact on the second quarter of 2009  was $1.5 million or $0.18 per share.  The comparable amount for the first nine months of 2009 was $1.9 million or $0.22 per share.

“Although we added $1.7 million to the provision for credit losses to keep pace with ongoing loan growth in new loans  plus higher levels of nonperforming assets and chargeoffs, we are pleased to report net income of nearly $2 million for the third quarter,” said W. Moorhead Vermilye,  president and chief executive officer.

“Our regional economy consistently outperforms the nation as a whole, but we are still working in an operating environment where asset quality concerns are likely to persist for the foreseeable future. We have been diligently moving problem loans through the resolution pipeline and expect to continue focusing resources on this area to maintain our traditional high-quality, conservative balance sheet. On the deposit side, we believe our people have done an excellent job managing our cost of funds, while also growing deposit balances by attracting customers who are seeking a leading locally-managed institution as a safe haven from market disruption,” said Vermilye.

The Company’s return on average assets for the third quarter of 2009 was 0.66%, compared to 0.13% and 1.19% for the quarters ended June 30, 2009 and September 30, 2008, respectively.  The return on average stockholders’ equity was 6.03% for the third quarter of 2009, compared to 1.07% for the second quarter of 2009 and 9.81% for the third quarter of 2008.

The Company’s return on average assets for the first nine months of 2009 was 0.50%, compared to 1.23% for the first nine months of 2008.  The return on average stockholders’ equity was 4.08% for the first nine months of 2009, compared to 9.95% for the same period in 2008.

Total assets were $1.158 billion at September 30, 2009, compared to $1.045 billion at the end of 2008, an increase of $113.0 million.  Total loans were $918.6 million and total deposits were $992.2 million, an increase of $30.1 million and $146.8 million, respectively, when compared to December 31, 2008.  The increase in deposits was primarily from the Company’s participation in the Promontory Insured Network Deposits Program (“IND”) beginning in the second quarter of 2009.  Total stockholders’ equity increased slightly from the end of 2008.

Review of Quarterly Financial Results

Net interest income for the third quarter of 2009 was $10.4 million, a 3.4% increase from the second quarter of 2009 and a 5.2% increase from the same period last year.  Higher average balances on earning assets and lower rates paid on interest bearing liabilities were sufficient to offset the decline in yields on earning assets.    The Company’s net interest margin was 3.79% for the third quarter of 2009, a decrease of 6 basis points when compared to the second quarter of 2009 and a decrease of 31 basis points when compared to the third quarter of 2008.

The provision for credit losses was $1.7 million for the three months ended September 30, 2009, which was the same for the three months ended June 30, 2009.  The comparable amount was $875 thousand for the three months ended September 30, 2008.  The continued large level of  provision expense was primarily in response to sustained 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 $1.8 million for the third quarter of 2009, $1.6 million for the second quarter of 2009 and $539 thousand for the third quarter of 2008.  Quarter-to-date annualized net charge-offs to average loans was 0.76% for the third quarter of 2009, 0.71% for the second quarter of 2009 and 0.25% for the third quarter of 2008. Nonperforming assets to total assets was 1.45% at September 30, 2009.  The comparable nonperforming asset ratio was 1.37% at June 30, 2009 and 0.72% at September 30, 2008.  The allowance for credit losses to period-end loans was 1.17% at both September 30, 2009 and  June 30, 2009 and 1.00% at September 30, 2008.  Management believes that the provision for credit losses and the resulting allowance were adequate at September 30, 2009.

Noninterest income for the third quarter of 2009 decreased 11.7% when compared to the second quarter of 2009 and decreased 10.0% when compared to the third quarter of 2008.  A mark to market gain on interest rate swaps of $420 thousand during the second quarter of 2009 and a decrease in insurance agency commissions of $149 thousand accounted for most of the decrease from the second quarter of 2009.  The decrease from the third quarter of 2008 was primarily due to a $1.3 million gain on the sale of a bank branch in August 2008.  The gain on the branch sale was partially offset by a $371 thousand other than temporary impairment 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.

Noninterest expense for the third quarter of 2009 decreased 3.7% when compared to the second quarter of 2009 and increased 9.2% when compared to the third quarter of 2008.  A significant portion of the fluctuations was due to FDIC insurance premium expense which decreased $462 thousand when compared to the second quarter of 2009 and increased $322 thousand when compared to the third quarter of 2008.  The  second quarter of 2009 included a special one-time assessment which totaled $513 thousand.

Review of Nine-Month Financial Results

Net interest income for the first nine months of 2009 was $30.6 million, an increase of 3.4% when compared to the first nine months of 2008.  Similar to the quarterly results reported above, higher average balances on earning assets and lower rates paid on interest bearing liabilities were sufficient to offset the decline in yields on earning assets.  The net interest margin declined 32 basis points from 4.22% for the first nine months of 2008 to 3.90% for the first nine months of 2009.

The provisions for credit losses for the nine months ended September 30, 2009 and 2008 were $5.3 million and $2.0 million, respectively.  Net charge-offs were $3.9 million and $885 thousand for the nine months ended September 30, 2009 and 2008, respectively.  Year-to-date annualized net charge-offs to average loans was 0.57% for the first nine months of 2009 and 0.14% for the first nine months of 2008.

Noninterest income for the nine months ended September 30, 2009 decreased 3.3% when compared to the same period in 2008.  The mark to market gain on interest rate swaps of $420 thousand during the second quarter of 2009, offset by a decrease in insurance agency commissions of $623 thousand, accounted for part of the decrease compared to the first nine months of 2008.  In addition, noninterest income for the first nine months of 2008 included the previously mentioned $1.3 million gain on the branch sale and the $708 thousand combined loss relating to the other than temporary impairment and the sale of the investment in the unconsolidated subsidiary.

Noninterest expense for the nine months ended September 30, 2009 increased 7.4% when compared to the same period in 2008.  A significant portion of the increase was due to increased FDIC insurance premium expense of $1.4 million when compared to the first nine months of 2008.  The increase in FDIC insurance premiums was attributable to higher overall rates, a one-time special assessment which totaled $513 thousand and growth in the Company’s total deposits.

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, 410-822-1400

Shore Bancshares, Inc.	Page 4 of 8
Financial Highlights
(Dollars in thousands, except per share data)

	For the Three Months Ended									For the Nine Months Ended
	Sep. 30,									Sep. 30,
	2009			2008			% Change			2009			2008			% Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,428		$	9,909			5.2	%	$	30,572		$	29,571			3.4	%
Provision for credit losses		1,702			875			94.5			5,318			1,952			172.4
Noninterest income		4,719			5,246			(10.0	)		15,416			15,942			(3.3	)
Noninterest expense		10,297			9,429			9.2			30,873			28,749			7.4
Income before income taxes		3,148			4,851			(35.1	)		9,797			14,812			(33.9	)
Income tax expense		1,197			1,780			(32.8	)		3,740			5,603			(33.3	)
Net income		1,951			3,071			(36.5	)		6,057			9,209			(34.2	)
Preferred stock dividends and discount accretion		-			-			-			1,876			-			-
Net income available to common shareholders	$	1,951		$	3,071			(36.5	)	$	4,181		$	9,209			(54.6	)
Return on average assets (1)		0.66	%		1.19	%		(44.5	)%		0.50	%		1.23	%		(59.3	)%
Return on average equity (1)		6.03			9.81			(38.5	)		4.08			9.95			(59.0	)
Net interest margin		3.79			4.10			(7.6	)		3.90			4.22			(7.6	)
Efficiency ratio - GAAP based		67.98			62.22			9.3			67.13			63.17			6.3
PER SHARE DATA
Basic net income per share	$	0.23		$	0.37			(37.8	)%	$	0.72		$	1.10			(34.5	)%
Basic net income per common share		0.23			0.37			(37.8	)		0.50			1.10			(54.5	)
Diluted net income per share		0.23			0.37			(37.8	)		0.72			1.10			(34.5	)
Diluted net income per common share		0.23			0.37			(37.8	)		0.50			1.10			(54.5	)
Dividends paid per common share		0.16			0.16			-			0.48			0.48			-
Book value per common share at period end		15.23			14.92			2.1
Tangible book value per common share at period end		12.68			12.30			3.1
Market value at period end		16.73			25.70			(34.9	)
Market range:
High		20.72			27.25			(24.0	)		24.43			27.25			(10.3	)
Low		16.64			18.00			(7.6	)		11.00			18.00			(38.9	)
AT PERIOD END
Loans	$	918,601		$	865,437			6.1	%
Securities		103,921			93,149			11.6
Assets		1,157,685			1,037,026			11.6
Deposits		992,196			839,217			18.2
Stockholders' equity		128,219			125,401			2.2
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.01	%		12.12	%					12.29	%		12.33	%
Annualized net charge-offs to average loans		0.76			0.25						0.57			0.14
Allowance for credit losses to period-end loans		1.17			1.00
Nonperforming assets to total assets		1.45			0.72

(1) Calculation uses net income available to common shareholders.

Shore Bancshares, Inc.	Page 5 of 8
Consolidated Balance Sheets
(In thousands, except per share data)

										Sep. 30, 2009			Sep. 30, 2009
	Sep. 30,			Dec. 31,			Sep. 30,			compared to			compared to
	2009			2008			2008			Dec. 31, 2008			Sep. 30, 2008
ASSETS
Cash and due from banks	$	13,699		$	16,803		$	21,883			(18.5	)%		(37.4	)%
Interest-bearing deposits with other banks		1,601			481			513			232.8			212.1
Federal funds sold		72,061			10,010			15,416			619.9			367.4
Investments available-for-sale (at fair value)		94,917			79,204			82,235			19.8			15.4
Investments held-to-maturity		9,004			10,252			10,914			(12.2	)		(17.5	)
Loans		918,601			888,528			865,437			3.4			6.1
Less: allowance for credit losses		(10,723	)		(9,320	)		(8,618	)		15.1			24.4
Loans, net		907,878			879,208			856,819			3.3			6.0
Premises and equipment, net		14,012			13,855			14,097			1.1			(0.6	)
Accrued interest receivable		4,769			4,606			5,023			3.5			(5.1	)
Goodwill		15,954			15,954			15,954			-			-
Other intangible assets, net		5,535			5,921			6,050			(6.5	)		(8.5	)
Other real estate owned		2,062			148			-			1,293.2			-
Other assets		16,193			8,199			8,122			97.5			99.4
Total assets	$	1,157,685		$	1,044,641		$	1,037,026			10.8			11.6
LIABILITIES
Noninterest-bearing deposits	$	124,440		$	102,584		$	118,049			21.3			5.4
Interest-bearing deposits		867,756			742,787			721,168			16.8			20.3
Total deposits		992,196			845,371			839,217			17.4			18.2
Short-term borrowings		17,673			52,969			53,078			(66.6	)		(66.7	)
Long-term debt		1,947			7,947			8,485			(75.5	)		(77.1	)
Accrued interest payable and other liabilities		17,650			10,969			10,845			60.9			62.7
Total liabilities		1,029,466			917,256			911,625			12.2			12.9
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares		84			84			84			-			-
Warrants		1,543			-			-			-			-
Additional paid in capital		29,844			29,768			29,744			0.3			0.3
Retained earnings		96,283			96,140			95,224			0.1			1.1
Accumulated other comprehensive income		465			1,393			349			(66.6	)		33.2
Total stockholders' equity		128,219			127,385			125,401			0.7			2.2
Total liabilities and stockholders' equity	$	1,157,685		$	1,044,641		$	1,037,026			10.8			11.6
Period-end common shares outstanding		8,419			8,405			8,405			0.2			0.2
Book value per common share	$	15.23		$	15.16		$	14.92			0.5			2.1

Shore Bancshares, Inc.	Page 6 of 8
Consolidated Statements of Income
(In thousands, except per share data)

	For the Three Months Ended								For the Nine Months Ended
	Sep. 30,								Sep. 30,
	2009		2008			% Change			2009		2008			% Change
INTEREST INCOME
Interest and fees on loans	$	14,001	$	14,179			(1.3	)%	$	41,372	$	42,700			(3.1	)%
Interest and dividends on investment securities:
Taxable		800		924			(13.4	)		2,324		2,949			(21.2	)
Tax-exempt		77		95			(18.9	)		241		327			(26.3	)
Interest on federal funds sold		31		79			(60.8	)		61		284			(78.5	)
Interest on deposits with other banks		4		21			(81.0	)		11		88			(87.5	)
Total interest income		14,913		15,298			(2.5	)		44,009		46,348			(5.0	)
INTEREST EXPENSE
Interest on deposits		4,368		4,955			(11.8	)		13,094		15,295			(14.4	)
Interest on short-term borrowings		19		344			(94.5	)		96		1,026			(90.6	)
Interest on long-term debt		98		90			8.9			247		456			(45.8	)
Total interest expense		4,485		5,389			(16.8	)		13,437		16,777			(19.9	)
NET INTEREST INCOME		10,428		9,909			5.2			30,572		29,571			3.4
Provision for credit losses		1,702		875			94.5			5,318		1,952			172.4
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		8,726		9,034			(3.4	)		25,254		27,619			(8.6	)
NONINTEREST INCOME
Service charges on deposit accounts		861		923			(6.7	)		2,558		2,711			(5.6	)
Investment securities gains		-		-			-			49		-			-
Other than temporary impairment of securities		-		(371	)		100.0			-		(371	)		100.0
Insurance agency commissions		2,744		2,845			(3.6	)		8,972		9,595			(6.5	)
Other noninterest income		1,114		1,849			(39.8	)		3,837		4,007			(4.2	)
Total noninterest income		4,719		5,246			(10.0	)		15,416		15,942			(3.3	)
NONINTEREST EXPENSE
Salaries and employee benefits		5,976		5,802			3.0			17,855		17,545			1.8
Occupancy expense		616		558			10.4			1,752		1,594			9.9
Furniture and equipment expense		299		310			(3.5	)		915		894			2.3
Data processing		675		610			10.7			1,865		1,728			7.9
Directors' fees		109		131			(16.8	)		394		426			(7.5	)
Amortization of intangible assets		128		128			-			386		386			-
Other noninterest expenses		2,494		1,890			32.0			7,706		6,176			24.8
Total noninterest expense		10,297		9,429			9.2			30,873		28,749			7.4
Income before income taxes		3,148		4,851			(35.1	)		9,797		14,812			(33.9	)
Income tax expense		1,197		1,780			(32.8	)		3,740		5,603			(33.3	)
NET INCOME		1,951		3,071			(36.5	)		6,057		9,209			(34.2	)
Preferred stock dividends and discount accretion		-		-			-			1,876		-			-
Net income available to common shareholders	$	1,951	$	3,071			(36.5	)	$	4,181	$	9,209			(54.6	)
Weighted average shares outstanding - basic		8,419		8,405			0.2			8,412		8,398			0.2
Weighted average shares outstanding - diluted		8,423		8,411			0.1			8,416		8,405			0.1
Basic net income per share	$	0.23	$	0.37			(37.8	)	$	0.72	$	1.10			(34.5	)
Basic net income per common share		0.23		0.37			(37.8	)		0.50		1.10			(54.5	)
Diluted net income per share		0.23		0.37			(37.8	)		0.72		1.10			(34.5	)
Diluted net income per common share		0.23		0.37			(37.8	)		0.50		1.10			(54.5	)
Dividends paid per common share		0.16		0.16			-			0.48		0.48			-

Shore Bancshares, Inc.	Page 7 of 8
Financial Highlights By Quarter
(Dollars in thousands, except per share data)

	3rd quarter			2nd quarter			1st quarter			4th quarter			3rd quarter			3Q 09			3Q 09
	2009			2009			2009			2008			2008			compared to			compared to
	(3Q 09)			(2Q 09)			(1Q 09)			(4Q 08)			(3Q 08)			2Q 09			3Q 08
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,428		$	10,086		$	10,058		$	10,348		$	9,909			3.4	%		5.2	%
Provision for credit losses		1,702			1,681			1,935			1,385			875			1.2			94.5
Noninterest income		4,719			5,347			5,350			4,408			5,246			(11.7	)		(10.0	)
Noninterest expense		10,297			10,693			9,883			9,621			9,429			(3.7	)		9.2
Income before income taxes		3,148			3,059			3,590			3,750			4,851			2.9			(35.1	)
Income tax expense		1,197			1,166			1,377			1,489			1,780			2.7			(32.8	)
Net income		1,951			1,893			2,213			2,261			3,071			3.1			(36.5	)
Preferred stock dividends and discount accretion		-			1,539			337			-			-			(100.0	)		-
Net income available to common shareholders	$	1,951		$	354		$	1,876		$	2,261		$	3,071			451.1			(36.5	)
Return on average assets (1)		0.66	%		0.13	%		0.72	%		0.87	%		1.19	%		407.7	%		(44.5	)%
Return on average equity (1)		6.03			1.07			5.05			7.11			9.81			463.6			(38.5	)
Net interest margin		3.79			3.85			4.09			4.24			4.10			(1.6	)		(7.6	)
Efficiency ratio - GAAP based		67.98			69.29			64.14			65.20			62.22			(1.9	)		9.3
PER SHARE DATA
Basic net income per share	$	0.23		$	0.23		$	0.26		$	0.27		$	0.37			-	%		(37.8	)%
Basic net income per common share		0.23			0.04			0.22			0.27			0.37			475.0			(37.8	)
Diluted net income per share		0.23			0.22			0.26			0.27			0.37			4.5			(37.8	)
Diluted net income per common share		0.23			0.04			0.22			0.27			0.37			475.0			(37.8	)
Dividends paid per common share		0.16			0.16			0.16			0.16			0.16			-			-
Book value per common share at period end		15.23			15.19			15.38			15.16			14.92			0.3			2.1
Tangible book value per common share at period end		12.68			12.62			12.79			12.55			12.30			0.5			3.1
Market value at period end		16.73			17.94			16.75			23.99			25.70			(6.7	)		(34.9	)
Market range:
High		20.72			21.46			24.43			25.97			27.25			(3.4	)		(24.0	)
Low		16.64			15.18			11.00			17.50			18.00			9.6			(7.6	)
AT PERIOD END
Loans	$	918,601		$	919,088		$	908,118		$	888,528		$	865,437			(0.1	)%		6.1	%
Securities		103,921			89,272			78,953			89,456			93,149			16.4			11.6
Assets		1,157,685			1,158,212			1,075,934			1,044,641			1,037,026			(0.0	)		11.6
Deposits		992,196			981,334			873,089			845,371			839,217			1.1			18.2
Stockholders' equity		128,219			127,876			152,781			127,385			125,401			0.3			2.2
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.01	%		11.84	%		14.23	%		12.22	%		12.12	%
Annualized net charge-offs to average loans		0.76			0.71			0.25			0.31			0.25
Allowance for credit losses to period-end loans		1.17			1.17			1.18			1.05			1.00
Nonperforming assets to total assets		1.45			1.37			0.85			0.79			0.72

(1) Calculation uses net income available to common shareholders.

Shore Bancshares, Inc.	Page 8 of 8
Consolidated Statements of Income By Quarter
(In thousands, except per share data)

													3Q 09			3Q 09
													compared to			compared to
	3Q 09		2Q 09		1Q 09		4Q 08			3Q 08			2Q 09			3Q 08
INTEREST INCOME
Interest and fees on loans	$	14,001	$	13,754	$	13,617	$	14,166		$	14,179			1.8	%		(1.3	)%
Interest and dividends on investment securities:
Taxable		800		768		756		839			924			4.2			(13.4	)
Tax-exempt		77		79		85		93			95			(2.5	)		(18.9	)
Interest on federal funds sold		31		23		7		24			79			34.8			(60.8	)
Interest on deposits with other banks		4		6		1		4			21			(33.3	)		(81.0	)
Total interest income		14,913		14,630		14,466		15,126			15,298			1.9			(2.5	)
INTEREST EXPENSE
Interest on deposits		4,368		4,441		4,285		4,582			4,955			(1.6	)		(11.8	)
Interest on short-term borrowings		19		28		49		121			344			(32.1	)		(94.5	)
Interest on long-term debt		98		75		74		75			90			30.7			8.9
Total interest expense		4,485		4,544		4,408		4,778			5,389			(1.3	)		(16.8	)
NET INTEREST INCOME		10,428		10,086		10,058		10,348			9,909			3.4			5.2
Provision for credit losses		1,702		1,681		1,935		1,385			875			1.2			94.5
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		8,726		8,405		8,123		8,963			9,034			3.8			(3.4	)
NONINTEREST INCOME
Service charges on deposit accounts		861		888		809		889			923			(3.0	)		(6.7	)
Investment securities gains (losses)		-		-		49		(15	)		-			-			-
Other than temporary impairment of securities		-		-		-		-			(371	)		-			100.0
Insurance agency commissions		2,744		2,893		3,335		2,495			2,845			(5.2	)		(3.6	)
Other noninterest income		1,114		1,566		1,157		1,039			1,849			(28.9	)		(39.8	)
Total noninterest income		4,719		5,347		5,350		4,408			5,246			(11.7	)		(10.0	)
NONINTEREST EXPENSE
Salaries and employee benefits		5,976		5,959		5,920		5,776			5,802			0.3			3.0
Occupancy expense		616		587		549		585			558			4.9			10.4
Furniture and equipment expense		299		302		314		291			310			(1.0	)		(3.5	)
Data processing		675		580		610		595			610			16.4			10.7
Directors' fees		109		117		168		132			131			(6.8	)		(16.8	)
Amortization of intangible assets		128		129		129		129			128			(0.8	)		-
Other noninterest expenses		2,494		3,019		2,193		2,113			1,890			(17.4	)		32.0
Total noninterest expense		10,297		10,693		9,883		9,621			9,429			(3.7	)		9.2
Income before income taxes		3,148		3,059		3,590		3,750			4,851			2.9			(35.1	)
Income tax expense		1,197		1,166		1,377		1,489			1,780			2.7			(32.8	)
NET INCOME		1,951		1,893		2,213		2,261			3,071			3.1			(36.5	)
Preferred stock dividends and discount accretion		-		1,539		337		-			-			(100.0	)		-
Net income available to common shareholders	$	1,951	$	354	$	1,876	$	2,261		$	3,071			451.1			(36.5	)
Weighted average shares outstanding - basic		8,419		8,413		8,405		8,405			8,405			0.1			0.2
Weighted average shares outstanding - diluted		8,423		8,417		8,408		8,410			8,411			0.1			0.1
Basic net income per share	$	0.23	$	0.23	$	0.26	$	0.27		$	0.37			-			(37.8	)
Basic net income per common share		0.23		0.04		0.22		0.27			0.37			475.0			(37.8	)
Diluted net income per share		0.23		0.22		0.26		0.27			0.37			4.5			(37.8	)
Diluted net income per common share		0.23		0.04		0.22		0.27			0.37			475.0			(37.8	)
Dividends paid per common share		0.16		0.16		0.16		0.16			0.16			-			-