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 27, 2010

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 January 27. 2010, Shore Bancshares, Inc. issued a press release describing its financial results for the three and 12 months ended December 31, 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 January 27, 2010 (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 28, 2010	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

- 2 - -

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated January 27, 2010 (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 2009 Earnings Results

Easton, Maryland (01/27/2010) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income available to common stockholders of $1.216 million or $0.14 per diluted common share for the fourth quarter of 2009, compared to $1.951 million or $0.23 per diluted common share for the third quarter of 2009 and $2.261 million or $0.27 per diluted common share for the fourth quarter of 2008.  Net income available to common stockholders for 2009 was $5.4 million or $0.64 per diluted common share, compared to $11.5 million or $1.37 per diluted common share for 2008.

During 2009, 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.  The impact on 2009 from the preferred stock activity was $1.9 million or $0.22 per share.

“We are pleased to report a profitable final quarter and full year, considering the ongoing difficult operating environment both nationally and here in the Mid-Atlantic region. We are fortunate that the economic climate across the Delmarva peninsula markets within our footprint has remained reasonably stable and continues to outperform the nation as a whole, in terms of unemployment, per capita income levels and real estate property valuations. However, we enter 2010 with a very conservative outlook and will remain focused on the resolution of problem assets, growing our core deposit base, and maintaining an above-average net interest margin,” said W. Moorhead Vermilye, President and Chief Executive Officer.

The Company’s return on average assets for the fourth quarter of 2009 was 0.41%, compared to 0.66% and 0.87% for the quarters ended September 30, 2009 and December 31, 2008, respectively.  The return on average stockholders’ equity was 3.75% for the fourth quarter of 2009, compared to 6.03% for the third quarter of 2009 and 7.11% for the fourth quarter of 2008.

The Company’s return on average assets was 0.48% for 2009, compared to 1.13% for 2008.  The return on average stockholders’ equity was 4.00% for 2009 and 9.22% for 2008.

Total assets were $1.157 billion at December 31, 2009, compared to $1.045 billion at the end of 2008, an increase of 10.7%.  Total loans were $916.6 million and total deposits were $990.9 million, an increase of 3.2% and 17.2%, 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 fourth quarter of 2009 was $10.8 million, a 3.6% increase from the third quarter of 2009 and a 4.4% increase from the same quarter of last year.  Higher average balances of 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 3.90% for the fourth quarter of 2009, an increase of 11 basis points when compared to the third quarter of 2009 and a decrease of 34 basis points when compared to the fourth quarter of 2008.

The provision for credit losses was $3.7 million for the three months ended December 31, 2009. The comparable amounts were $1.7 million and $1.4 million for the three months ended September 30, 2009 and December 31, 2008, respectively.  The continued large level of  provision expense was primarily in response to the overall increase in nonperforming assets and loan charge-offs, as well as to overall economic conditions.  Net charge-offs were $3.5 million for the fourth quarter of 2009, $1.8 million for the third quarter of 2009 and $683 thousand for the fourth quarter of 2008.  Quarter-to-date annualized net charge-offs to average loans was 1.51% for the fourth quarter of 2009, 0.76% for the third quarter of 2009 and 0.31% for the fourth quarter of 2008. Nonperforming assets to total assets was 1.63% at December 31, 2009.  The comparable nonperforming asset ratio was 1.51% at September 30, 2009 and 0.79% at December 31, 2008.  The allowance for credit losses to period-end loans increased to 1.19% at  December 31, 2009, compared to 1.17% at September 30, 2009 and 1.05% at December 31, 2008.  Management believes that the provision for credit losses and the resulting allowance were adequate at December 31, 2009.

Noninterest income for the fourth quarter of 2009 decreased 12.6% when compared to the third quarter of 2009 and decreased 6.4% when compared to the fourth quarter of 2008.  The decrease in insurance agency commissions of $585 thousand from the third quarter of 2009 and $336 thousand from the fourth quarter of 2008 accounted for most of the decline.

Noninterest expense for the fourth quarter of 2009 decreased 9.0% when compared to the third quarter of 2009 and decreased 2.6% when compared to the fourth quarter of 2008.  The decrease from the third quarter of 2009 was primarily due to lower salaries and employee benefits caused by less expense accrued for bonus and profit sharing plans.  The decrease from the fourth quarter of 2008 was also primarily due to lower salaries and employee benefits, partially offset by higher FDIC insurance premiums.  

Review of 2009 Financial Results

Net interest income for 2009 was $41.4 million, an increase of 3.7% when compared to 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 33 basis points from 4.23% for 2008 to 3.90% for 2009.

The provisions for credit losses for 2009 and 2008 were $9.0 million and $3.3 million, respectively.  Net charge-offs were $7.4 million and $1.6 million for 2009 and 2008, respectively.  Year-to-date annualized net charge-offs to average loans was 0.81% for 2009 and 0.19% for 2008.

Noninterest income for 2009 decreased 4.0% when compared to 2008.  A decline in insurance agency commissions of $959 thousand for the year accounted for most of the decrease when compared to 2008.  Other noninterest income included a mark to market gain on interest rate swaps of $420 thousand during the second quarter of 2009.  In addition, noninterest income for 2008 included 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 2009 increased 4.9% when compared to 2008.  A significant portion of the increase was due to increased FDIC insurance premium expense of $1.7 million when compared to 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, CNB, 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 Twelve Months Ended
	Dec. 31,									Dec. 31,
	2009			2008			% Change			2009			2008			% Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,806		$	10,348			4.4	%	$	41,378		$	39,919			3.7	%
Provision for credit losses		3,668			1,385			164.8			8,986			3,337			169.3
Noninterest income		4,125			4,408			(6.4	)		19,541			20,350			(4.0	)
Noninterest expense		9,375			9,621			(2.6	)		40,248			38,370			4.9
Income before income taxes		1,888			3,750			(49.7	)		11,685			18,562			(37.0	)
Income tax expense		672			1,489			(54.9	)		4,412			7,092			(37.8	)
Net income		1,216			2,261			(46.2	)		7,273			11,470			(36.6	)
Preferred stock dividends and discount accretion		-			-			-			1,876			-			-
Net income available to common shareholders	$	1,216		$	2,261			(46.2	)	$	5,397		$	11,470			(52.9	)
Return on average assets (1)		0.41	%		0.87	%		(52.9	)%		0.48	%		1.13	%		(57.5	)%
Return on average equity (1)		3.75			7.11			(47.3	)		4.00			9.22			(56.6	)
Net interest margin		3.90			4.24			(8.0	)		3.90			4.23			(7.8	)
Efficiency ratio - GAAP based		62.79			65.20			(3.7	)		66.07			63.66			3.8
PER SHARE DATA
Basic net income per share	$	0.14		$	0.27			(48.1	)%	$	0.86		$	1.37			(37.2	)%
Basic net income per common share		0.14			0.27			(48.1	)		0.64			1.37			(53.3	)
Diluted net income per share		0.14			0.27			(48.1	)		0.86			1.37			(37.2	)
Diluted net income per common share		0.14			0.27			(48.1	)		0.64			1.37			(53.3	)
Dividends paid per common share		0.16			0.16			-			0.64			0.64			-
Book value per common share at period end		15.18			15.16			0.1
Tangible book value per common share at period end		12.64			12.55			0.7
Market value at period end		14.50			23.99			(39.6	)
Market range:
High		17.71			25.97			(31.8	)		24.43			27.25			(10.3	)
Low		13.52			17.50			(22.7	)		11.00			17.50			(37.1	)
AT PERIOD END
Loans	$	916,557		$	888,528			3.2	%
Securities		109,684			89,456			22.6
Assets		1,156,516			1,044,641			10.7
Deposits		990,937			845,371			17.2
Stockholders' equity		127,810			127,385			0.3
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.01	%		12.22	%					11.96	%		12.30	%
Annualized net charge-offs to average loans		1.51			0.31						0.81			0.19
Allowance for credit losses to period-end loans		1.19			1.05
Nonperforming assets to total loans+other real estate owned		2.05			0.93
Nonperforming assets to total assets		1.63			0.79
Nonperforming assets+Loans 90 days past due and still accruing to total loans+other real estate owned		2.86			1.09
Nonperforming assets+Loans 90 days past due and still accruing to total assets		2.27			0.92

(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)

							Dec. 31, 2009
	Dec. 31,			Dec. 31,			compared to
	2009			2008			Dec. 31, 2008
ASSETS
Cash and due from banks	$	14,411		$	16,803			(14.2	)%
Interest-bearing deposits with other banks		598			481			24.3
Federal funds sold		60,637			10,010			505.8
Investments available-for-sale (at fair value)		100,744			79,204			27.2
Investments held-to-maturity		8,940			10,252			(12.8	)
Loans		916,557			888,528			3.2
Less: allowance for credit losses		(10,876	)		(9,320	)		16.7
Loans, net		905,681			879,208			3.0
Premises and equipment, net		14,307			13,855			3.3
Accrued interest receivable		4,804			4,606			4.3
Goodwill		15,954			15,954			-
Other intangible assets, net		5,406			5,921			(8.7	)
Other real estate and other assets owned, net		2,572			148			1,637.8
Other assets		22,462			8,199			174.0
Total assets	$	1,156,516		$	1,044,641			10.7
LIABILITIES
Noninterest-bearing deposits	$	122,492		$	102,584			19.4
Interest-bearing deposits		868,445			742,787			16.9
Total deposits		990,937			845,371			17.2
Short-term borrowings		20,404			52,969			(61.5	)
Long-term debt		1,429			7,947			(82.0	)
Accrued interest payable and other liabilities		15,936			10,969			45.3
Total liabilities		1,028,706			917,256			12.2
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares		84			84			-
Warrants		1,543			-			-
Additional paid in capital		29,872			29,768			0.3
Retained earnings		96,151			96,140			-
Accumulated other comprehensive income		160			1,393			(88.5	)
Total stockholders' equity		127,810			127,385			0.3
Total liabilities and stockholders' equity	$	1,156,516		$	1,044,641			10.7
Period-end common shares outstanding		8,419			8,405			0.2
Book value per common share	$	15.18		$	15.16			0.1

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

	For the Three Months Ended								For the Twelve Months Ended
	Dec. 31,								Dec. 31,
	2009		2008			% Change			2009		2008			% Change
INTEREST INCOME
Interest and fees on loans	$	13,837	$	14,166			(2.3	)%	$	55,209	$	56,866			(2.9	)%
Interest and dividends on investment securities:
Taxable		860		839			2.5			3,184		3,788			(15.9	)
Tax-exempt		60		93			(35.5	)		301		420			(28.3	)
Interest on federal funds sold		23		24			(4.2	)		84		308			(72.7	)
Interest on deposits with other banks		-		4			(100.0	)		11		92			(88.0	)
Total interest income		14,780		15,126			(2.3	)		58,789		61,474			(4.4	)
INTEREST EXPENSE
Interest on deposits		3,924		4,582			(14.4	)		17,018		19,877			(14.4	)
Interest on short-term borrowings		31		121			(74.4	)		127		1,147			(88.9	)
Interest on long-term debt		19		75			(74.7	)		266		531			(49.9	)
Total interest expense		3,974		4,778			(16.8	)		17,411		21,555			(19.2	)
NET INTEREST INCOME		10,806		10,348			4.4			41,378		39,919			3.7
Provision for credit losses		3,668		1,385			164.8			8,986		3,337			169.3
NET INTEREST INCOME AFTER PROVISION   FOR CREDIT LOSSES		7,138		8,963			(20.4	)		32,392		36,582			(11.5	)
NONINTEREST INCOME
Service charges on deposit accounts		866		889			(2.6	)		3,424		3,600			(4.9	)
Investment securities gains (losses)		-		(15	)		100.0			49		(15	)		426.7
Other than temporary impairment of securities		-		-			-			-		(371	)		100.0
Insurance agency commissions		2,159		2,495			(13.5	)		11,131		12,090			(7.9	)
Other noninterest income		1,100		1,039			5.9			4,937		5,046			(2.2	)
Total noninterest income		4,125		4,408			(6.4	)		19,541		20,350			(4.0	)
NONINTEREST EXPENSE
Salaries and employee benefits		5,264		5,776			(8.9	)		23,119		23,321			(0.9	)
Occupancy expense		572		585			(2.2	)		2,324		2,179			6.7
Furniture and equipment expense		268		291			(7.9	)		1,183		1,185			(0.2	)
Data processing		598		595			0.5			2,463		2,323			6.0
Directors' fees		84		132			(36.4	)		478		558			(14.3	)
Amortization of intangible assets		129		129			-			515		515			-
Other noninterest expenses		2,460		2,113			16.4			10,166		8,289			22.6
Total noninterest expense		9,375		9,621			(2.6	)		40,248		38,370			4.9
Income before income taxes		1,888		3,750			(49.7	)		11,685		18,562			(37.0	)
Income tax expense		672		1,489			(54.9	)		4,412		7,092			(37.8	)
NET INCOME		1,216		2,261			(46.2	)		7,273		11,470			(36.6	)
Preferred stock dividends and discount accretion		-		-			-			1,876		-			-
Net income available to common shareholders	$	1,216	$	2,261			(46.2	)	$	5,397	$	11,470			(52.9	)
Weighted average shares outstanding - basic		8,419		8,405			0.2			8,414		8,400			0.2
Weighted average shares outstanding - diluted		8,421		8,410			0.1			8,417		8,407			0.1
Basic net income per share	$	0.14	$	0.27			(48.1	)	$	0.86	$	1.37			(37.2	)
Basic net income per common share		0.14		0.27			(48.1	)		0.64		1.37			(53.3	)
Diluted net income per share		0.14		0.27			(48.1	)		0.86		1.37			(37.2	)
Diluted net income per common share		0.14		0.27			(48.1	)		0.64		1.37			(53.3	)
Dividends paid per common share		0.16		0.16			-			0.64		0.64			-

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

	4th quarter			3rd quarter			2nd quarter			1st quarter			4th quarter			4Q 09			4Q 09
	2009			2009			2009			2009			2008			compared to			compared to
	(4Q 09)			(3Q 09)			(2Q 09)			(1Q 09)			(4Q 08)			3Q 09			4Q 08
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,806		$	10,428		$	10,086		$	10,058		$	10,348			3.6	%		4.4	%
Provision for credit losses		3,668			1,702			1,681			1,935			1,385			115.5			164.8
Noninterest income		4,125			4,719			5,347			5,350			4,408			(12.6	)		(6.4	)
Noninterest expense		9,375			10,297			10,693			9,883			9,621			(9.0	)		(2.6	)
Income before income taxes		1,888			3,148			3,059			3,590			3,750			(40.0	)		(49.7	)
Income tax expense		672			1,197			1,166			1,377			1,489			(43.9	)		(54.9	)
Net income		1,216			1,951			1,893			2,213			2,261			(37.7	)		(46.2	)
Preferred stock dividends and discount accretion		-			-			1,539			337			-			-			-
Net income available to common shareholders	$	1,216		$	1,951		$	354		$	1,876		$	2,261			(37.7	)		(46.2	)
Return on average assets (1)		0.41	%		0.66	%		0.13	%		0.72	%		0.87	%		(37.9	)%		(52.9	)%
Return on average equity (1)		3.75			6.03			1.07			5.05			7.11			(37.8	)		(47.3	)
Net interest margin		3.90			3.79			3.85			4.09			4.24			2.9			(8.0	)
Efficiency ratio - GAAP based		62.79			67.98			69.29			64.14			65.20			(7.6	)		(3.7	)
PER SHARE DATA
Basic net income per share	$	0.14		$	0.23		$	0.23		$	0.26		$	0.27			(39.1	)%		(48.1	)%
Basic net income per common share		0.14			0.23			0.04			0.22			0.27			(39.1	)		(48.1	)
Diluted net income per share		0.14			0.23			0.22			0.26			0.27			(39.1	)		(48.1	)
Diluted net income per common share		0.14			0.23			0.04			0.22			0.27			(39.1	)		(48.1	)
Dividends paid per common share		0.16			0.16			0.16			0.16			0.16			-			-
Book value per common share at period end		15.18			15.23			15.19			15.38			15.16			(0.3	)		0.1
Tangible book value per common share at period end		12.64			12.68			12.62			12.79			12.55			(0.3	)		0.7
Market value at period end		14.50			16.73			17.94			16.75			23.99			(13.3	)		(39.6	)
Market range:
High		17.71			20.72			21.46			24.43			25.97			(14.5	)		(31.8	)
Low		13.52			16.64			15.18			11.00			17.50			(18.8	)		(22.7	)
AT PERIOD END
Loans	$	916,557		$	918,601		$	919,088		$	908,118		$	888,528			(0.2	)%		3.2	%
Securities		109,684			103,921			89,272			78,953			89,456			5.5			22.6
Assets		1,156,516			1,157,685			1,158,212			1,075,934			1,044,641			(0.1	)		10.7
Deposits		990,937			992,196			981,334			873,089			845,371			(0.1	)		17.2
Stockholders' equity		127,810			128,219			127,876			152,781			127,385			(0.3	)		0.3
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.01	%		11.01	%		11.84	%		14.23	%		12.22	%
Annualized net charge-offs to average loans		1.51			0.76			0.71			0.25			0.31
Allowance for credit losses to period-end loans		1.19			1.17			1.17			1.18			1.05
Nonperforming assets to total loans+other real estate owned		2.05			1.90			1.73			1.00			0.93
Nonperforming assets to total assets		1.63			1.51			1.37			0.85			0.79
Nonperforming assets+Loans 90 days past due and still accruing to total loans+other real estate owned		2.86			2.89			2.60			1.87			1.09
Nonperforming assets+Loans 90 days past due and still accruing to total assets		2.27			2.30			2.07			1.58			0.92

(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)

												4Q 09			4Q 09
												compared to			compared to
	4Q 09		3Q 09		2Q 09		1Q 09		4Q 08			3Q 09			4Q 08
INTEREST INCOME
Interest and fees on loans	$	13,837	$	14,001	$	13,754	$	13,617	$	14,166			(1.2	)%		(2.3	)%
Interest and dividends on investment securities:
Taxable		860		800		768		756		839			7.5			2.5
Tax-exempt		60		77		79		85		93			(22.1	)		(35.5	)
Interest on federal funds sold		23		31		23		7		24			(25.8	)		(4.2	)
Interest on deposits with other banks		-		4		6		1		4			(100.0	)		(100.0	)
Total interest income		14,780		14,913		14,630		14,466		15,126			(0.9	)		(2.3	)
INTEREST EXPENSE
Interest on deposits		3,924		4,368		4,441		4,285		4,582			(10.2	)		(14.4	)
Interest on short-term borrowings		31		19		28		49		121			63.2			(74.4	)
Interest on long-term debt		19		98		75		74		75			(80.6	)		(74.7	)
Total interest expense		3,974		4,485		4,544		4,408		4,778			(11.4	)		(16.8	)
NET INTEREST INCOME		10,806		10,428		10,086		10,058		10,348			3.6			4.4
Provision for credit losses		3,668		1,702		1,681		1,935		1,385			115.5			164.8
NET INTEREST INCOME AFTER PROVISION   FOR CREDIT LOSSES		7,138		8,726		8,405		8,123		8,963			(18.2	)		(20.4	)
NONINTEREST INCOME
Service charges on deposit accounts		866		861		888		809		889			0.6			(2.6	)
Investment securities gains (losses)		-		-		-		49		(15	)		-			100.0
Insurance agency commissions		2,159		2,744		2,893		3,335		2,495			(21.3	)		(13.5	)
Other noninterest income		1,100		1,114		1,566		1,157		1,039			(1.3	)		5.9
Total noninterest income		4,125		4,719		5,347		5,350		4,408			(12.6	)		(6.4	)
NONINTEREST EXPENSE
Salaries and employee benefits		5,264		5,976		5,959		5,920		5,776			(11.9	)		(8.9	)
Occupancy expense		572		616		587		549		585			(7.1	)		(2.2	)
Furniture and equipment expense		268		299		302		314		291			(10.4	)		(7.9	)
Data processing		598		675		580		610		595			(11.4	)		0.5
Directors' fees		84		109		117		168		132			(22.9	)		(36.4	)
Amortization of intangible assets		129		128		129		129		129			0.8			-
Other noninterest expenses		2,460		2,494		3,019		2,193		2,113			(1.4	)		16.4
Total noninterest expense		9,375		10,297		10,693		9,883		9,621			(9.0	)		(2.6	)
Income before income taxes		1,888		3,148		3,059		3,590		3,750			(40.0	)		(49.7	)
Income tax expense		672		1,197		1,166		1,377		1,489			(43.9	)		(54.9	)
NET INCOME		1,216		1,951		1,893		2,213		2,261			(37.7	)		(46.2	)
Preferred stock dividends and discount accretion		-		-		1,539		337		-			-			-
Net income available to common shareholders	$	1,216	$	1,951	$	354	$	1,876	$	2,261			(37.7	)		(46.2	)
Weighted average shares outstanding - basic		8,419		8,419		8,413		8,405		8,405			-			0.2
Weighted average shares outstanding - diluted		8,421		8,423		8,417		8,408		8,410			-			0.1
Basic net income per share	$	0.14	$	0.23	$	0.23	$	0.26	$	0.27			(39.1	)		(48.1	)
Basic net income per common share		0.14		0.23		0.04		0.22		0.27			(39.1	)		(48.1	)
Diluted net income per share		0.14		0.23		0.22		0.26		0.27			(39.1	)		(48.1	)
Diluted net income per common share		0.14		0.23		0.04		0.22		0.27			(39.1	)		(48.1	)
Dividends paid per common share		0.16		0.16		0.16		0.16		0.16			-			-