EX-99.1 2 v191727_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 Second Quarter and First-Half Results

Easton, Maryland (07/27/2010) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $445 thousand or $0.05 per diluted common share for the second quarter of 2010, compared to a net loss of $1.6 million or $(0.19) per diluted common share for the first quarter of 2010, and net income of $354 thousand or $0.04 per diluted common share for the second quarter of 2009.  The second quarter of 2010 included a provision for credit losses of $4.9 million, which was $2.7 million lower than the comparable amount for the first quarter of 2010 but $3.2 million higher than the comparable amount for the second quarter of 2009.  For the second quarter of 2009, net income available to common stockholders was negatively impacted by $1.5 million in 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 Company reported a net loss of $1.1 million or $(0.13) per diluted common share for the first half of 2010, compared to net income of $2.2 million or $0.27 per diluted common share for the first half of 2009. The provision for credit losses was $12.5 million for the first half of 2010 and $3.6 million for the first half of 2009.  Net income for the first six months of 2009 reflected $1.9 million in preferred stock dividends and discount accretion.

“In this tough credit and economic environment, we are pleased to be able to report a modest profit this quarter,” said W. Moorhead Vermilye, president and chief executive officer. “Our teams of loan workout and credit assessment specialists have been working diligently to identify, monitor, resolve and eventually dispose of problem loans and we are confident they are doing an effective job as we move through this cycle. This is our principal focus, and in the face of weak loan demand, we understand clearly what issues we need to resolve to maintain our traditionally stellar balance sheet.”

The Company’s return on average assets for the second quarter of 2010 was 0.16%, compared to (0.55)% and 0.13% for the quarters ended March 31, 2010 and June 30, 2009, respectively.  The return on average stockholders’ equity was 1.42% for the second quarter of 2010, compared to (4.95)% for the first quarter of 2010 and 1.07% for the second quarter of 2009.

The Company’s return on average assets for the first six months of 2010 was (0.20)%, compared to 0.41% for the first six months of 2009.  The return on average stockholders’ equity was (1.78)% for the first half of 2010, compared to 3.18% for the first half of 2009.

Total assets were $1.129 billion at June 30, 2010, compared to $1.157 billion at the end of 2009, a decrease of 2.4%.  Total loans were $905.5 million, a decrease of 1.2%, and total deposits were $971.6 million, a decrease of 2.0%, when compared to December 31, 2009.  Total stockholders’ equity decreased 2.5% from $127.8 million at the end of 2009 to $124.7 million at June 30, 2010.
 
 
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Review of Quarterly Financial Results
 
Net interest income for the second quarter of 2010 was $10.7 million, an increase of 2.8% from the first quarter of 2010 and an increase of 6.0% from the same period last year.  The increase in net interest income when compared to the first quarter of 2010 was due to slightly higher rates on average earning assets and a decrease in the balances and rates paid on interest bearing liabilities offsetting the decline in average earning assets.  The increase in net interest income when compared to the second quarter of 2009 was primarily due to higher average balances of earning assets and lower rates paid on interest bearing liabilities offsetting the decline in yields on earning assets.  The Company’s net interest margin was 4.03% for the second quarter of 2010, an increase of 8 basis points when compared to the first quarter of 2010 and an increase of 18 basis points when compared to the second quarter of 2009.

As previously mentioned, the provision for credit losses was $4.9 million for the three months ended June 30, 2010. The comparable amounts were $7.6 million and $1.7 million for the three months ended March 31, 2010 and June 30, 2009, respectively.  The ratio of the allowance for credit losses to period-end loans increased to 1.47% at June 30, 2010, compared to 1.41% at March 31, 2010 and 1.17% at June 30, 2009.  Management believes that the provision for credit losses and the resulting allowance were adequate at June 30, 2010.

The continued historically large level of provision expense was primarily in response to the overall increase in nonperforming assets and loan charge-offs, as well as overall economic conditions.  Net charge-offs were $4.4 million for the second quarter of 2010, $5.7 million for the first quarter of 2010 and $1.6 million for the second quarter of 2009.  The ratio of quarter-to-date annualized net charge-offs to average loans was 1.95% for the second quarter of 2010, 2.54% for the first quarter of 2010 and 0.71% for the second quarter of 2009. The ratio of nonperforming assets to total assets was 3.42% at June 30, 2010.  The comparable nonperforming asset ratio was 2.87% at March 31, 2010, and 1.37% at June 30, 2009.

Total noninterest income for the second quarter of 2010 decreased $314 thousand when compared to the first quarter of 2010 and decreased $779 thousand when compared to the second quarter of 2009. The decrease when compared to the first quarter of 2010 was primarily a result of a decrease in insurance agency commissions and contingency payments.  Contingency payments are typically received in the first quarter of each year and are based on the prior year’s performance.  The decline in noninterest income during the second quarter of 2010 when compared to the second quarter of 2009 was primarily due to a decline in insurance agency commissions and a $420 thousand gain on an interest rate swap transaction recorded in the second quarter of 2009.

Total noninterest expense for the second quarter of 2010 decreased $633 thousand when compared to the first quarter of 2010 mainly due to lower expenses accrued for bonus and profit sharing plans. When compared to the second quarter of 2009, total noninterest expense for the second quarter of 2010 decreased $1.0 million primarily due to lower expenses accrued for bonus and profit sharing plans and lower FDIC insurance premium expense which were partially offset by higher expenses related to collection and other real estate owned activities.   Included in the FDIC insurance premium expense for the second quarter of 2009 was a special one-time assessment of $513 thousand.

Review of Six-Month Financial Results
 
Net interest income for the first six months of 2010 was $21.1 million, an increase of 4.7% when compared to the first six months of 2009.  The increase was primarily due to higher average balances of earning assets and lower rates paid on interest bearing liabilities offsetting the decline in yields on earning assets.  The net interest margin increased from 3.96% for the first half of 2009 to 3.99% for the first half of 2010.

The provisions for credit losses for the six months ended June 30, 2010 and 2009 were $12.5 million and $3.6 million, respectively.  Net charge-offs were $10.1 million and $2.2 million for the six months ended June 30, 2010 and 2009, respectively.  The ratio of year-to-date annualized net charge-offs to average loans was 2.24% for the first half of 2010 and 0.48% for the first half of 2009.
 
 
Page 3 of 10

Total noninterest income for the six months ended June 30, 2010 declined $1.2 million when compared to the same period in 2009.  As with the second quarter 2010 results, the decrease in noninterest income was mainly due to a decline in insurance agency commissions and a $420 thousand gain on an interest rate swap transaction recorded in the second quarter of 2009.

Total noninterest expense for the six months ended June 30, 2010 decreased $567 thousand when compared to the same period in 2009.  Lower expenses accrued for bonus and profit sharing plans and lower FDIC premium insurance expense were partially offset by higher expenses related to collection and other real estate owned activities when compared to the first six months of 2009.  

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; and a registered investment adviser firm, Wye Financial Services, LLC.  Shore Bancshares, Inc. engages in the mortgage broker business under the name “Wye Mortgage Group” through a minority series investment in an unrelated Delaware limited liability company.

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 10
  
Financial Highlights
                                
(Dollars in thousands, except per share data)
                                
                                     
                                     
   
For the Three Months Ended
    
For the Six Months Ended
  
   
June 30,
    
June 30,
  
   
2010
    
2009
    
% Change
    
2010
    
2009
    
% Change
  
PROFITABILITY FOR THE PERIOD
                                    
Net interest income
   $ 10,691     $ 10,086       6.0 %   $ 21,086     $ 20,144       4.7 %
Provision for credit losses
     4,917       1,681       192.5       12,534       3,616       246.6  
Noninterest income
     4,568       5,347       (14.6 )     9,450       10,697       (11.7 )
Noninterest expense
     9,688       10,693       (9.4 )     20,009       20,576       (2.8 )
Income (loss) before income taxes
     654       3,059       (78.6 )     (2,007 )     6,649       (130.2 )
Income tax expense (benefit)
     209       1,166       (82.1 )     (890 )     2,543       (135.0 )
Net income (loss)
     445       1,893       (76.5 )     (1,117 )     4,106       (127.2 )
Preferred stock dividends and discount accretion
     -       1,539       (100.0 )     -       1,876       (100.0 )
Net income (loss) available to common shareholders
   $ 445     $ 354       25.7     $ (1,117 )   $ 2,230       (150.1 )
                                                 
                                                 
Return on average assets (1)
     0.16 %     0.13 %     23.1 %     (0.20 ) %     0.41 %     (148.8 ) %
Return on average equity (1)
     1.42       1.07       32.7       (1.78 )     3.18       (156.0 )
Net interest margin
     4.03       3.85       4.7       3.99       3.96       0.8  
Efficiency ratio - GAAP based
     63.49       69.29       (8.4 )     65.53       66.72       (1.8 )
                                                 
                                                 
PER SHARE DATA
                                                
Basic net income (loss) per share
   $ 0.05     $ 0.23       (78.3 ) %   $ (0.13 )   $ 0.49       (126.5 ) %
Basic net income (loss) per common share
     0.05       0.04       25.0       (0.13 )     0.27       (148.1 )
Diluted net income (loss) per share
     0.05       0.22       (77.3 )     (0.13 )     0.49       (126.5 )
Diluted net income (loss) per common share
     0.05       0.04       25.0       (0.13 )     0.27       (148.1 )
Dividends paid per common share
     0.06       0.16       (62.5 )     0.12       0.32       (62.5 )
Book value per common share at period end
     14.77       15.19       (2.8 )                        
Tangible book value per common share at period end
     12.27       12.62       (2.8 )                        
Market value at period end
     11.91       17.94       (33.6 )                        
Market range:
                                                
High
     14.80       21.46       (31.0 )     14.80       24.43       (39.4 )
Low
     11.75       15.18       (22.6 )     10.21       11.00       (7.2 )
                                                 
                                                 
PERIOD-END BALANCE SHEET DATA
                                                
Loans
   $ 905,477     $ 919,088       (1.5 ) %                        
Securities
     106,556       86,123       23.7                          
Assets
     1,129,196       1,158,212       (2.5 )                        
Deposits
     971,608       981,334       (1.0 )                        
Stockholders' equity
     124,666       127,876       (2.5 )                        
                                                 
                                                 
AVERAGE BALANCE SHEET DATA
                                                
Loans
   $ 909,295     $ 913,671       (0.5 ) %   $ 909,831     $ 906,066       0.4 %
Securities
     109,744       83,387       31.6       109,996       83,672       31.5  
Earning assets
     1,071,115       1,060,886       1.0       1,073,257       1,033,909       3.8  
Assets
     1,134,662       1,120,338       1.3       1,140,105       1,089,532       4.6  
Deposits
     976,749       942,431       3.6       979,491       896,311       9.3  
Stockholders' equity
     125,670       132,607       (5.2 )     126,869       141,501       (10.3 )
                                                 
                                                 
CAPITAL AND CREDIT QUALITY RATIOS
                                          
Average equity to average assets
     11.08 %     11.84 %             11.13 %     12.99 %        
Annualized net charge-offs to average loans
     1.95       0.71               2.24       0.48          
Allowance for credit losses to period-end loans
     1.47       1.17                                  
Nonperforming assets to total loans+other real estate owned
     4.26       1.73                                  
Nonperforming assets to total assets
     3.42       1.37                                  
Nonperforming assets+Loans 90 days past due
                                  
and still accruing to total loans+other real estate owned
     4.78       2.60                                  
Nonperforming assets+Loans 90 days past due
                                  
and still accruing to total assets
     3.84       2.07                                  
                                                 
(1) Calculation uses net income (loss) available to common shareholders.
                          
 
 
Shore Bancshares, Inc.
                    
  Page 5 of 10
  
Consolidated Balance Sheets
                              
(In thousands, except per share data)
                              
                               
                               
                     
June 30, 2010
    
June 30, 2010
  
   
June 30,
    
Dec. 31,
    
June 30,
    
compared to
    
compared to
  
   
2010
    
2009
    
2009
    
Dec. 31, 2009
    
June 30, 2009
  
ASSETS
                              
    Cash and due from banks
   $ 16,645     $ 14,411     $ 20,498       15.5 %     (18.8 ) %
    Interest-bearing deposits with other banks
     15,652       598       1,622       2,517.4       865.0  
    Federal funds sold
     32,372       60,637       85,242       (46.6 )     (62.0 )
    Investments available-for-sale (at fair value)
     98,211       97,595       77,129       0.6       27.3  
    Investments held-to-maturity
     8,345       8,940       8,994       (6.7 )     (7.2 )
                                         
    Loans
     905,477       916,557       919,088       (1.2 )     (1.5 )
    Less: allowance for credit losses
     (13,289 )     (10,876 )     (10,784 )     22.2       23.2  
    Loans, net
     892,188       905,681       908,304       (1.5 )     (1.8 )
                                         
    Premises and equipment, net
     14,924       14,307       14,018       4.3       6.5  
    Goodwill
     15,954       15,954       15,954       -       -  
    Other intangible assets, net
     5,148       5,406       5,663       (4.8 )     (9.1 )
    Other real estate and other assets owned, net
     1,428       2,572       2,212       (44.5 )     (35.4 )
    Other assets
     28,329       30,415       18,576       (6.9 )     52.5  
                                         
Total assets
   $ 1,129,196     $ 1,156,516     $ 1,158,212       (2.4 )     (2.5 )
                                         
LIABILITIES
                                        
    Noninterest-bearing deposits
   $ 121,410     $ 122,492     $ 113,111       (0.9 )     7.3  
    Interest-bearing deposits
     850,198       868,445       868,223       (2.1 )     (2.1 )
Total deposits
     971,608       990,937       981,334       (2.0 )     (1.0 )
                                         
    Short-term borrowings
     17,864       20,404       28,096       (12.4 )     (36.4 )
    Accrued expenses and other liabilities
     13,629       15,936       12,959       (14.5 )     5.2  
    Long-term debt
     1,429       1,429       7,947       -       (82.0 )
Total liabilities
     1,004,530       1,028,706       1,030,336       (2.4 )     (2.5 )
                                         
STOCKHOLDERS' EQUITY
                                        
Common stock, par value $0.01; authorized
                                  
       35,000,000 shares
     84       84       84       -       -  
    Warrant
     1,543       1,543       1,543       -       -  
    Additional paid in capital
     30,081       29,872       29,816       0.7       0.9  
    Retained earnings
     94,021       96,151       95,679       (2.2 )     (1.7 )
    Accumulated other comprehensive (loss) income
     (1,063 )     160       754       (764.4 )     (241.0 )
Total stockholders' equity
     124,666       127,810       127,876       (2.5 )     (2.5 )
                                         
Total liabilities and stockholders' equity
   $ 1,129,196     $ 1,156,516     $ 1,158,212       (2.4 )     (2.5 )
                                         
Period-end common shares outstanding
     8,443       8,419       8,419       0.3       0.3  
Book value per common share
   $ 14.77     $ 15.18     $ 15.19       (2.7 )     (2.8 )
 
 
Shore Bancshares, Inc.
                      
  Page 6 of 10
  
Consolidated Statements of Income
                                
(In thousands, except per share data)
                                
                                     
                                     
   
For the Three Months Ended
    
For the Six Months Ended
  
   
June 30,
    
June 30,
  
   
2010
    
2009
    
% Change
    
2010
    
2009
    
% Change
  
INTEREST INCOME
                                    
    Interest and fees on loans
   $ 13,047     $ 13,754       (5.1 )  %   $ 25,921     $ 27,371       (5.3 )  %
Interest and dividends on investment securities:
                                          
        Taxable
     846       768       10.2       1,728       1,524       13.4  
        Tax-exempt
     56       79       (29.1 )     115       164       (29.9 )
    Interest on federal funds sold
     14       23       (39.1 )     26       30       (13.3 )
    Interest on deposits with other banks
     4       6       (33.3 )     5       7       (28.6 )
                   Total interest income
     13,967       14,630       (4.5 )     27,795       29,096       (4.5 )
                                                 
INTEREST EXPENSE
                                                
    Interest on deposits
     3,242       4,441       (27.0 )     6,627       8,726       (24.1 )
    Interest on short-term borrowings
     19       28       (32.1 )     51       77       (33.8 )
    Interest on long-term debt
     15       75       (80.0 )     31       149       (79.2 )
                   Total interest expense
     3,276       4,544       (27.9 )     6,709       8,952       (25.1 )
                                                 
NET INTEREST INCOME
     10,691       10,086       6.0       21,086       20,144       4.7  
Provision for credit losses
     4,917       1,681       192.5       12,534       3,616       246.6  
                                                 
NET INTEREST INCOME AFTER PROVISION
                                          
  FOR CREDIT LOSSES
     5,774       8,405       (31.3 )     8,552       16,528       (48.3 )
                                                 
NONINTEREST INCOME
                                                
    Service charges on deposit accounts
     831       888       (6.4 )     1,617       1,697       (4.7 )
    Trust and investment fee income
     372       258       44.2       788       476       65.5  
    Investment securities gains (losses)
     -       -       -       -       49       (100.0 )
    Insurance agency commissions
     2,595       2,893       (10.3 )     5,484       6,228       (11.9 )
    Other noninterest income
     770       1,308       (41.1 )     1,561       2,247       (30.5 )
                      Total noninterest income
     4,568       5,347       (14.6 )     9,450       10,697       (11.7 )
                                                 
NONINTEREST EXPENSE
                                                
    Salaries and wages
     4,363       4,759       (8.3 )     8,853       9,299       (4.8 )
    Employee benefits
     758       1,200       (36.8 )     2,039       2,580       (21.0 )
    Occupancy expense
     597       587       1.7       1,219       1,136       7.3  
    Furniture and equipment expense
     313       302       3.6       613       616       (0.5 )
    Data processing
     660       580       13.8       1,291       1,190       8.5  
    Directors' fees
     105       117       (10.3 )     226       285       (20.7 )
    Amortization of intangible assets
     129       129       -       258       258       -  
    Insurance agency commissions expense
     464       537       (13.6 )     892       1,087       (17.9 )
    FDIC insurance premium expense
     460       919       (49.9 )     941       1,163       (19.1 )
    Other noninterest expenses
     1,839       1,563       17.7       3,677       2,962       24.1  
                      Total noninterest expense
     9,688       10,693       (9.4 )     20,009       20,576       (2.8 )
                                                 
Income (loss) before income taxes
     654       3,059       (78.6 )     (2,007 )     6,649       (130.2 )
Income tax expense (benefit)
     209       1,166       (82.1 )     (890 )     2,543       (135.0 )
                                                 
NET INCOME (LOSS)
     445       1,893       (76.5 )     (1,117 )     4,106       (127.2 )
Preferred stock dividends and discount accretion
     -       1,539       (100.0 )     -       1,876       (100.0 )
Net income (loss) available to common shareholders
   $ 445     $ 354       25.7     $ (1,117 )   $ 2,230       (150.1 )
                                                 
Weighted average shares outstanding - basic
     8,443       8,413       0.4       8,440       8,409       0.4  
Weighted average shares outstanding - diluted
     8,443       8,417       0.3       8,440       8,413       0.3  
                                                 
Basic net income (loss) per share
   $ 0.05     $ 0.23       (78.3 )   $ (0.13 )   $ 0.49       (126.5 )
Basic net income (loss) per common share
     0.05       0.04       25.0       (0.13 )     0.27       (148.1 )
Diluted net income (loss) per share
     0.05       0.22       (77.3 )     (0.13 )     0.49       (126.5 )
Diluted net income (loss) per common share
     0.05       0.04       25.0       (0.13 )     0.27       (148.1 )
Dividends paid per common share
     0.06       0.16       (62.5 )     0.12       0.32       (62.5 )
 
 
Shore Bancshares, Inc.
                            
  Page 7 of 10
  
Consolidated Average Balance Sheets
                                      
(Dollars in thousands)
                                      
                                                 
                                                 
   
For the Three Months Ended
    
For the Six Months Ended
  
   
June 30,
    
June 30,
  
   
2010
    
2009
    
2010
    
2009
  
   
Average
    
Yield/
    
Average
    
Yield/
    
Average
    
Yield/
    
Average
    
Yield/
  
   
balance
    
rate
    
balance
    
rate
    
balance
    
rate
    
balance
    
rate
  
Earning assets
                                                
Loans
   $ 909,295       5.77 %   $ 913,671       6.06 %   $ 909,831       5.76 %   $ 906,066       6.11 %
Investment securities
                                                                
Taxable
     103,284       3.29       75,277       4.09       103,385       3.37       75,067       4.09  
Tax-exempt
     6,460       5.30       8,110       6.02       6,611       5.35       8,605       5.92  
Federal funds sold
     38,001       0.15       55,699       0.16       42,253       0.13       38,873       0.15  
Interest-bearing deposits
     14,075       0.12       8,129       0.33       11,177       0.10       5,298       0.28  
Total earning assets
     1,071,115       5.26 %     1,060,886       5.56 %     1,073,257       5.25 %     1,033,909       5.71 %
Cash and due from banks
     9,997               18,705               12,197               15,395          
Other assets
     67,860               51,595               67,889               50,487          
Allowance for credit losses
     (14,310 )             (10,848 )             (13,238 )             (10,259 )        
Total assets
   $ 1,134,662             $ 1,120,338             $ 1,140,105             $ 1,089,532          
                                                                 
                                                                 
Interest bearing liabilities
                                                                
Demand deposits
   $ 132,563       0.25 %   $ 125,076       0.24 %   $ 130,287       0.25 %   $ 123,104       0.24 %
Money market and savings deposits
     259,273       0.72       222,825       0.63       258,180       0.70       188,165       0.56  
Certificates of deposit $100,000 or more
     251,340       2.09       245,210       3.20       255,416       2.17       241,997       3.30  
Other time deposits
     215,987       2.56       239,668       3.45       217,849       2.62       236,077       3.50  
Interest bearing deposits
     859,163       1.51       832,779       2.14       861,732       1.55       789,343       2.23  
Short-term borrowings
     15,771       0.48       25,435       0.45       16,896       0.60       32,469       0.48  
Long-term debt
     1,429       4.40       7,947       3.78       1,429       4.43       7,947       3.78  
Total interest bearing liabilities
     876,363       1.50 %     866,161       2.10 %     880,057       1.54 %     829,759       2.18 %
Noninterest bearing deposits
     117,586               109,652               117,759               106,968          
Accrued expenses and other liabilities
     15,043               11,918               15,420               11,304          
Stockholders' equity
     125,670               132,607               126,869               141,501          
Total liabilities and stockholders' equity
   $ 1,134,662             $ 1,120,338             $ 1,140,105             $ 1,089,532          
                                                                 
Net interest spread
             3.76 %             3.46 %             3.71 %             3.53 %
Net interest margin
             4.03 %             3.85 %             3.99 %             3.96 %
 
 
Shore Bancshares, Inc.
                      
  Page 8 of 10
  
Financial Highlights By Quarter
                                
(Dollars in thousands, except per share data)
                                
                                           
                                           
   
2nd quarter
    
1st quarter
    
4th quarter
    
3rd quarter
    
2nd quarter
      
2Q 10
      
2Q 10
  
   
2010
    
2010
    
2009
    
2009
    
2009
    
compared to
    
compared to
  
     
(2Q 10)
      
(1Q 10)
      
(4Q 09)
      
(3Q 09)
      
(2Q 09)
      
1Q 10
      
2Q 09
  
PROFITABILITY FOR THE PERIOD
                                                        
Net interest income
   $ 10,691     $ 10,395     $ 10,806     $ 10,428     $ 10,086       2.8 %     6.0 %
Provision for credit losses
     4,917       7,617       3,668       1,702       1,681       (35.4 )     192.5  
Noninterest income
     4,568       4,882       4,125       4,719       5,347       (6.4 )     (14.6 )
Noninterest expense
     9,688       10,321       9,375       10,297       10,693       (6.1 )     (9.4 )
Income (loss) before income taxes
     654       (2,661 )     1,888       3,148       3,059       124.6       (78.6 )
Income tax expense (benefit)
     209       (1,099 )     672       1,197       1,166       119.0       (82.1 )
Net income (loss)
     445       (1,562 )     1,216       1,951       1,893       128.5       (76.5 )
Preferred stock dividends and discount accretion
     -       -       -       -       1,539       -       (100.0 )
Net income (loss) available to common shareholders
   $ 445     $ (1,562 )   $ 1,216     $ 1,951     $ 354       128.5       25.7  
                                                         
                                                         
Return on average assets (1)
     0.16 %     (0.55 ) %     0.41 %     0.66 %     0.13 %     129.1 %     23.1 %
Return on average equity (1)
     1.42       (4.95 )     3.75       6.03       1.07       128.7       32.7  
Net interest margin
     4.03       3.95       3.90       3.79       3.85       2.0       4.7  
Efficiency ratio - GAAP based
     63.49       67.56       62.79       67.98       69.29       (6.0 )     (8.4 )
                                                         
                                                         
PER SHARE DATA
                                                        
Basic net income (loss) per share
   $ 0.05     $ (0.19 )   $ 0.14     $ 0.23     $ 0.23       126.3 %     (78.3 ) %
Basic net income (loss) per common share
     0.05       (0.19 )     0.14       0.23       0.04       126.3       25.0  
Diluted net income (loss) per share
     0.05       (0.19 )     0.14       0.23       0.22       126.3       (77.3 )
Diluted net income (loss) per common share
     0.05       (0.19 )     0.14       0.23       0.04       126.3       25.0  
Dividends paid per common share
     0.06       0.06       0.16       0.16       0.16       -       (62.5 )
Book value per common share at period end
     14.77       14.82       15.18       15.23       15.19       (0.3 )     (2.8 )
Tangible book value per common share at period end
     12.27       12.30       12.64       12.68       12.62       (0.2 )     (2.8 )
Market value at period end
     11.91       14.25       14.50       16.73       17.94       (16.4 )     (33.6 )
Market range:
                                                        
High
     14.80       14.75       17.71       20.72       21.46       0.3       (31.0 )
Low
     11.75       10.21       13.52       16.64       15.18       15.1       (22.6 )
                                                         
                                                         
PERIOD-END BALANCE SHEET DATA
                                                        
Loans
   $ 905,477     $ 905,194     $ 916,557     $ 918,601     $ 919,088       - %     (1.5 ) %
Securities
     106,556       112,929       106,535       100,772       86,123       (5.6 )     23.7  
Assets
     1,129,196       1,146,334       1,156,516       1,157,685       1,158,212       (1.5 )     (2.5 )
Deposits
     971,608       990,750       990,937       992,196       981,334       (1.9 )     (1.0 )
Stockholders' equity
     124,666       125,108       127,810       128,219       127,876       (0.4 )     (2.5 )
                                                         
                                                         
AVERAGE BALANCE SHEET DATA
                                                        
Loans
   $ 909,295     $ 910,374     $ 921,908     $ 920,241     $ 913,671       (0.1 ) %     (0.5 ) %
Securities
     109,744       110,252       104,561       97,226       83,387       (0.5 )     31.6  
Earning assets
     1,071,115       1,075,425       1,104,919       1,100,538       1,060,886       (0.4 )     1.0  
Assets
     1,134,662       1,145,607       1,169,337       1,166,587       1,120,338       (1.0 )     1.3  
Deposits
     976,749       982,265       1,002,982       1,001,304       942,431       (0.6 )     3.6  
Stockholders' equity
     125,670       128,081       128,715       128,409       132,607       (1.9 )     (5.2 )
                                                         
                                                         
                                                         
CAPITAL AND CREDIT QUALITY RATIOS
                                                  
Average equity to average assets
     11.08 %     11.18 %     11.01 %     11.01 %     11.84 %                
Annualized net charge-offs to average loans
     1.95       2.54       1.51       0.76       0.71                  
Allowance for credit losses to period-end loans
     1.47       1.41       1.19       1.17       1.17                  
Nonperforming assets to total loans+other real estate owned
     4.26       3.62       2.05       1.90       1.73                  
Nonperforming assets to total assets
     3.42       2.87       1.63       1.51       1.37                  
Nonperforming assets+Loans 90 days past due
                                                  
and still accruing to total loans+other real estate owned
     4.78       3.93       2.86       2.89       2.60                  
Nonperforming assets+Loans 90 days past due
                                                  
and still accruing to total assets
     3.84       3.11       2.27       2.30       2.07                  
                                                         
(1) Calculation uses net income (loss) available to common shareholders.
                          
 
 
Shore Bancshares, Inc.
                      
  Page 9 of 10
  
Consolidated Statements of Income By Quarter
                                
(In thousands, except per share data)
                                
                                           
                                           
                                   
2Q 10
      
2Q 10
  
                                 
compared to
    
compared to
  
     
2Q 10
      
1Q 10
      
4Q 09
      
3Q 09
      
2Q 09
      
1Q 10
      
2Q 09
  
INTEREST INCOME
                                                        
Interest and fees on loans
   $ 13,047     $ 12,874     $ 13,837     $ 14,001     $ 13,754       1.3 %     (5.1 ) %
Interest and dividends on investment securities:
                                          
Taxable
     846       882       860       800       768       (4.1 )     10.2  
Tax-exempt
     56       59       60       77       79       (5.1 )     (29.1 )
Interest on federal funds sold
     14       12       23       31       23       16.7       (39.1 )
Interest on deposits with other banks
     4       1       -       4       6       300.0       (33.3 )
Total interest income
     13,967       13,828       14,780       14,913       14,630       1.0       (4.5 )
                                                         
INTEREST EXPENSE
                                                        
Interest on deposits
     3,242       3,385       3,924       4,368       4,441       (4.2 )     (27.0 )
Interest on short-term borrowings
     19       32       31       19       28       (40.6 )     (32.1 )
Interest on long-term debt
     15       16       19       98       75       (6.3 )     (80.0 )
Total interest expense
     3,276       3,433       3,974       4,485       4,544       (4.6 )     (27.9 )
                                                         
NET INTEREST INCOME
     10,691       10,395       10,806       10,428       10,086       2.8       6.0  
Provision for credit losses
     4,917       7,617       3,668       1,702       1,681       (35.4 )     192.5  
                                                         
NET INTEREST INCOME AFTER PROVISION
                                                
 FOR CREDIT LOSSES
     5,774       2,778       7,138       8,726       8,405       107.8       (31.3 )
                                                         
NONINTEREST INCOME
                                                        
Service charges on deposit accounts
     831       786       866       861       888       5.7       (6.4 )
Trust and investment fee income
     372       416       350       274       258       (10.6 )     44.2  
Investment securities gains (losses)
     -       -       -       -       -       -       -  
Insurance agency commissions
     2,595       2,889       2,159       2,744       2,893       (10.2 )     (10.3 )
Other noninterest income
     770       791       750       840       1,308       (2.7 )     (41.1 )
Total noninterest income
     4,568       4,882       4,125       4,719       5,347       (6.4 )     (14.6 )
                                                         
NONINTEREST EXPENSE
                                                        
Salaries and wages
     4,363       4,490       4,424       4,765       4,759       (2.8 )     (8.3 )
Employee benefits
     758       1,281       840       1,211       1,200       (40.8 )     (36.8 )
Occupancy expense
     597       622       572       616       587       (4.0 )     1.7  
Furniture and equipment expense
     313       300       268       299       302       4.3       3.6  
Data processing
     660       631       598       675       580       4.6       13.8  
Directors' fees
     105       121       84       109       117       (13.2 )     (10.3 )
Amortization of intangible assets
     129       129       129       128       129       -       -  
Insurance agency commissions expense
     464       428       398       428       537       8.4       (13.6 )
FDIC insurance premium expense
     460       481       457       458       919       (4.4 )     (49.9 )
Other noninterest expenses
     1,839       1,838       1,605       1,608       1,563       0.1       17.7  
Total noninterest expense
     9,688       10,321       9,375       10,297       10,693       (6.1 )     (9.4 )
                                                         
Income (loss) before income taxes
     654       (2,661 )     1,888       3,148       3,059       124.6       (78.6 )
Income tax expense (benefit)
     209       (1,099 )     672       1,197       1,166       119.0       (82.1 )
                                                         
NET INCOME (LOSS)
     445       (1,562 )     1,216       1,951       1,893       128.5       (76.5 )
Preferred stock dividends and discount accretion
     -       -       -       -       1,539       -       (100.0 )
Net income (loss) available to common shareholders
   $ 445     $ (1,562 )   $ 1,216     $ 1,951     $ 354       128.5       25.7  
                                                         
Weighted average shares outstanding - basic
     8,443       8,436       8,419       8,419       8,413       0.1       0.4  
Weighted average shares outstanding - diluted
     8,443       8,436       8,421       8,423       8,417       0.1       0.3  
                                                         
Basic net income (loss) per share
   $ 0.05     $ (0.19 )   $ 0.14     $ 0.23     $ 0.23       126.3       (78.3 )
Basic net income (loss) per common share
     0.05       (0.19 )     0.14       0.23       0.04       126.3       25.0  
Diluted net income (loss) per share
     0.05       (0.19 )     0.14       0.23       0.22       126.3       (77.3 )
Diluted net income (loss) per common share
     0.05       (0.19 )     0.14       0.23       0.04       126.3       25.0  
Dividends paid per common share
     0.06       0.06       0.16       0.16       0.16       -       (62.5 )
 
 
Shore Bancshares, Inc.
                                              
  Page 10 of 10
  
Consolidated Average Balance Sheets By Quarter
                                                  
(Dollars in thousands)
                                                        
                                                                         
                                                                         
                                                               
Average balance
  
                                                                 
2Q 10
      
2Q 10
  
                                                               
compared to
    
compared to
  
     
2Q 10
      
1Q 10
      
4Q 09
      
3Q 09
      
2Q 09
      
1Q 10
      
2Q 09
  
   
Average
    
Yield/
    
Average
    
Yield/
    
Average
    
Yield/
    
Average
    
Yield/
    
Average
    
Yield/
                  
   
balance
    
rate
    
balance
    
rate
    
balance
    
rate
    
balance
    
rate
    
balance
    
rate
                  
Earning assets
                                                                                      
Loans
   $ 909,295       5.77 %   $ 910,374       5.75 %   $ 921,908       5.97 %   $ 920,241       6.05 %   $ 913,671       6.06 %     (0.1 )  %     (0.5 ) %
Investment securities
                                                                                                
Taxable
     103,284       3.29       103,488       3.45       97,595       3.50       89,101       3.56       75,277       4.09       (0.2 )     37.2  
Tax-exempt
     6,460       5.30       6,764       5.39       6,966       4.96       8,125       5.76       8,110       6.02       (4.5 )     (20.4 )
Federal funds sold
     38,001       0.15       46,553       0.11       77,782       0.11       81,466       0.16       55,699       0.16       (18.4 )     (31.8 )
Interest-bearing deposits
     14,075       0.12       8,246       0.06       668       0.45       1,605       0.77       8,129       0.33       70.7       73.2  
Total earning assets
     1,071,115       5.26 %     1,075,425       5.24 %     1,104,919       5.33 %     1,100,538       5.41 %     1,060,886       5.56 %     (0.4 )     1.0  
Cash and due from banks
     9,997               14,422               17,312               20,042               18,705               (30.7 )     (46.6 )
Other assets
     67,860               67,914               58,543               57,049               51,595               (0.1 )     31.5  
Allowance for credit losses
     (14,310 )             (12,154 )             (11,437 )             (11,042 )             (10,848 )             17.7       31.9  
Total assets
   $ 1,134,662             $ 1,145,607             $ 1,169,337             $ 1,166,587             $ 1,120,338               (1.0 )     1.3  
                                                                                                 
                                                                                                 
Interest bearing liabilities
                                                                                                
Demand deposits
   $ 132,563       0.25 %   $ 127,986       0.25 %   $ 127,537       0.26 %   $ 125,233       0.26 %   $ 125,076       0.24 %     3.6       6.0  
Money market and savings deposits
     259,273       0.72       256,818       0.68       249,393       0.66       245,801       0.67       222,825       0.63       1.0       16.4  
Certificates of deposit $100,000 or more
     251,340       2.09       259,538       2.24       276,390       2.51       274,580       2.82       245,210       3.20       (3.2 )     2.5  
Other time deposits
     215,987       2.56       219,731       2.67       228,020       2.91       237,757       3.20       239,668       3.45       (1.7 )     (9.9 )
Interest bearing deposits
     859,163       1.51       864,073       1.59       881,340       1.77       883,371       1.96       832,779       2.14       (0.6 )     3.2  
Short-term borrowings
     15,771       0.48       18,032       0.71       18,994       0.63       18,373       0.42       25,435       0.45       (12.5 )     (38.0 )
Long-term debt
     1,429       4.40       1,429       4.45       1,429       5.28       1,947       19.90       7,947       3.78       -       (82.0 )
Total interest bearing liabilities
     876,363       1.50 %     883,534       1.58 %     901,763       1.75 %     903,691       1.97 %     866,161       2.10 %     (0.8 )     1.2  
Noninterest bearing deposits
     117,586               118,192               121,642               117,933               109,652               (0.5 )     7.2  
Accrued expenses and other liabilities
     15,043               15,800               17,217               16,554               11,918               (4.8 )     26.2  
Stockholders' equity
     125,670               128,081               128,715               128,409               132,607               (1.9 )     (5.2 )
Total liabilities and stockholders' equity
   $ 1,134,662             $ 1,145,607             $ 1,169,337             $ 1,166,587             $ 1,120,338               (1.0 )     1.3  
                                                                                                 
                                                                                                 
Net interest spread
             3.76 %             3.66 %             3.58 %             3.44 %             3.46 %                
Net interest margin
             4.03 %             3.95 %             3.90 %             3.79 %             3.85 %