Shore Bancshares Reports Third Quarter and Nine-Month Results

Oct 26, 2010, 20:15 ET from Shore Bancshares, Inc.

EASTON, Md., Oct. 26 /PRNewswire-FirstCall/ -- Shore Bancshares, Inc. (Nasdaq: SHBI) reported a net loss of $1.4 million or $(0.17) per diluted common share for the third quarter of 2010, compared to net income of $445 thousand or $0.05 per diluted common share for the second quarter of 2010, and net income of $1.951 million or $0.23 per diluted common share for the third quarter of 2009.  During the third quarter of 2010, the Company recorded goodwill impairment charges of $3.0 million and other intangible assets impairment charges of $51 thousand.  The provision for credit losses was $4.2 million in the third quarter of 2010, which was $724 thousand lower than the provision for the second quarter of 2010 but $2.5 million higher than the provision for the third quarter of 2009.  

The Company reported a net loss of $2.5 million or $(0.30) per diluted common share for the first nine months of 2010, compared to net income of $4.2 million or $0.50 per diluted common share for the first nine months of 2009.  The 2010 year-to-date net loss included the previously mentioned goodwill and other intangible assets impairment charges of $3.051 million.  The provision for credit losses was $16.7 million and $5.3 million for the first nine months of 2010 and 2009, respectively.  For the first nine months of 2009, net income available to common stockholders was negatively impacted by $1.9 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.  

“Our underlying operating performance for the quarter was decent considering the ongoing tough business environment, and would have generated a profit had it not been for the offsetting impact of one-time goodwill impairment charges,” said W. Moorhead Vermilye, president and chief executive officer. “Half of the goodwill impairment charges related to our acquisition in 2004 of The Felton Bank and the other half to our purchase in 2007 of TSGIA, Inc., a wholesale insurance agency. It is important to note that the charge for goodwill impairment is a non-cash accounting entry that does not affect our regulatory capital levels. Further, the goodwill impairment charges were only for a portion of the total goodwill in those entities and 18.8% of the goodwill of the overall Company.”

The Company’s return on average assets for the third quarter of 2010 was (0.49)%, compared to 0.16% and 0.66% for the quarters ended June 30, 2010 and September 30, 2009, respectively.  The return on average stockholders’ equity was (4.43)% for the third quarter of 2010, compared to 1.42% for the second quarter of 2010 and 6.03% for the third quarter of 2009.

The Company’s return on average assets for the first nine months of 2010 was (0.30)%, compared to 0.50% for the first nine months of 2009.  The return on average stockholders’ equity was (2.66)% and 4.08% for the first nine months of 2010 and 2009, respectively.

Total assets were $1.135 billion at September 30, 2010, compared to $1.157 billion at the end of 2009, a decrease of 1.9%.  Total loans were $906.5 million, a decrease of 1.1%, and total deposits were $982.4 million, a decrease of  0.9%, when compared to December 31, 2009.  At September 30, 2010, total stockholders’ equity was $122.4 million, a decrease of 4.3% from $127.8 million at the end of 2009.

Review of Quarterly Financial Results

Net interest income for the third quarter of 2010 was $10.7 million, relatively unchanged from the second quarter of 2010 and an increase of 2.5% from the same period last year.  The increase in net interest income when compared to the third quarter of 2009 was primarily due to a decrease in the balances and rates paid on interest bearing liabilities that more than offset the decline in the balances and yields on earning assets.  The Company’s net interest margin was 4.00% for the third quarter of 2010, slightly lower than the 4.03% for  the second quarter of 2010 and 21 basis points higher than the 3.79% for the third quarter of 2009.

As previously mentioned, the provision for credit losses was $4.2 million for the three months ended September 30, 2010, compared to $4.9 million and $1.7 million for the three months ended June 30, 2010 and September 30, 2009, respectively.  The ratio of the allowance for credit losses to period-end loans was 1.45% at September 30, 2010, compared to 1.47% at June 30, 2010 and 1.17% at September 30, 2009.  Management believes that the provision for credit losses and the resulting allowance were adequate at September 30, 2010.  

The continued historically large level of provision for credit losses 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 $4.3 million for the third quarter of 2010, $4.4 million for the second quarter of 2010 and $1.8 million for the third quarter of 2009.  The ratio of quarter-to-date annualized net charge-offs to average loans was 1.90% for the third quarter of 2010, 1.95% for the second quarter of 2010 and 0.76% for the third quarter of 2009. The ratio of nonperforming assets to total assets was 3.38% at September 30, 2010.  The comparable nonperforming asset ratio was 3.45% at June 30, 2010, and 1.51% at September 30, 2009.  

Total noninterest income for the third quarter of 2010 increased $75 thousand when compared to the second quarter of 2010 and decreased $76 thousand when compared to the third quarter of 2009. The increase when compared to the second quarter of 2010 was primarily due to a $224 thousand gain relating to the surrender of directors’ life insurance policies which was partially offset by decreases in mortgage broker fees and insurance agency commissions.  The decrease when compared to the third quarter of 2009 was mainly due to decreases in mortgage broker fees and insurance agency commissions which were partially offset by the $224 thousand gain from the life insurance policies.  

Total noninterest expense for the third quarter of 2010 increased $2.9 million when compared to the second quarter of 2010 mainly due to goodwill impairment charges of $3.0 million and other intangible assets impairment charges of $51 thousand.  The increase in noninterest expense was slightly offset by lower expenses related to other real estate owned activities. When compared to the third quarter of 2009, total noninterest expense for the third quarter of 2010 increased $2.3 million primarily due to the goodwill and other intangible assets impairment charges.  The increase in noninterest expense was somewhat offset by lower expenses accrued for bonus and profit sharing plans.  Excluding the goodwill and other intangible assets impairment charges, total noninterest expense decreased 1.1% and 7.0% when compared to the second quarter of 2010 and the third quarter of 2009, respectively.  

Review of Nine-Month Financial Results

Net interest income for the first nine months of 2010 was $31.8 million, an increase of 3.9% when compared to the first nine 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 3.90% for the first nine months of 2009 to 3.99% for the first nine months of 2010.

The provisions for credit losses for the nine months ended September 30, 2010 and 2009 were $16.7 million and $5.3 million, respectively.  Net charge-offs were $14.5 million and $3.9 million for the nine months ended September 30, 2010 and 2009, respectively. The ratio of year-to-date annualized net charge-offs to average loans was 2.13% for the first nine months of 2010 and 0.57% for the first nine months of 2009.  

Total noninterest income for the nine months ended September 30, 2010 declined $1.3 million when compared to the same period in 2009.  The decrease in noninterest income was mainly due to a decline in mortgage broker fees and insurance agency commissions.

Total noninterest expense for the nine months ended September 30, 2010 increased $1.8 million when compared to the same period in 2009.  The increase in noninterest expense was primarily due to the goodwill and other intangible assets impairment charges and higher expenses related to collection and other real estate owned activities which were partially offset by lower expenses accrued for bonus and profit sharing plans, lower insurance agency commissions expense and lower FDIC insurance premium expense.  Excluding the goodwill and other intangible assets impairment charges, total noninterest expense decreased 4.2% when compared to the first nine 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”.

Shore Bancshares, Inc.







Page 4 of 10

Financial Highlights












(Dollars in thousands, except per share data)





































For the Three Months Ended


For the Nine Months Ended


September 30,


September 30,


2010


2009


% Change


2010


2009


% Change

PROFITABILITY FOR THE PERIOD












    Net interest income

$    10,687


$    10,428


2.5%


$    31,773


$    30,572


3.9%

    Provision for credit losses

4,193


1,702


146.4


16,727


5,318


214.5

    Noninterest income

4,643


4,719


(1.6)


14,093


15,416


(8.6)

    Noninterest expense

12,629


10,297


22.6


32,638


30,873


5.7

    (Loss) income before income taxes

(1,492)


3,148


(147.4)


(3,499)


9,797


(135.7)

    Income tax (benefit) expense

(92)


1,197


(107.7)


(982)


3,740


(126.3)

    Net (loss) income

(1,400)


1,951


(171.8)


(2,517)


6,057


(141.6)

    Preferred stock dividends and discount accretion

-


-


-


-


1,876


(100.0)

    Net (loss) income available to common shareholders

$    (1,400)


$      1,951


(171.8)


$    (2,517)


$      4,181


(160.2)

























    Return on average assets (1)

(0.49) %


0.66%


(174.2) %


(0.30) %


0.50%


(160.0) %

    Return on average equity (1)

(4.43)


6.03


(173.5)


(2.66)


4.08


(165.2)

    Net interest margin

4.00


3.79


5.5


3.99


3.90


2.3

    Efficiency ratio - GAAP based

82.38


67.98


21.2


71.16


67.13


6.0

























PER SHARE DATA












    Basic net (loss) income per share

$      (0.17)


$        0.23


(173.9) %


$      (0.30)


$        0.72


(141.7) %

    Basic net (loss) income per common share

(0.17)


0.23


(173.9)


(0.30)


0.50


(160.0)

    Diluted net (loss) income per share

(0.17)


0.23


(173.9)


(0.30)


0.72


(141.7)

    Diluted net (loss) income per common share

(0.17)


0.23


(173.9)


(0.30)


0.50


(160.0)

    Dividends paid per common share

0.06


0.16


(62.5)


0.18


0.48


(62.5)

    Book value per common share at period end

14.49


15.23


(4.9)







    Tangible book value per common share at period end

12.37


12.68


(2.4)







    Market value at period end

9.48


16.73


(43.3)







    Market range:












      High

12.10


20.72


(41.6)


14.80


24.43


(39.4)

      Low

9.20


16.64


(44.7)


9.20


11.00


(16.4)

























PERIOD-END BALANCE SHEET DATA












    Loans

$  906,490


$  918,601


(1.3) %







    Securities

104,075


100,772


3.3







    Assets

1,134,503


1,157,685


(2.0)







    Deposits

982,428


992,196


(1.0)







    Stockholders' equity

122,355


128,219


(4.6)































AVERAGE BALANCE SHEET DATA












    Loans

$  904,293


$  920,241


(1.7) %


$  907,965


$  910,842


(0.3) %

    Securities

105,466


97,226


8.5


108,469


88,240


22.9

    Earning assets

1,066,063


1,100,538


(3.1)


1,070,833


1,056,362


1.4

    Assets

1,139,043


1,166,587


(2.4)


1,139,747


1,115,499


2.2

    Deposits

984,018


1,001,304


(1.7)


980,968


931,693


5.3

    Stockholders' equity

125,308


128,409


(2.4)


126,343


137,089


(7.8)

























CAPITAL AND CREDIT QUALITY RATIOS












    Average equity to average assets

11.00%


11.01%




11.09%


12.29%



    Annualized net charge-offs to average loans

1.90


0.76




2.13


0.57



    Allowance for credit losses to period-end loans

1.45


1.17









    Nonperforming assets to total loans+other real estate












       owned

4.22


1.90









    Nonperforming assets to total assets

3.38


1.51









    Nonperforming assets+Loans 90 days past due












       and still accruing to total loans+other real estate












       owned

4.58


2.89









    Nonperforming assets+Loans 90 days past due












       and still accruing to total assets

3.67


2.30





















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



Shore Bancshares, Inc.





Page 5 of 10

Consolidated Balance Sheets










(In thousands, except per share data)





































Sep. 30, 2010


Sep. 30, 2010


Sep. 30,


Dec. 31,


Sep. 30,


compared to


compared to


2010


2009


2009


Dec. 31, 2009


Sep. 30, 2009

ASSETS










   Cash and due from banks

$      21,764


$      14,411


$      13,699


51.0%


58.9%

   Interest-bearing deposits with other banks

18,014


598


1,601


2,912.4


1,025.2

   Federal funds sold

35,161


60,637


72,061


(42.0)


(51.2)

   Investments available-for-sale (at fair value)

96,219


97,595


91,768


(1.4)


4.9

   Investments held-to-maturity

7,856


8,940


9,004


(12.1)


(12.7)











   Loans

906,490


916,557


918,601


(1.1)


(1.3)

   Less: allowance for credit losses

(13,153)


(10,876)


(10,723)


20.9


22.7

   Loans, net

893,337


905,681


907,878


(1.4)


(1.6)











   Premises and equipment, net

14,714


14,307


14,012


2.8


5.0

   Goodwill

12,954


15,954


15,954


(18.8)


(18.8)

   Other intangible assets, net

4,969


5,406


5,535


(8.1)


(10.2)

   Other real estate and other assets owned, net

1,517


2,572


2,062


(41.0)


(26.4)

   Other assets

27,998


30,415


24,111


(7.9)


16.1











       Total assets

$ 1,134,503


$ 1,156,516


$ 1,157,685


(1.9)


(2.0)











LIABILITIES










   Noninterest-bearing deposits

$    121,480


$    122,492


$    124,440


(0.8)


(2.4)

   Interest-bearing deposits

860,948


868,445


867,756


(0.9)


(0.8)

       Total deposits

982,428


990,937


992,196


(0.9)


(1.0)











   Short-term borrowings

17,782


20,404


17,673


(12.9)


0.6

   Accrued expenses and other liabilities

10,509


15,936


17,650


(34.1)


(40.5)

   Long-term debt

1,429


1,429


1,947


-


(26.6)

       Total liabilities

1,012,148


1,028,706


1,029,466


(1.6)


(1.7)











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

30,173


29,872


29,844


1.0


1.1

   Retained earnings

92,115


96,151


96,283


(4.2)


(4.3)

   Accumulated other comprehensive (loss) income

(1,560)


160


465


(1,075.0)


(435.5)

       Total stockholders' equity

122,355


127,810


128,219


(4.3)


(4.6)











       Total liabilities and stockholders' equity

$ 1,134,503


$ 1,156,516


$ 1,157,685


(1.9)


(2.0)











Period-end common shares outstanding

8,443


8,419


8,419


0.3


0.3

Book value per common share

$        14.49


$        15.18


$        15.23


(4.5)


(4.9)













Shore Bancshares, Inc.






Page 6 of 10

Consolidated Statements of Income










(In thousands, except per share data)































For the Three Months Ended


For the Nine Months Ended


September 30,


September 30,


2010


2009

% Change


2010


2009

% Change

INTEREST INCOME










   Interest and fees on loans

$ 13,083


$ 14,001

(6.6)%


$ 39,004


$ 41,372

(5.7)%

   Interest and dividends on investment securities:










       Taxable

677


800

(15.4)


2,405


2,324

3.5

       Tax-exempt

50


77

(35.1)


165


241

(31.5)

   Interest on federal funds sold

21


31

(32.3)


47


61

(23.0)

   Interest on deposits with other banks

6


4

50.0


11


11

-

       Total interest income

13,837


14,913

(7.2)


41,632


44,009

(5.4)











INTEREST EXPENSE










   Interest on deposits

3,117


4,368

(28.6)


9,744


13,094

(25.6)

   Interest on short-term borrowings

17


19

(10.5)


68


96

(29.2)

   Interest on long-term debt

16


98

(83.7)


47


247

(81.0)

       Total interest expense

3,150


4,485

(29.8)


9,859


13,437

(26.6)











NET INTEREST INCOME

10,687


10,428

2.5


31,773


30,572

3.9

Provision for credit losses

4,193


1,702

146.4


16,727


5,318

214.5











NET INTEREST INCOME AFTER PROVISION










 FOR CREDIT LOSSES

6,494


8,726

(25.6)


15,046


25,254

(40.4)











NONINTEREST INCOME










   Service charges on deposit accounts

841


861

(2.3)


2,458


2,558

(3.9)

   Trust and investment fee income

357


274

30.3


1,145


750

52.7

   Investment securities gains (losses)

-


-

-


-


49

(100.0)

   Insurance agency commissions

2,513


2,744

(8.4)


7,997


8,972

(10.9)

   Other noninterest income

932


840

11.0


2,493


3,087

(19.2)

       Total noninterest income

4,643


4,719

(1.6)


14,093


15,416

(8.6)











NONINTEREST EXPENSE










   Salaries and wages

4,404


4,765

(7.6)


13,257


14,064

(5.7)

   Employee benefits

897


1,211

(25.9)


2,936


3,791

(22.6)

   Occupancy expense

547


616

(11.2)


1,766


1,752

0.8

   Furniture and equipment expense

325


299

8.7


938


915

2.5

   Data processing

696


675

3.1


1,987


1,865

6.5

   Directors' fees

118


109

8.3


344


394

(12.7)

   Goodwill and other intangible assets impairment

3,051


-

-


3,051


-

-

   Amortization of intangible assets

128


128

-


386


386

-

   Insurance agency commissions expense

338


428

(21.0)


1,230


1,515

(18.8)

   FDIC insurance premium expense

448


458

(2.2)


1,389


1,621

(14.3)

   Other noninterest expenses

1,677


1,608

4.3


5,354


4,570

17.2

       Total noninterest expense

12,629


10,297

22.6


32,638


30,873

5.7











(Loss) income before income taxes

(1,492)


3,148

(147.4)


(3,499)


9,797

(135.7)

Income tax (benefit) expense

(92)


1,197

(107.7)


(982)


3,740

(126.3)











NET (LOSS) INCOME  

(1,400)


1,951

(171.8)


(2,517)


6,057

(141.6)

Preferred stock dividends and discount accretion

-


-

-


-


1,876

(100.0)

Net (loss) income available to common shareholders

$ (1,400)


$   1,951

(171.8)


$ (2,517)


$   4,181

(160.2)











Weighted average shares outstanding - basic

8,443


8,419

0.3


8,441


8,412

0.3

Weighted average shares outstanding - diluted

8,443


8,423

0.2


8,441


8,416

0.3











Basic net (loss) income per share

$   (0.17)


$     0.23

(173.9)


$   (0.30)


$     0.72

(141.7)

Basic net (loss) income per common share

(0.17)


0.23

(173.9)


(0.30)


0.50

(160.0)

Diluted net (loss) income per share

(0.17)


0.23

(173.9)


(0.30)


0.72

(141.7)

Diluted net (loss) income per common share

(0.17)


0.23

(173.9)


(0.30)


0.50

(160.0)

Dividends paid per common share

0.06


0.16

(62.5)


0.18


0.48

(62.5)













Shore Bancshares, Inc.

Page 7 of 10

Consolidated Average Balance Sheets








(Dollars in thousands)









































For the Three Months Ended


For the Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009


Average


Yield/


Average


Yield/


Average


Yield/


Average


Yield/


balance


rate


balance


rate


balance


rate


balance


rate

Earning assets
















 Loans

$    904,293


5.76%


$    920,241


6.05%


$    907,965


5.76%


$    910,842


6.09%

 Investment securities
















  Taxable

99,572


2.70


89,101


3.56


102,100


3.15


79,797


3.89

  Tax-exempt

5,894


5.16


8,125


5.76


6,369


5.26


8,443


5.87

 Federal funds sold

40,638


0.20


81,466


0.16


41,709


0.15


53,227


0.15

 Interest-bearing deposits

15,666


0.15


1,605


0.77


12,690


0.12


4,053


0.35

   Total earning assets

1,066,063


5.18%


1,100,538


5.41%


1,070,833


5.22%


1,056,362


5.60%

Cash and due from banks

21,865




20,042




15,455




16,960



Other assets

65,081




57,049




66,942




52,700



Allowance for credit losses

(13,966)




(11,042)




(13,483)




(10,523)



Total assets

$ 1,139,043




$ 1,166,587




$ 1,139,747




$ 1,115,499



































Interest-bearing liabilities
















 Demand deposits

$    132,023


0.24%


$    125,233


0.26%


$    130,872


0.25%


$    123,821


0.25%

 Money market and savings
















  deposits

259,511


0.81


245,801


0.67


258,628


0.73


207,588


0.60

 Certificates of deposit $100,000
















  or more

258,542


1.91


274,580


2.82


256,470


2.08


252,978


3.13

 Other time deposits

212,098


2.37


237,757


3.20


215,911


2.53


236,643


3.39

 Interest-bearing deposits

862,174


1.44


883,371


1.96


861,881


1.51


821,030


2.13

 Short-term borrowings

16,092


0.38


18,373


0.42


16,673


0.55


27,718


0.46

 Long-term debt

1,429


4.36


1,947


19.90


1,429


4.40


5,925


5.57

   Total interest-bearing liabilities

879,695


1.42%


903,691


1.97%


879,983


1.50%


854,673


2.10%

Noninterest-bearing deposits

121,844




117,933




119,087




110,663



Accrued expenses and other liabilities

12,196




16,554




14,334




13,074



Stockholders' equity

125,308




128,409




126,343




137,089



Total liabilities and stockholders' equity

$ 1,139,043




$ 1,166,587




$ 1,139,747




$ 1,115,499



















Net interest spread



3.76%




3.44%




3.72%




3.50%

Net interest margin



4.00%




3.79%




3.99%




3.90%



















Shore Bancshares, Inc.

Page 8 of 10

Financial Highlights By Quarter








(Dollars in thousands, except per share data)





































3rd quarter


2nd quarter


1st quarter


4th quarter


3rd quarter


3Q 10


3Q 10


2010


2010


2010


2009


2009


compared to


compared to


(3Q 10)


(2Q 10)


(1Q 10)


(4Q 09)


(3Q 09)


2Q 10


3Q 09

PROFITABILITY FOR THE PERIOD














    Net interest income

$      10,687


$    10,691


$    10,395


$    10,806


$    10,428


- %


2.5%

    Provision for credit losses

4,193


4,917


7,617


3,668


1,702


(14.7)


146.4

    Noninterest income

4,643


4,568


4,882


4,125


4,719


1.6


(1.6)

    Noninterest expense

12,629


9,688


10,321


9,375


10,297


30.4


22.6

    (Loss) income before income taxes

(1,492)


654


(2,661)


1,888


3,148


(328.1)


(147.4)

    Income tax (benefit) expense

(92)


209


(1,099)


672


1,197


(144.0)


(107.7)

    Net (loss) income

(1,400)


445


(1,562)


1,216


1,951


(414.6)


(171.8)

    Preferred stock dividends and














     discount accretion

-


-


-


-


-


-


-

    Net (loss) income available to














     common shareholders

$      (1,400)


$         445


$    (1,562)


$      1,216


$      1,951


(414.6)


(171.8)





























    Return on average assets (1)

(0.49)%


0.16%


(0.55)%


0.41%


0.66%


(406.3)%


(174.2)%

    Return on average equity (1)

(4.43)


1.42


(4.95)


3.75


6.03


(412.0)


(173.5)

    Net interest margin

4.00


4.03


3.95


3.90


3.79


(0.7)


5.5

    Efficiency ratio - GAAP based

82.38


63.49


67.56


62.79


67.98


29.8


21.2





























PER SHARE DATA














    Basic net (loss) income per share

$        (0.17)


$        0.05


$      (0.19)


$        0.14


$        0.23


(440.0)%


(173.9)%

    Basic net (loss) income per common share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

    Diluted net (loss) income per share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

    Diluted net (loss) income per














     common share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

    Dividends paid per common share

0.06


0.06


0.06


0.16


0.16


-


(62.5)

    Book value per common share at














     period end

14.49


14.77


14.82


15.18


15.23


(1.9)


(4.9)

    Tangible book value per common














     share at period end

12.37


12.27


12.30


12.64


12.68


0.8


(2.4)

    Market value at period end

9.48


11.91


14.25


14.50


16.73


(20.4)


(43.3)

    Market range:














       High

12.10


14.80


14.75


17.71


20.72


(18.2)


(41.6)

       Low

9.20


11.75


10.21


13.52


16.64


(21.7)


(44.7)





























PERIOD-END BALANCE SHEET DATA














    Loans

$    906,490


$  905,477


$  905,194


$  916,557


$  918,601


0.1%


(1.3)%

    Securities

104,075


106,556


112,929


106,535


100,772


(2.3)


3.3

    Assets

1,134,503


1,129,196


1,146,334


1,156,516


1,157,685


0.5


(2.0)

    Deposits

982,428


971,608


990,750


990,937


992,196


1.1


(1.0)

    Stockholders' equity

122,355


124,666


125,108


127,810


128,219


(1.9)


(4.6)





























AVERAGE BALANCE SHEET DATA














    Loans

$    904,293


$  909,295


$  910,374


$  921,908


$  920,241


(0.6)%


(1.7)%

    Securities

105,466


109,744


110,252


104,561


97,226


(3.9)


8.5

    Earning assets

1,066,063


1,071,115


1,075,425


1,104,919


1,100,538


(0.5)


(3.1)

    Assets

1,139,043


1,134,662


1,145,607


1,169,337


1,166,587


0.4


(2.4)

    Deposits

984,018


976,749


982,265


1,002,982


1,001,304


0.7


(1.7)

    Stockholders' equity

125,308


125,670


128,081


128,715


128,409


(0.3)


(2.4)





























CAPITAL AND CREDIT QUALITY RATIOS














    Average equity to average assets

11.00%


11.08%


11.18%


11.01%


11.01%





    Annualized net charge-offs to














       average loans

1.90


1.95


2.54


1.51


0.76





    Allowance for credit losses to














       period-end loans      

1.45


1.47


1.41


1.19


1.17





    Nonperforming assets to total














       loans+other real estate owned

4.22


4.29


3.62


2.05


1.90





    Nonperforming assets to total assets

3.38


3.45


2.87


1.63


1.51





    Nonperforming assets+Loans 90














       days past due














       and still accruing to total














       loans+other real estate owned

4.58


4.81


3.93


2.86


2.89





    Nonperforming assets+Loans 90














       days past due














       and still accruing to total assets

3.67


3.86


3.11


2.27


2.30



















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



Shore Bancshares, Inc.







Page 9 of 10

Consolidated Statements of Income By Quarter














(In thousands, except per share data)





















































3Q 10


3Q 10












compared to


compared to


3Q 10


2Q 10


1Q 10


4Q 09


3Q 09


2Q 10


3Q 09

INTEREST INCOME














   Interest and fees on loans

$ 13,083


$ 13,047


$ 12,874


$ 13,837


$ 14,001


0.3%


(6.6)%

   Interest and dividends on investment














     securities:














       Taxable

677


846


882


860


800


(20.0)


(15.4)

       Tax-exempt

50


56


59


60


77


(10.7)


(35.1)

   Interest on federal funds sold

21


14


12


23


31


50.0


(32.3)

   Interest on deposits with other banks

6


4


1


-


4


50.0


50.0

           Total interest income

13,837


13,967


13,828


14,780


14,913


(0.9)


(7.2)















INTEREST EXPENSE














   Interest on deposits

3,117


3,242


3,385


3,924


4,368


(3.9)


(28.6)

   Interest on short-term borrowings

17


19


32


31


19


(10.5)


(10.5)

   Interest on long-term debt

16


15


16


19


98


6.7


(83.7)

           Total interest expense

3,150


3,276


3,433


3,974


4,485


(3.8)


(29.8)















NET INTEREST INCOME

10,687


10,691


10,395


10,806


10,428


-


2.5

Provision for credit losses

4,193


4,917


7,617


3,668


1,702


(14.7)


146.4















NET INTEREST INCOME AFTER PROVISION














 FOR CREDIT LOSSES

6,494


5,774


2,778


7,138


8,726


12.5


(25.6)















NONINTEREST INCOME














   Service charges on deposit accounts

841


831


786


866


861


1.2


(2.3)

   Trust and investment fee income

357


372


416


350


274


(4.0)


30.3

   Investment securities gains (losses)

-


-


-


-


-


-


-

   Insurance agency commissions

2,513


2,595


2,889


2,159


2,744


(3.2)


(8.4)

   Other noninterest income

932


770


791


750


840


21.0


11.0

           Total noninterest income

4,643


4,568


4,882


4,125


4,719


1.6


(1.6)















NONINTEREST EXPENSE














   Salaries and wages

4,404


4,363


4,490


4,424


4,765


0.9


(7.6)

   Employee benefits

897


758


1,281


840


1,211


18.3


(25.9)

   Occupancy expense

547


597


622


572


616


(8.4)


(11.2)

   Furniture and equipment expense

325


313


300


268


299


3.8


8.7

   Data processing

696


660


631


598


675


5.5


3.1

   Directors' fees

118


105


121


84


109


12.4


8.3

   Goodwill and other intangible assets impairment

3,051


-


-


-


-


-


-

   Amortization of intangible assets

128


129


129


129


128


(0.8)


-

   Insurance agency commissions expense

338


464


428


398


428


(27.2)


(21.0)

   FDIC insurance premium expense

448


460


481


457


458


(2.6)


(2.2)

   Other noninterest expenses

1,677


1,839


1,838


1,605


1,608


(8.8)


4.3

           Total noninterest expense

12,629


9,688


10,321


9,375


10,297


30.4


22.6















(Loss) income before income taxes

(1,492)


654


(2,661)


1,888


3,148


(328.1)


(147.4)

Income tax (benefit) expense

(92)


209


(1,099)


672


1,197


(144.0)


(107.7)















NET (LOSS) INCOME  

(1,400)


445


(1,562)


1,216


1,951


(414.6)


(171.8)

Preferred stock dividends and discount accretion

-


-


-


-


-


-


-

Net (loss) income available to common shareholders

$ (1,400)


$      445


$ (1,562)


$   1,216


$   1,951


(414.6)


(171.8)















Weighted average shares outstanding - basic

8,443


8,443


8,436


8,419


8,419


-


0.3

Weighted average shares outstanding - diluted

8,443


8,443


8,436


8,421


8,423


-


0.2















Basic net (loss) income per share

$   (0.17)


$     0.05


$   (0.19)


$     0.14


$     0.23


(440.0)


(173.9)

Basic net (loss) income per common share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

Diluted net (loss) income per share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

Diluted net (loss) income per common share

(0.17)


0.05


(0.19)


0.14


0.23


(440.0)


(173.9)

Dividends paid per common share

0.06


0.06


0.06


0.16


0.16


-


(62.5)

















Shore Bancshares, Inc.









Page 10 of 10

Consolidated Average Balance Sheets By Quarter
















(Dollars in thousands)





































































Average balance






















3Q 10


3Q 10






















compared to


compared to


3Q 10


2Q 10


1Q 10


4Q 09




3Q 09




2Q 10


3Q 09


Average


Yield/


Average


Yield/


Average


Yield/


Average


Yield/


Average


Yield/






balance


rate


balance


rate


balance


rate


balance


rate


balance


rate





Earning assets
























 Loans

$    904,293


5.76%


$    909,295


5.77%


$    910,374


5.75%


$    921,908


5.97%


$    920,241


6.05%


(0.6)%


(1.7)%

 Investment
























  securities
























  Taxable

99,572


2.70


103,284


3.29


103,488


3.45


97,595


3.50


89,101


3.56


(3.6)


11.8

  Tax-exempt

5,894


5.16


6,460


5.30


6,764


5.39


6,966


4.96


8,125


5.76


(8.8)


(27.5)

 Federal
























  funds sold

40,638


0.20


38,001


0.15


46,553


0.11


77,782


0.11


81,466


0.16


6.9


(50.1)

 Interest-bearing deposits

15,666


0.15


14,075


0.12


8,246


0.06


668


0.45


1,605


0.77


11.3


876.1

  Total
























   earning assets

1,066,063


5.18%


1,071,115


5.26%


1,075,425


5.24%


1,104,919


5.33%


1,100,538


5.41%


(0.5)


(3.1)

Cash and
























due from banks

21,865




9,997




14,422




17,312




20,042




118.7


9.1

Other assets

65,081




67,860




67,914




58,543




57,049




(4.1)


14.1

Allowance for
























credit losses

(13,966)




(14,310)




(12,154)




(11,437)




(11,042)




(2.4)


26.5

Total assets

$ 1,139,043




$ 1,134,662




$ 1,145,607




$ 1,169,337




$ 1,166,587




0.4


(2.4)

















































Interest-bearing liabilities
























 Demand
























  deposits

$    132,023


0.24%


$    132,563


0.25%


$    127,986


0.25%


$    127,537


0.26%


$    125,233


0.26%


(0.4)


5.4

 Money market
























  and savings deposits

259,511


0.81


259,273


0.72


256,818


0.68


249,393


0.66


245,801


0.67


0.1


5.6

 Certificates of
























  deposit $100,000
























  or more

258,542


1.91


251,340


2.09


259,538


2.24


276,390


2.51


274,580


2.82


2.9


(5.8)

 Other time
























  deposits

212,098


2.37


215,987


2.56


219,731


2.67


228,020


2.91


237,757


3.20


(1.8)


(10.8)

   Interest-bearing
























    deposits

862,174


1.44


859,163


1.51


864,073


1.59


881,340


1.77


883,371


1.96


0.4


(2.4)

 Short-term
























  borrowings

16,092


0.38


15,771


0.48


18,032


0.71


18,994


0.63


18,373


0.42


2.0


(12.4)

 Long-term
























  debt

1,429


4.36


1,429


4.40


1,429


4.45


1,429


5.28


1,947


19.90


-


(26.6)

   Total interest-
























    bearing liabilities

879,695


1.42%


876,363


1.50%


883,534


1.58%


901,763


1.75%


903,691


1.97%


0.4


(2.7)

Noninterest-bearing deposits

121,844




117,586




118,192




121,642




117,933




3.6


3.3

Accrued expenses and other liabilities

12,196




15,043




15,800




17,217




16,554




(18.9)


(26.3)

Stockholders' equity

125,308




125,670




128,081




128,715




128,409




(0.3)


(2.4)

Total liabilities and stockholders' equity

$ 1,139,043




$ 1,134,662




$ 1,145,607




$ 1,169,337




$ 1,166,587




0.4


(2.4)

















































Net interest spread



3.76%




3.76%




3.66%




3.58%




3.44%





Net interest margin



4.00%




4.03%




3.95%




3.90%




3.79%































SOURCE Shore Bancshares, Inc.



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