Exhibit 99.1
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-822-1400
PRESS RELEASE
Shore Bancshares Reports 14.3 Percent Increase in First Quarter Earnings
Easton, Maryland (04/26/2006)- Shore Bancshares, Inc. (NASDAQ - SHBI) reported first quarter earnings of $3.6 million or $0.64 per diluted share, an increase of 14.3% over the $3.1 million or $0.56 per diluted share for the first quarter of 2005.
“We are pleased with our financial performance for the first quarter. We continued to experience strong loan demand throughout the quarter. Despite a very competitive market for deposits, the combination of robust loan growth plus increased loan yields produced a net interest margin of 4.80%,” said W. Moorhead Vermilye, President and CEO of Shore Bancshares, Inc. “The local economy remains strong, and our performance is a direct result. Our efficiency ratio (GAAP-based) was 54.05% at the end of the quarter compared to 55.01% for the first quarter of 2005.”
“We have recently expanded our secondary market mortgage program with the recruitment of three proven producers who are well-known in our local market. Wye Mortgage, a division of Centreville National Bank, should now be able to cover a much larger geographic reach than is currently being served. We continue to focus efforts on the core banking business of the Company as we look for additional products and services to offer to our customers,” said Vermilye.
The Company’s return on average assets for the quarter ended March 31, 2006 was 1.67%, compared to 1.56% for the quarter ended March 31, 2005. The return on average stockholders’ equity was 13.7% for the quarter ended March 31, 2006, compared to 13.29% for the same quarter last year.
At March 31, 2006, total assets were $855.4 million, total deposits were $708.7 million, and total stockholders’ equity was $104.1 million. The increase in total assets of $3.8 million since December 31, 2005 was related to loan growth. Loans increased $14.4 million during the first quarter of 2006 totaling $641.9 million at March 31, 2006. Loan growth during the quarter was funded by a reduction in federal funds sold and interest bearing deposits of the Company and deposit growth of $3.8 million.
Financial Results for the Quarter
Net interest income for the first quarter of 2006 was $9.4 million, which represents an increase of 13.7 % over the $8.3 million earned during the same period last year. Higher loan yields resulted in an increase in the net interest margin from 4.51% in 2005 to 4.80% in 2006. The market for deposits remained competitive throughout the first quarter resulting in higher rates paid for interest bearing deposits.
The provision for credit losses for the three-month periods ended March 31, 2006 and 2005 was $311,000 and $180,000, respectively. Net charge-offs were $130,000 and $114,000 for the three months ended March 31, 2006 and 2005, respectively. The increase in the provision for the first quarter of 2006 when compared to the same period last year reflects the continued growth in the Company’s loan portfolio. Management believes that the provision for credit losses and the resulting allowance are adequate at March 31, 2006.
Noninterest income for the first quarter of 2006 increased $544,000 when compared to the first quarter of 2005. Increases in service charges, insurance agency commissions and other noninterest income all contributed to the growth.
Noninterest expense for the first quarter of 2006 increased $798,000 when compared to the first quarter of 2005. The increase is primarily the result of increased salaries and benefits costs of $489,000. Salary and benefit increases are the result of higher incentive compensation cost and increased staffing for a new branch and trust operations that began in July 2005. Other operating cost increases totaling $309,000 were related to overall growth of the Company.
Shore Bancshares Information
Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore. It is the parent company of three banks, The Talbot Bank of Easton, Maryland, The Centreville National Bank of Maryland, and The Felton Bank; two insurance producer firms, The Avon-Dixon Agency, LLC and Elliott Wilson Insurance, LLC; an insurance premium finance company, Mubell Finance, LLC; and a registered investment adviser firm, Wye Financial Services, LLC.
Forward-Looking Statements
This press release may contain 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 about the future, as well as its assumptions and judgments concerning such beliefs, plans and objections. 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 Risk Factors contained in Item 1A of Part I of the Annual Report of Shore Bancshares, Inc. on Form 10-K for the year ended December 31, 2005.
For further information contact: W. Moorhead Vermilye, President and CEO
| Financial Highlights | | | | | | | |
| (dollars in thousands, except per share data) | | Three Months Ended | |
| | | March 31, | |
| | | 2006 | | 2005 | | % Change | |
| | | (unaudited) | |
| PROFITABILITY FOR THE PERIOD: | | | | | | | | | | |
| Net interest income | | $ | 9,414 | | $ | 8,277 | | | 13.7 | % |
| Provision for loan and lease losses | | | 311 | | | 180 | | | 72.8 | % |
| Noninterest income | | | 3,706 | | | 3,162 | | | 17.2 | % |
| Noninterest expense | | | 7,091 | | | 6,293 | | | 12.7 | % |
| Income before income taxes | | | 5,718 | | | 4,966 | | | 15.1 | % |
| Net income | | | 2,167 | | | 1,860 | | | 16.5 | % |
| | | | 3,551 | | | 3,106 | | | 14.3 | % |
| Return on average assets | | | 1.67 | % | | 1.56 | % | | 6.8 | % |
| Return on average equity | | | 13.70 | % | | 13.29 | % | | 3.1 | % |
| Net interest margin | | | 4.80 | % | | 4.51 | % | | 6.2 | % |
| Efficiency ratio - GAAP based | | | 54.05 | % | | 55.01 | % | | -1.8 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| PER SHARE DATA: | | | | | | | | | | |
| Basic net income | | $ | 0.64 | | $ | 0.56 | | | 14.3 | % |
| Diluted net income | | $ | 0.64 | | $ | 0.56 | | | 14.3 | % |
| Dividends declared | | $ | 0.21 | | $ | 0.19 | | | 10.5 | % |
| Book Value | | $ | 18.67 | | $ | 17.12 | | | 9.0 | % |
| Tangible book value | | $ | 16.20 | | $ | 14.57 | | | 11.2 | % |
| Average outstanding fully diluted shares | | | 5,563,051 | | | 5,569,664 | | | -0.1 | % |
| | | | | | | | | | | |
| AT PERIOD-END: | | | | | | | | | | |
| Assets | | $ | 855,422 | | $ | 812,491 | | | 5.3 | % |
| Deposits | | $ | 708,723 | | $ | 678,782 | | | 4.4 | % |
| Loans and leases | | $ | 641,913 | | $ | 596,267 | | | 7.7 | % |
| Securities | | $ | 123,270 | | $ | 123,890 | | | -0.5 | % |
| Stockholders' equity | | $ | 104,125 | | $ | 94,640 | | | 10.0 | % |
| | | | | | | | | | | |
| CAPITAL AND CREDIT QUALITY RATIOS: | | | | | | |
| Average equity to average assets | | | 12.16 | % | | 11.73 | % | | | |
| Allowance for loan and lease losses to loans and leases | | | 0.84 | % | | 0.80 | % | | | |
| Nonperforming assets to total assets | | | 0.12 | % | | 0.19 | % | | | |
| Annualized net (charge-offs) recoveries to average loan and leases | | | 0.08 | % | | 0.08 | % | | | |
| Consolidated Balance Sheets | | | | | | | | | | |
| (dollars in thousands, except per share data) | | | | | | March 31, | | | | |
| | | | 2006 | | | | | | 2005 | |
| | (unaudited) |
| ASSETS | | | | | | | | | | |
| Cash and due from banks | | $ | 27,231 | | | | | $ | 22,495 | |
| Federal funds sold | | | 21,908 | | | | | | 34,939 | |
| Interest-bearing deposits with banks | | | 5,501 | | | | | | 898 | |
| Investments available-for-sale, at fair value | | | 108,391 | | | | | | 108,499 | |
Investments held-to-maturity, at amortized cost - (fair value of $14,798 and $15,374, respectively) | | | 14,879 | | | | | | 15,391 | |
| | | | | | | | | | | |
| Total loans and leases | | | 641,913 | | | | | | 596,267 | |
| Less: allowance for loan and lease losses | | | (5,417 | ) | | | | | (4,758 | ) |
| Net loans and leases | | | 636,496 | | | | | | 591,509 | |
| | | | | | | | | | | |
| Premises and equipment, net | | | 15,560 | | | | | | 13,595 | |
| Accrued interest receivable | | | 4,109 | | | | | | 3,561 | |
| Goodwill | | | 11,939 | | | | | | 11,939 | |
| Other intangible assets, net | | | 1,821 | | | | | | 2,158 | |
| Other assets | | | 7,587 | | | | | | 7,507 | |
| | | | | | | | | | | |
| Total assets | | $ | 855,422 | | | | | $ | 812,491 | |
| | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | |
| Noninterest-bearing deposits | | | 110,748 | | | | | | 103,414 | |
| Interest-bearing deposits | | | 597,975 | | | | | | 575,368 | |
| Total deposits | | | 708,723 | | | | | | 678,782 | |
| | | | | | | | | | | |
| Short-term borrowings | | | 27,281 | | | | | | 28,331 | |
| Other long-term borrowings | | | 9,000 | | | | | | 5,000 | |
| Accrued interest payable and other liabilities | | | 6,293 | | | | | | 5,738 | |
| Total liabilities | | | 751,297 | | | | | | 717,851 | |
| | | | | | | | | | | |
| STOCKHOLDER'S EQUITY | | | | | | | | | | |
Common stock -- par value $.01; shares authorized 35,000,000; shares issued and outstanding 5,577,435 and 5,527,120, respectively; | | | 56 | | | | | | 55 | |
| Additional paid in capital | | | 29,411 | | | | | | 28,426 | |
| Retained earnings | | | 76,025 | | | | | | 67,240 | |
| Accumulated other comprehensive income | | | (1,367 | ) | | | | | (1,081 | ) |
| Total stockholder's equity | | | 104,125 | | | | | | 94,640 | |
| | | | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 855,422 | | | | | $ | 812,491 | |
| Consolidated Statements of Income | | | | | | | |
| (dollars in thousands, except per share data) | | Three Months Ended |
| | | March 31, |
| | | | 2006 | | | 2005 | |
| | (unaudited) |
| Interest Income: | | | | | | | |
| Interest and fees on loans and leases | | $ | 11,455 | | $ | 9,599 | |
| Interest on deposits with banks | | | 171 | | | 5 | |
| Interest and dividends on securities: | | | | | | | |
| Taxable | | | 1,020 | | | 870 | |
| Exempt from federal income taxes | | | 143 | | | 149 | |
| Interest on federal funds sold | | | 276 | | | 184 | |
| Total interest income | | | 13,065 | | | 10,807 | |
| | | | | | | | |
| Interest expense: | | | | | | | |
| Interest on deposits | | | 3,318 | | | 2,379 | |
| Interest on short-term borrowings | | | 264 | | | 88 | |
| Interest on long-term borrowings | | | 69 | | | 63 | |
| | | | | | | | |
| Total interest expense | | | 3,651 | | | 2,530 | |
| Net interest income | | | 9,414 | | | 8,277 | |
| Provision for loan and lease losses | | | 311 | | | 180 | |
| Net interest income after provision for loan and lease losses | | | 9,103 | | | 8,097 | |
| | | | | | | | |
| Noninterest income: | | | | | | | |
| Securities gains (losses) | | | 0 | | | 58 | |
| Service charges on deposit accounts | | | 744 | | | 562 | |
| Insurance agency commissions | | | 2,331 | | | 2,084 | |
| Other income | | | 631 | | | 458 | |
| Total noninterest income | | | 3,706 | | | 3,162 | |
| Noninterest expenses: | | | | | | | |
| Salaries and employee benefits | | | 4,468 | | | 3,979 | |
| Occupancy expense of premises | | | 409 | | | 400 | |
| Equipment expenses | | | 323 | | | 255 | |
| Data processing | | | 377 | | | 354 | |
| Directors' fees | | | 177 | | | 190 | |
| Amortization of intangible assets | | | 84 | | | 84 | |
| Other expenses | | | 1,253 | | | 1,031 | |
| Total noninterest expense | | | 7,091 | | | 6,293 | |
| | | | | | | | |
| Income before income taxes | | | 5,718 | | | 4,966 | |
| Income tax expense | | | 2,167 | | | 1,860 | |
| | | | | | | | |
| Net income | | $ | 3,551 | | $ | 3,106 | |
| | | | | | | | |
| Basic net income per share | | $ | 0.64 | | $ | 0.56 | |
| Diluted net income per share | | $ | 0.64 | | $ | 0.56 | |
| Dividends declared per share | | $ | 0.21 | | $ | 0.19 | |
