Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-822-1400
PRESS RELEASE
Shore Bancshares Reports 14 Percent Increase in Second Quarter
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Earnings
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August 1, 2003
Easton, Maryland - Shore Bancshares, Inc., (NASDAQ - SHBI) reported net income
for the second quarter of 2003 of $2,456,000 or $.45 per diluted share, a 13.9%
increase over the $2,157,000 or $.40 per diluted share reported for the second
quarter of 2002. Net income for the six-month period ended June 30, 2003 was
$4,977,000 or $.93 per diluted share, an increase of 27.7% over June 30, 2002
earnings which totaled $3,897,000 or $.73 per diluted share.
During the second quarter of 2003 net interest income increased $173,000 or 2.8%
when compared to the same period in 2002. The increase was the result of a
$705,000 reduction in interest expense for the three-month period ended June 30,
2003 compared to the three-month period ended June 30, 2002. Interest income
declined $532,000 during the second quarter of 2003 when compared to the second
quarter of 2002 due to declining yields on loans and investment securities.
Noninterest income increased $1,086,000 for the second quarter of 2003 compared
to the same period in 2002. An $860,000 increase in insurance agency commissions
and $144,000 earned from mortgage banking activities are the primary reasons for
noninterest income growth. Comparing the second quarter of 2003 and 2002,
noninterest expense increased $768,000 or 19.4% as a result of the operation of
the insurance agencies, a new branch location opened during the first quarter of
2003, and other increases attributable to growth of the Company. An $81,000 gain
on sale of securities was recognized during the second quarter of 2003.
For the six-month period ended June 30, 2003 net interest income increased
$643,000 or 5.6%, when compared to the same period in 2002. The increase is
attributable to a decline in interest expense of $1,353,000 for the six-month
period in 2003 compared to 2002. Total interest income for the six-month period
ended June 30, 2003 declined $710,000 when compared to the six months ended June
30, 2002. Declining yields on loans and investment securities are the reason for
the decline in interest income. Noninterest income for the first six months of
2003 has increased $3,342,000, primarily as a result of the operation of the
insurance agencies, but also from an increase in gains on investment securities,
and income generated by the Company's mortgage banking activities. Insurance
agency commissions totaled $3,329,000 for the six-months ended June 30, 2003, an
increase of $2,669,000 when compared to the same period last year. This included
approximately $668,000 of contingency income received from insurance companies
based upon the recent claim history of the agency's customers. This contingency
income is typically recognized in the first quarter of each year. The Company
generated approximately $280,000 in fee income during the first six months of
2003 from its mortgage banking division, which it began in September 2002. Gains
on sale of securities totaled $358,000 during the six-month period ended June
30, 2003 compared to $5,000 for the six months ended June 30, 2002. When
compared to the same period last year, noninterest expenses increased $2,303,000
for the six months ended June 30, 2003. The operation of the insurance agencies
for six months in 2003, compared to two months in 2002, accounts for $1,929,000
of the increase in noninterest expense. Other increases in noninterest expenses
were attributable to overall growth of the Company.
The Company's provision for credit losses was $70,000 and $79,000 for the
three-month periods ended June 30, 2003 and 2002, respectively. For the
six-month periods ended June 30, 2003 and 2002, the provision for credit losses
was $160,000 and $211,000, respectively. The decline in the provision for credit
losses for both the three and six month periods is the result of strong asset
quality.
Total assets were approximately $673,110,000 at June 30, 2003 compared to
$654,067,000 at December 31, 2002. The increase was primarily the result of loan
growth funded by increased deposits. Total loans were $456,144,000 at June 30,
2003, an increase of $16,605,000 over December 31, 2002 and total deposits at
June 30, 2003 were $558,983,000, an increase of $13,791,000 over December 31,
2002.
The Company paid a cash dividend of $0.17 per share during the second quarter of
2003.
Shore Bancshares, Inc. is a financial holding company headquartered in Easton,
Maryland and is the largest independent bank holding company located on the
Eastern Shore. It is the sole shareholder of The Talbot Bank of Easton, Maryland
and The Centreville National Bank of Maryland. On May 1, 2002 Shore began the
operation of its insurance subsidiaries, The Avon Dixon Agency, LLC and Elliott
Wilson Insurance, LLC. Also during 2002, Wye Financial Services, LLC, a
registered investment advisory firm, was formed.
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
present management's expectations, beliefs, plans and objectives regarding
future financial performance, and assumptions or judgments concerning such
performance. Any discussions contained in this press release, except to the
extent that they contain historical facts, are forward-looking and accordingly
involve estimates, assumptions, judgments and uncertainties. There are a number
of factors that could cause actual results or outcomes to differ materially from
those addressed in the forward-looking statements. Such factors are detailed in
Part I, Item 1 of Shore's Annual Report on Form 10-K, as amended on Form 10-K/A,
for the year ended December 31, 2002, under the heading "Risk Factors."
For further information contact: W. Moorhead Vermilye, President and CEO