x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
Maryland
|
52-1974638
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
|
Incorporation
or Organization)
|
Identification
No.)
|
|
18
East Dover Street, Easton, Maryland
|
21601
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Page
|
||
3
|
||
3
|
||
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
10
|
||
16
|
||
17
|
||
18
|
||
19
|
||
20
|
September
30,
|
December
31,
|
||||||
ASSETS:
|
2005
|
2004
|
|||||
(unaudited)
|
|||||||
Cash
and due from banks
|
$
|
27,329
|
$
|
22,051
|
|||
Interest
bearing deposits with other banks
|
4,418
|
961
|
|||||
Federal
funds sold
|
36,814
|
20,539
|
|||||
Investment
securities:
|
|||||||
Held-to-maturity,
at amortized cost (fair value of, $14,889 and $15,802,
respectively)
|
14,852
|
15,662
|
|||||
Available
for sale, at fair value
|
111,912
|
103,434
|
|||||
Loans,
less allowance for credit losses ($4,980 and $4,692,
respectively)
|
606,859
|
590,766
|
|||||
Insurance
premiums receivable
|
372
|
386
|
|||||
Premises
and equipment, net
|
14,200
|
13,070
|
|||||
Accrued
interest receivable on loans and investment securities
|
3,993
|
3,275
|
|||||
Investment
in unconsolidated subsidiary
|
915
|
859
|
|||||
Goodwill
|
11,939
|
11,939
|
|||||
Other
intangible assets
|
1,990
|
2,242
|
|||||
Deferred
income taxes
|
1,724
|
1,543
|
|||||
Other
real estate owned
|
337
|
391
|
|||||
Other
assets
|
3,998
|
3,480
|
|||||
TOTAL
ASSETS
|
$
|
841,652
|
$
|
790,598
|
|||
LIABILITIES:
|
|||||||
Deposits:
|
|||||||
Noninterest
bearing demand
|
$
|
110,538
|
$
|
102,672
|
|||
NOW
and Super NOW
|
110,909
|
112,327
|
|||||
Certificates
of deposit $100,000 or more
|
105,841
|
91,315
|
|||||
Other
time and savings
|
374,683
|
352,358
|
|||||
Total
Deposits
|
701,971
|
658,672
|
|||||
Accrued
Interest Payable
|
951
|
630
|
|||||
Short
term borrowings
|
29,832
|
27,106
|
|||||
Long
term debt
|
5,000
|
5,000
|
|||||
Contingent
earn-out payments payable
|
513
|
3,313
|
|||||
Other
liabilities
|
3,705
|
2,901
|
|||||
TOTAL
LIABILITIES
|
741,972
|
697,622
|
|||||
STOCKHOLDERS’
EQUITY:
|
|||||||
Common
stock, par value $.01; authorized 35,000,000 shares; issued and
outstanding:
|
|||||||
September
30, 2005
5,546,446
|
|||||||
December
31, 2004
5,515,198
|
55
|
55
|
|||||
Additional
paid in capital
|
28,789
|
28,017
|
|||||
Retained
earnings
|
71,668
|
65,182
|
|||||
Accumulated
other comprehensive loss
|
(832
|
)
|
(278
|
)
|
|||
TOTAL
STOCKHOLDERS’ EQUITY
|
99,680
|
92,976
|
|||||
TOTAL
LIABILITIES & STOCKHOLDERS’ EQUITY
|
$
|
841,652
|
$
|
790,598
|
|||
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
INTEREST
INCOME
|
|||||||||||||
Loans,
including fees
|
$
|
10,779
|
$
|
8,657
|
$
|
30,573
|
$
|
23,819
|
|||||
Interest
and dividends on investment securities:
|
|||||||||||||
Taxable
|
979
|
1,088
|
2,788
|
3,380
|
|||||||||
Tax-exempt
|
142
|
146
|
435
|
450
|
|||||||||
Other
interest income
|
336
|
90
|
737
|
227
|
|||||||||
Total
interest income
|
12,236
|
9,981
|
34,533
|
27,876
|
|||||||||
INTEREST
EXPENSE
|
|||||||||||||
Certificates
of deposit, $100,000 or more
|
935
|
589
|
2,447
|
1,730
|
|||||||||
Other
deposits
|
2,034
|
1,568
|
5,480
|
4,608
|
|||||||||
Other
interest
|
202
|
120
|
534
|
325
|
|||||||||
Total
interest expense
|
3,171
|
2,277
|
8,461
|
6,663
|
|||||||||
NET
INTEREST INCOME
|
9,065
|
7,704
|
26,072
|
21,213
|
|||||||||
PROVISION
FOR CREDIT LOSSES
|
220
|
165
|
580
|
370
|
|||||||||
NET
INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
|
8,845
|
7,539
|
25,492
|
20,843
|
|||||||||
NONINTEREST
INCOME
|
|||||||||||||
Service
charges on deposit accounts
|
788
|
658
|
2,077
|
1,811
|
|||||||||
Gain
on sale of securities
|
–
|
(13
|
)
|
58
|
1
|
||||||||
Insurance
agency commissions
|
1,206
|
1,577
|
4,994
|
4,985
|
|||||||||
Other
noninterest income
|
564
|
492
|
1,629
|
1,447
|
|||||||||
Total
noninterest income
|
2,558
|
2,714
|
8,758
|
8,244
|
|||||||||
NONINTEREST
EXPENSE
|
|||||||||||||
Salaries
and employee benefits
|
3,965
|
3,519
|
11,680
|
10,167
|
|||||||||
Expenses
of premises and equipment
|
695
|
594
|
1,986
|
1,757
|
|||||||||
Other
noninterest expense
|
1,733
|
1,571
|
5,099
|
4,559
|
|||||||||
Total
noninterest expense
|
6,393
|
5,684
|
18,765
|
16,483
|
|||||||||
INCOME
BEFORE TAXES
|
5,010
|
4,569
|
15,485
|
12,604
|
|||||||||
Federal
and state income tax expense
|
1,868
|
1,634
|
5,736
|
4,553
|
|||||||||
NET
INCOME
|
$
|
3,142
|
$
|
2,935
|
$
|
9,749
|
$
|
8,051
|
|||||
Basic
earnings per common share
|
$
|
0.57
|
$
|
0.53
|
$
|
1.76
|
$
|
1.47
|
|||||
Diluted
earnings per common share
|
$
|
0.56
|
$
|
0.53
|
$
|
1.75
|
$
|
1.46
|
|||||
Dividends
declared per common share
|
$
|
0.21
|
$
|
0.18
|
$
|
0.59
|
$
|
0.54
|
|||||
Accumulated
|
||||||||||||||||
Additional
|
other
|
Total
|
||||||||||||||
Common
|
Paid
in
|
Retained
|
Comprehensive
|
Stockholders’
|
||||||||||||
Stock
|
Capital
|
Earnings
|
Income(loss)
|
Equity
|
||||||||||||
Balances,
January 1, 2004
|
$
|
54
|
$
|
24,231
|
$
|
58,932
|
$
|
310
|
$
|
83,527
|
||||||
Comprehensive
income:
|
||||||||||||||||
Net
income
|
–
|
–
|
8,051
|
–
|
8,051
|
|||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||
Unrealized
loss on available for sale securities , net of reclassification
adjustment
of $242
|
–
|
–
|
–
|
(435
|
)
|
(435
|
)
|
|||||||||
Total
comprehensive income
|
7,616
|
|||||||||||||||
Shares
issued
|
1
|
3,740
|
–
|
–
|
3,741
|
|||||||||||
Cash
dividends paid $0.54 per share
|
–
|
–
|
(2,955
|
)
|
–
|
(2,955
|
)
|
|||||||||
Balances,
September 30, 2004
|
$
|
55
|
$
|
27,971
|
$
|
64,028
|
$
|
(125
|
)
|
$
|
91,929
|
|||||
Balances,
January 1, 2005
|
$
|
55
|
$
|
28,017
|
$
|
65,182
|
$
|
(278
|
)
|
$
|
92,976
|
|||||
Comprehensive
income:
|
||||||||||||||||
Net
income
|
–
|
–
|
9,749
|
–
|
9,749
|
|||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||
Unrealized
loss on available for sale securities, net of reclassification
adjustment
of $56
|
–
|
–
|
–
|
(554
|
)
|
(554
|
)
|
|||||||||
Total
comprehensive income
|
9,195
|
|||||||||||||||
Shares
issued
|
–
|
772
|
–
|
–
|
772
|
|||||||||||
Cash
dividends paid $0.59 per share
|
–
|
–
|
(3,263
|
)
|
–
|
(3,263
|
)
|
|||||||||
Balances,
September 30, 2005
|
$
|
55
|
$
|
28,789
|
$
|
71,668
|
$
|
(832
|
)
|
$
|
99,680
|
|||||
For
the Nine Months Ended
|
|||||||
September
30,
|
|||||||
2005
|
2004
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
Income
|
$
|
9,749
|
$
|
8,051
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
1,076
|
1,092
|
|||||
Discount
accretion on debt securities
|
(91
|
)
|
(90
|
)
|
|||
Provision
for credit losses
|
580
|
370
|
|||||
Deferred
income taxes
|
167
|
– | |||||
Gain
on sale of securities
|
(58
|
)
|
(1
|
)
|
|||
Deferred
gain on sale of premise and equipment
|
(176
|
)
|
–
|
||||
Valuation
on other real estate owned
|
54
|
–
|
|||||
Equity
in earnings of unconsolidated subsidiary
|
(56
|
)
|
(20
|
)
|
|||
Net
changes in:
|
|||||||
Insurance
premiums receivable
|
24
|
649
|
|||||
Accrued
interest receivable
|
(718
|
)
|
(21
|
)
|
|||
Other
assets
|
(527
|
)
|
(23
|
)
|
|||
Accrued
interest payable on deposits
|
321
|
(47
|
)
|
||||
Accrued
expenses
|
805
|
69
|
|||||
Net
cash provided by operating activities
|
11,150
|
10,029
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Proceeds
from maturities and principal payments of securities available for
sale
|
13,724
|
52,607
|
|||||
Proceeds
from sale of investment securities available for sale
|
2,010
|
13,931
|
|||||
Purchase
of securities available for sale
|
(25,080
|
)
|
(31,224
|
)
|
|||
Proceeds
from maturities and principal payments of securities held to
maturity
|
792
|
1,911
|
|||||
Purchase
of securities held to maturity
|
–
|
(2,056
|
)
|
||||
Net
increase in loans
|
(16,673
|
)
|
(63,295
|
)
|
|||
Proceeds
from sale of premise and equipment
|
912
|
–
|
|||||
Purchase
of premises and equipment
|
(2,559
|
)
|
(1,113
|
)
|
|||
Purchase
of other real estate owned
|
–
|
(117
|
)
|
||||
Proceeds
from sale of investment in unconsolidated subsidiary
|
– |
380
|
|||||
Acquisition
net of stock issued
|
–
|
(235
|
)
|
||||
Deferred
earn out payment, net of stock issued
|
(2,400
|
)
|
–
|
||||
Net
cash used in investing activities
|
(29,274
|
)
|
(29,211
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Net
increase in demand, NOW, money market and savings deposits
|
6,444
|
9,887
|
|||||
Net
increase in certificates of deposit
|
36,854
|
(2,914
|
)
|
||||
Net
increase in short term borrowings
|
2,726
|
9,867
|
|||||
Proceeds
from issuance of common stock
|
373
|
533
|
|||||
Dividends
paid
|
(3,263
|
)
|
(2,955
|
)
|
|||
Net
cash provided by financing activities
|
43,134
|
14,418
|
|||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
25,010
|
(4,764
|
)
|
||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
43,551
|
46,731
|
|||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
68,561
|
$
|
41,967
|
|||
1) |
The
consolidated financial statements include the accounts of Shore
Bancshares, Inc. and its subsidiaries (collectively referred to in
these
Notes as the “Company”) with all significant intercompany transactions
eliminated. The consolidated financial statements conform to accounting
principles generally accepted in the United States of America and
to
prevailing practices within the banking industry. The accompanying
interim
financial statements are unaudited; however, in the opinion of management
all adjustments necessary to present fairly the financial position
at
September 30, 2005, the results of operations for the three- and
nine-month periods ended September 30, 2005 and 2004, the changes
in
stockholders’ equity for the nine-months ended September 30, 2005 and
2004, and cash flows for the nine-month periods ended September 30,
2005
and 2004, have been included. All such adjustments are of a normal
recurring nature. The amounts as of December 31, 2004 were derived
from
audited financial statements. The results of operations for the three
and
nine-month periods ended September 30, 2005 are not necessarily indicative
of the results to be expected for any other interim period or for
the full
year. This Quarterly Report on Form 10-Q should be read in conjunction
with the Company’s Annual Report on Form 10-K for the year ended December
31, 2004.
|
2)
|
Year
to date basic earnings per share is derived by dividing net income
available to common stockholders by the weighted average number of
common
shares outstanding during the period. The diluted earnings per share
calculation is derived by dividing net income by the weighted average
number of shares outstanding during the period, adjusted for the
dilutive
effect of outstanding stock options. Information relating to the
calculation of earnings per share is summarized as
follows:
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(in
thousands, except per share data)
|
|||||||||||||
Net
Income
|
$
|
3,142
|
$
|
2,935
|
$
|
9,749
|
$
|
8,051
|
|||||
Weighted
Average Shares Outstanding - Basic
|
5,545
|
5,513
|
5,532
|
5,472
|
|||||||||
Dilutive
securities
|
33
|
44
|
34
|
45
|
|||||||||
Weighted
Average Shares Outstanding - Diluted
|
5,578
|
5,557
|
5,566
|
5,517
|
|||||||||
Net
income per common share – Basic
|
$
|
0.57
|
$
|
0.53
|
$
|
1.76
|
$
|
1.47
|
|||||
Net
income per common share – Diluted
|
$
|
0.56
|
$
|
0.53
|
$
|
1.75
|
$
|
1.46
|
3)
|
Under
the provisions of Statements of Financial Accounting Standards (SFAS)
Nos.
114 and 118, "Accounting by Creditors for Impairment of a Loan,"
a loan is
considered impaired if it is probable that the Company will not collect
all principal and interest payments according to the loan’s contracted
terms. The impairment of a loan is measured at the present value
of
expected future cash flows using the loan’s effective interest rate, or at
the loan’s observable market price or the fair value of the collateral if
the loan is collateral dependent. Interest income generally is not
recognized on specific impaired loans unless the likelihood of further
loss is remote. Interest payments received on such loans are applied
as a
reduction of the loans principal balance. Interest income on other
nonaccrual loans is recognized only to the extent of interest payments
received.
|
(Dollars
in thousands)
|
September
30, 2005
|
December
31, 2004
|
|||||
Impaired
loans with valuation allowance
|
$
|
880
|
$
|
1,246
|
|||
Impaired
loans with no valuation allowance
|
4
|
223
|
|||||
Total
impaired loans
|
$
|
884
|
$
|
1,469
|
|||
Allowance
for credit losses applicable to impaired loans
|
$
|
495
|
$
|
442
|
|||
Allowance
for credit losses applicable to other than impaired loans
|
4,485
|
4,250
|
|||||
Total
allowance for credit losses
|
$
|
4,980
|
$
|
4,692
|
|||
Interest
income on impaired loans recorded on the cash basis
|
$
|
102
|
$
|
11
|
|||
4) |
In
the normal course of business, to meet the financial needs of its
customers, the Company’s bank subsidiaries are parties to financial
instruments with off-balance sheet risk. These financial instruments
include commitments to extend credit and standby letters of credit.
At
September 30, 2005, total commitments to extend credit were approximately
$196,529,000. Outstanding letters of credit were approximately
$17,786,000
at September 30, 2005.
|
5) |
The
Company has adopted the disclosure-only provisions of SFAS No.
123,
“Accounting for Stock-based Compensation” and related interpretations in
accounting for its stock compensation plans. No compensation expense
related to the plans was recorded during the three- and nine-month
periods
ended September 30, 2005 and 2004. If the Company had elected to
recognize
compensation cost based on fair value at the vesting dates for
awards
under the plans consistent with the method prescribed by SFAS No.
123, net
income and earnings per share would have been changed to the pro
forma
amounts as follows (dollars in thousands, except per share
data):
|
|
Three-Month
Period Ended
|
Nine-Month
Period Ended
|
|||||||||||
September
30,
|
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income:
|
|||||||||||||
As
reported
|
$
|
3,142
|
$
|
2,935
|
$
|
9,749
|
$
|
8,051
|
|||||
Less
pro forma stock-based compensation expense determined under the
fair value
method, net of related tax effects
|
(8
|
)
|
–
|
(44
|
)
|
(29
|
)
|
||||||
Pro
forma net income
|
$
|
3,134
|
$
|
2,935
|
$
|
9,705
|
$
|
8,022
|
|||||
Basic
earnings per share:
|
|||||||||||||
As
reported
|
$
|
0.57
|
$
|
0.53
|
$
|
1.76
|
$
|
1.47
|
|||||
Pro
forma
|
0.57
|
0.53
|
1.75
|
1.47
|
|||||||||
Diluted
earnings per share
|
|||||||||||||
As
reported
|
$
|
0.56
|
$
|
0.53
|
$
|
1.75
|
$
|
1.46
|
|||||
Pro
forma
|
0.56
|
0.53
|
1.74
|
1.45
|
6) |
The
Company operates two primary businesses: Community Banking and
Insurance
Products and Services. Through the Community Banking business,
the Company
provides services to consumers and small businesses on the Eastern
Shore
of Maryland and in Delaware through its 16-branch network. Community
banking activities include small business services, retail brokerage,
and
consumer banking products and services. Loan products available
to
consumers include mortgage, home equity, automobile, marine, and
installment loans, credit cards and other secured and unsecured
personal
lines of credit. Small business lending includes commercial mortgages,
real estate development loans, equipment and operating loans, as
well as
secured and unsecured lines of credit, credit cards, accounts receivable
financing arrangements, and merchant card services.
|
Community
|
Insurance
products
|
Parent
|
Intersegment
|
Consolidated
|
||||||||||||
(In
thousands)
|
banking
|
and
services
|
Company(a)
|
Transactions
|
Total
|
|||||||||||
2005
|
||||||||||||||||
Net
Interest income
|
$
|
26,069
|
$
|
–
|
$
|
3
|
$
|
–
|
$
|
26,072
|
||||||
Provision
for credit losses
|
580
|
–
|
–
|
–
|
580
|
|||||||||||
Net
interest income after provision
|
25,489
|
–
|
3
|
–
|
25,492
|
|||||||||||
Noninterest
income
|
3,687
|
5,155
|
2,014
|
(2,098
|
)
|
8,758
|
||||||||||
Noninterest
expense
|
14,300
|
4,433
|
2,130
|
(2,098
|
)
|
18,765
|
||||||||||
Income
before taxes
|
14,876
|
722
|
(113
|
)
|
–
|
15,485
|
||||||||||
Income
tax expense
|
5,495
|
286
|
(45
|
)
|
–
|
5,736
|
||||||||||
Net
income
|
$
|
9,381
|
$
|
436
|
$
|
(68
|
)
|
$
|
–
|
$
|
9,749
|
|||||
Intersegment
revenue(expense)
|
$
|
(1,776
|
)
|
$
|
(86
|
)
|
$
|
1,862
|
$
|
–
|
$
|
–
|
||||
Average
assets
|
$
|
802,086
|
$
|
9,683
|
$
|
3,456
|
$
|
–
|
$
|
815,225
|
||||||
2004
|
||||||||||||||||
Net
Interest income
|
$
|
21,212
|
–
|
$
|
1
|
$
|
–
|
$
|
21,213
|
|||||||
Provision
for credit losses
|
370
|
–
|
–
|
–
|
370
|
|||||||||||
Net
interest income after provision
|
20,842
|
–
|
1
|
–
|
20,843
|
|||||||||||
Noninterest
income
|
3,055
|
5,148
|
1,679
|
(1,638
|
)
|
8,244
|
||||||||||
Noninterest
expense
|
12,254
|
4,182
|
1,685
|
(1,638
|
)
|
16,483
|
||||||||||
Income
before taxes
|
11,643
|
966
|
(5
|
)
|
–
|
12,604
|
||||||||||
Income
tax expense
|
4,173
|
382
|
(2
|
)
|
–
|
4,553
|
||||||||||
Net
income
|
$
|
7,470
|
$
|
584
|
(3
|
)
|
–
|
$
|
8,051
|
|||||||
Intersegment
revenue(expense)
|
$
|
(1,461
|
)
|
$
|
(138
|
)
|
$
|
1,599
|
$
|
–
|
$
|
–
|
||||
Average
assets
|
$
|
761,981
|
$
|
6,527
|
$
|
3,273
|
$
|
–
|
$
|
771,781
|
||||||
(a)
|
Amount
included in Parent Company relates to services provided to subsidiaries
by
the Company and rental income.
|
7) |
On
April 1, 2004, the Company completed its merger with Midstate
Bancorp,
Inc., a Delaware bank holding company (“Midstate Bancorp”). Pursuant to
the merger agreement, each share of common stock of Midstate
Bancorp was
converted into the right to receive (i) $31.00 in cash, plus
(ii) 0.8732
shares of the common stock of the Corporation, with cash being
paid in
lieu of fractional shares at the rate of $33.83 per share. The
Company
paid $2,953,710 in cash and issued 82,786 shares of common stock
to
stockholders of Midstate Bancorp in connection with the Merger.
The
Company recorded approximately $2,636,000 of Goodwill and $968,000
of
other intangible assets as a result of the
acquisition.
|
8)
|
On
September 23, 2005, the Company finalized a Sale-Leaseback transaction
with an unrelated third party in respect of the property located
in
Felton, Delaware that is used by Felton Bank for its main office
location.
As part of this transaction, the Company entered into a 20-year leaseback
calling for annual rent of $84,525. The gain on the sale portion
of the
transaction of approximately $176,000 has been deferred and will
be
recognized over the life of the lease.
|
Nine
Months ended September 30, 2005
|
Nine
Months ended September 30, 2004
|
||||||||||||||||||
Average
|
Income
|
Yield
|
Average
|
Income
|
Yield
|
||||||||||||||
(Dollars
in thousands)
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
|||||||||||||
Earning
Assets
|
|||||||||||||||||||
Investment
securities
|
$
|
120,979
|
$
|
3,446
|
3.80
|
%
|
$
|
147,584
|
$
|
4,065
|
3.67
|
%
|
|||||||
Loans
|
602,836
|
30,602
|
6.77
|
%
|
544,145
|
23,842
|
5.84
|
%
|
|||||||||||
Interest
bearing deposits
|
961
|
20
|
2.71
|
%
|
6,229
|
46
|
0.98
|
%
|
|||||||||||
Federal
funds sold
|
30,810
|
716
|
3.10
|
%
|
21,964
|
182
|
1.11
|
%
|
|||||||||||
Total
earning assets
|
755,586
|
34,784
|
6.14
|
%
|
719,922
|
28,135
|
5.21
|
%
|
|||||||||||
Noninterest
earning assets
|
59,638
|
51,859
|
|||||||||||||||||
Total
Assets
|
$
|
815,224
|
$
|
771,781
|
|||||||||||||||
Interest
bearing liabilities
|
|||||||||||||||||||
Interest
bearing deposits
|
$
|
577,546
|
7,927
|
1.83
|
%
|
$
|
553,409
|
6,338
|
1.53
|
%
|
|||||||||
Short
term borrowing
|
24,736
|
345
|
1.86
|
%
|
25,251
|
137
|
0.72
|
%
|
|||||||||||
Long
term debt
|
5,000
|
189
|
5.03
|
%
|
5,000
|
188
|
5.04
|
%
|
|||||||||||
Total
interest bearing liabilities
|
607,282
|
8,461
|
1.86
|
%
|
583,660
|
6,663
|
1.52
|
%
|
|||||||||||
Noninterest
bearing liabilities
|
111,444
|
97,522
|
|||||||||||||||||
Stockholders’
equity
|
96,498
|
90,599
|
|||||||||||||||||
Total
liabilities and stockholders’ equity
|
$
|
815,224
|
$
|
771,781
|
|||||||||||||||
Net
interest spread
|
$
|
26,323
|
4.28
|
%
|
$
|
21,472
|
3.69
|
%
|
|||||||||||
Net
interest margin
|
4.65
|
%
|
3.98
|
%
|
|||||||||||||||
(1) |
All
amounts are reported on a tax equivalent basis computed using the
statutory federal income tax rate, exclusive of the
alternative
minimum tax rate, of 35% and nondeductible interest
expense.
|
(2)
|
Average
loan balances include nonaccrual
loans.
|
(3) |
Interest
income on loans includes amortized loan fees, net of costs, for each
loan
category and yield calculations are stated to include
all.
|
Nine
months Ended
|
|||||||
September
30,
|
|||||||
(Dollars
in thousands)
|
2005
|
2004
|
|||||
Allowance
balance - beginning of year
|
$
|
4,692
|
$
|
4,060
|
|||
Charge-offs:
|
|||||||
Commercial
and other
|
254
|
448
|
|||||
Real
estate
|
–
|
50
|
|||||
Consumer
|
110
|
92
|
|||||
Totals
|
364
|
590
|
|||||
Recoveries:
|
|||||||
Commercial
|
15
|
64
|
|||||
Real
estate
|
1
|
19
|
|||||
Consumer
|
56
|
53
|
|||||
Totals
|
72
|
136
|
|||||
Net
charge-offs
|
292
|
454
|
|||||
Allowance
of acquired institution
|
–
|
426
|
|||||
Provision
for credit losses
|
580
|
370
|
|||||
Allowance
balance – end of period
|
$
|
4,980
|
$
|
4,402
|
|||
Average
loans outstanding during period
|
$
|
602,836
|
$
|
544,145
|
|||
Net
charge-offs (annualized) as a percentage of average loans outstanding
during period
|
0.02
|
%
|
0.11
|
%
|
|||
Allowance
for credit losses at period end as a percentage of average
loans
|
0.83
|
%
|
0.81
|
%
|
|||
September
30,
|
December
31,
|
||||||
Nonperforming
Assets:
|
2005
|
2004
|
|||||
Nonaccrual
loans
|
$
|
884
|
$
|
1,469
|
|||
Other
real estate owned
|
337
|
391
|
|||||
1,221
|
1,860
|
||||||
Past
due loans still accruing
|
659
|
2,969
|
|||||
Total
nonperforming and past due loans
|
$
|
1,880
|
$
|
4,829
|
|||
Minimum
|
Required
to be
|
|||||||||
Actual
|
Requirements
|
Well
Capitalized
|
||||||||
Tier
1 risk-based capital
|
13.57
%
|
|
4.00
%
|
|
6.00
%
|
|
||||
Total
risk-based capital
|
14.37
%
|
|
8.00
%
|
|
10.00
%
|
|
||||
Leverage
ratio
|
10.71
%
|
|
3.00
%
|
|
5.00
%
|
|
||||
Immediate
Change in Rates
|
||||||||||||||||
+200
|
+100
|
-100
|
-200
|
Policy
|
||||||||||||
Basis
Points
|
Basis
Points
|
Basis
Points
|
Basis
Points
|
Limit
|
||||||||||||
September
30, 2005
|
||||||||||||||||
%
Change in Net Interest Income
|
8.88
|
%
|
5.03
|
%
|
(5.23
|
%)
|
(11.64
|
%)
|
+
25
|
%
|
||||||
%
Change in Fair Value of Capital
|
3.29
|
%
|
2.27
|
%
|
(3.00
|
%)
|
(7.76
|
%)
|
+15
|
%
|
||||||
December
31, 2004
|
||||||||||||||||
%
Change in Net Interest Income
|
8.90
|
%
|
5.19
|
%
|
(6.41
|
%)
|
(14.09
|
%)
|
+25
|
%
|
||||||
%
Change in Fair Value of Capital
|
2.49
|
%
|
1.90
|
%
|
(4.08
|
%)
|
(10.31
|
%)
|
+15
|
%
|
3.1
|
Amended
and Restated Articles of Incorporation (incorporated by reference
to
Exhibit 3.1 of the Company’s Form 8-K filed on December 14,
2000).
|
3.2
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.2 of
the
Company’s Form 8-K filed on November 9,
2005).
|
10.1
|
Form
of Employment Agreement with W. Moorhead Vermilye (incorporated by
reference to Appendix XIII of Exhibit 2.1 of the Company’s Form 8-K filed
on July 31, 2000).
|
10.2
|
Form
of Employment Agreement with Daniel T. Cannon (incorporated by reference
to Appendix XIII of Exhibit 2.1 of the Company’s Form 8-K filed on July
31, 2000).
|
10.3
|
Form
of Employment Agreement with Thomas H. Evans, as amended on November
3,
2005 (
incorporated
by reference to the Company’s Form 8-K filed on November 9,
2005)
.
|
10.4
|
Separation
Agreement and General Release between The Avon-Dixon Agency, LLC
and
Steven Fulwood (incorporated by reference to exhibit 10.11 of the
Company’s Quarterly Report on Form 10-Q for the period ended March 31,
2005).
|
10.5
|
Form
of Executive Supplemental Retirement Plan Agreement between The
Centreville National Bank of Maryland and Daniel T. Cannon (incorporated
by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form
10-Q for the period ended June 30,
2003).
|
10.6
|
Form
of Life Insurance Endorsement Method Split Dollar Plan Agreement
between
The Centreville National Bank of Maryland and Daniel T. Cannon
(incorporated by reference to Exhibit 10.5 of the Company’s Quarterly
Report on Form 10-Q for the period ended June 30,
2003).
|
10.7
|
Form
of Talbot Bank of Easton, Maryland Supplemental Deferred Compensation
Plan
(filed herewith).
|
10.8
|
Form
of Talbot Bank of Easton, Maryland Supplemental Deferred Compensation
Plan
Trust Agreement (filed herewith).
|
10.9
|
1998
Employee Stock Purchase Plan, as amended
(incorporated
by reference to Appendix A of the Company’s definitive Proxy Statement on
Schedule 14A for the 2003 Annual Meeting of Stockholders filed on
March
31, 2003).
|
10.10
|
1998
Stock Option Plan (incorporated by reference to Exhibit 10 of the
Company’s Registration Statement on Form S-8 filed with the SEC on
September 25, 1998 (Registration No.
333-64319)).
|
10.11
|
Talbot
Bancshares, Inc. Employee Stock Option Plan (incorporated by reference
to
Exhibit 10 of the Company’s Registration Statement on Form S-8 filed May
4, 2001 (Registration No.
333-60214)).
|
31.1
|
Certifications
of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith).
|
31.2
|
Certifications
of the PAO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith).
|
32.1
|
Certification
of the Periodic Report by the CEO pursuant to 18 U.S.C. § 1350 (furnished
herewith).
|
32.2
|
Certification
of the Periodic Report by the PAO pursuant to 18 U.S.C. § 1350 (furnished
herewith).
|
SHORE BANCSHARES, INC. | ||
|
|
|
Date: November 8, 2005 | By: | /s/ W. Moorhead Vermilye |
|
||
W.
Moorhead Vermilye
President and Chief Executive
Officer
|
Date: November 8, 2005 | By: | /s/ Susan E. Leaverton |
|
||
Susan
E. Leaverton
Treasurer and Principal Accounting
Officer
|
Exhibit
|
||
Number
|
Description
|
|
3.1
|
Amended
and Restated Articles of Incorporation (incorporated by reference
to
Exhibit 3.1 of the Company’s Form 8-K filed on December 14,
2000).
|
|
3.2
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.2 of
the
Company’s Form 8-K filed on November 9, 2005).
|
|
10.1
|
Form
of Employment Agreement with W. Moorhead Vermilye (incorporated
by
reference to Appendix XIII of Exhibit 2.1 of the Company’s Form 8-K filed
on July 31, 2000).
|
|
10.2
|
Form
of Employment Agreement with Daniel T. Cannon (incorporated by
reference
to Appendix XIII of Exhibit 2.1 of the Company’s Form 8-K filed on July
31, 2000).
|
|
10.3
|
Form
of
Employment
Agreement with Thomas H. Evans, as amended on November 3, 2005
(incorporated by reference to the Company’s Form 8-K filed on November 9,
2005).
|
|
10.4
|
Separation
Agreement and General Release between The Avon-Dixon Agency, LLC
and
Steven Fulwood (incorporated by reference to exhibit 10.11 of the
Company’s Quarterly Report on Form 10-Q for the period ended March 31,
2005).
|
|
10.5
|
Form
of Executive Supplemental Retirement Plan Agreement between The
Centreville National Bank of Maryland and Daniel T. Cannon (incorporated
by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2003).
|
|
10.6
|
Form
of Life Insurance Endorsement Method Split Dollar Plan Agreement
between
The Centreville National Bank of Maryland and Daniel T. Cannon
(incorporated by reference to Exhibit 10.5 of the Company’s Quarterly
Report on Form 10-Q for the period ended June 30,
2003).
|
|
10.7
|
Form
of Talbot Bank of Easton, Maryland Supplemental Deferred Compensation
Plan
(filed herewith).
|
|
10.8
|
Form
of Talbot Bank of Easton, Maryland Supplemental Deferred Compensation
Plan
Trust Agreement (filed herewith).
|
|
10.9
|
1998
Employee Stock Purchase Plan, as amended (incorporated by reference
to
Appendix A of the Company’s definitive Proxy Statement on Schedule 14A for
the 2003 Annual Meeting of Stockholders filed on March 31,
2003).
|
|
10.10
|
1998
Stock Option Plan (incorporated by reference to Exhibit 10 of the
Company’s Registration Statement on Form S-8 filed with the SEC on
September 25, 1998 (Registration No. 333-64319)).
|
|
10.11
|
Talbot
Bancshares, Inc. Employee Stock Option Plan (incorporated by reference
to
Exhibit 10 of the Company’s Registration Statement on Form S-8 filed May
4, 2001 (Registration No. 333-60214)).
|
|
31.1
|
Certifications
of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith).
|
|
31.2
|
Certifications
of the PAO pursuant to Section 302 of the Sarbanes-Oxley Act (filed
herewith).
|
|
32.1
|
Certification
of the Periodic Report by the CEO pursuant to 18 U.S.C. § 1350 (furnished
herewith).
|
|
32.2
|
Certification
of the Periodic Report by the PAO pursuant to 18 U.S.C. § 1350 (furnished
herewith).
|
1
|
||
1
|
||
1
|
||
1
|
||
1
|
||
1
|
||
2
|
||
2
|
||
2
|
||
2
|
||
2
|
||
2
|
||
2
|
3
|
||
3
|
||
4
|
5
|
||
6
|
||
6
|
||
6
|
ATTEST/WITNESS |
THE
TALBOT BANK OF EASTON,
MARYLAND
|
|||
/s/ |
By:
|
/s/ | ||
|
|
|||
Print: |
Print
Name: Jerome M. McConnell
Date: |
(SEAL)
|
2
|
||
2
|
||
3
|
||
4
|
||
4
|
||
4
|
||
5
|
||
5
|
||
5
|
||
5
|
||
5
|
||
5
|
||
6
|
||
6
|
||
6
|
||
ATTEST/WITNESS: | THE TALBOT BANK OF EASTON, MARYLAND | |||
/s/ | /s/ | |||
|
|
|||
Print Name: |
Print
Name: Jerome M. McConnell
Date: |
(SEAL)
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ATTEST/WITNESS: | ALEX, BROWN CAPITAL ADVISORY & TRUST COMPANY, TRUSTEE | |||
/s/ | /s/ | |||
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Print Name: |
Print
Name:
Date: |
(SEAL)
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a. |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
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b. |
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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c. |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
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d. |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
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a. |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
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b. |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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Date: November 8, 2005 | By: | /s/ W. Moorhead Vermilye |
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W.
Moorhead Vermilye
President and Chief Executive
Officer
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a. |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
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b. |
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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c. |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
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d. |
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
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a. |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
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b. |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
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Date: November 8, 2005 | By: | /s/ Susan E. Leaverton |
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Susan
E. Leaverton
Treasurer and Principal Accounting
Officer
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Date: November 8, 2005 | By: | /s/ W. Moorhead Vermilye |
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W.
Moorhead Vermilye
President/Chief Executive
Officer
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Date: November 8, 2005 | By: | /s/ Susan E. Leaverton |
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Susan
E. Leaverton
Treasurer/Principal Accounting
Officer
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