x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
¨ |
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)
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(Do
not check if a smaller reporting company)
|
Page
|
|
Part
I.Financial Information
|
2
|
Item
1. Financial Statements
|
2
|
Consolidated
Balance Sheets -
September
30, 2008 (unaudited) and December 31, 2007
|
2
|
Consolidated
Statements of Income -
For
the three and nine months ended September 30, 2008 and 2007
(unaudited)
|
3
|
Consolidated
Statements of Changes in Stockholders’ Equity -
For
the nine months ended September 30, 2008 and 2007
(unaudited)
|
4
|
Consolidated
Statements of Cash Flows -
For
the nine months ended September 30, 2008 and 2007
(unaudited)
|
5
|
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
12
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
21
|
Item
4. Controls and Procedures
|
21
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Part
II. Other Information
|
21
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Item
1A. Risk Factors
|
21
|
Item
6. Exhibits
|
22
|
Signatures
|
22
|
Exhibit
Index
|
23
|
September 30,
|
|
December 31,
|
|
||||
|
|
2008
|
|
2007
|
|||
|
(Unaudited)
|
|
|||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
21,883
|
$
|
17,198
|
|||
Interest
bearing deposits with other banks
|
513
|
3,036
|
|||||
Federal
funds sold
|
15,416
|
6,646
|
|||||
Investment
securities:
|
|||||||
Available
for sale, at fair value
|
82,235
|
97,137
|
|||||
Held-to-maturity,
at amortized cost - fair value of $10,941 (2008) and $12,924
(2007)
|
10,914
|
12,896
|
|||||
Loans
|
865,437
|
776,350
|
|||||
Less:
allowance for credit losses
|
(8,618
|
)
|
(7,551
|
)
|
|||
Loans,
net
|
856,819
|
768,799
|
|||||
Insurance
premiums receivable
|
1,164
|
1,083
|
|||||
Premises
and equipment, net
|
14,097
|
15,617
|
|||||
Accrued
interest receivable
|
5,023
|
5,008
|
|||||
Investment
in unconsolidated subsidiary
|
-
|
937
|
|||||
Goodwill
|
15,954
|
15,954
|
|||||
Other
intangible assets, net
|
6,050
|
6,436
|
|||||
Deferred
income taxes
|
2,610
|
1,847
|
|||||
Other
real estate owned
|
-
|
176
|
|||||
Other
assets
|
4,348
|
4,141
|
|||||
TOTAL
ASSETS
|
$
|
1,037,026
|
$
|
956,911
|
|||
LIABILITIES
|
|||||||
Deposits:
|
|||||||
Noninterest
bearing demand
|
$
|
118,049
|
$
|
104,081
|
|||
Interest
bearing demand
|
119,144
|
115,623
|
|||||
Money
market and savings
|
182,397
|
169,896
|
|||||
Certificates
of deposit $100,000 or more
|
197,590
|
161,568
|
|||||
Other
time
|
222,037
|
214,727
|
|||||
Total
deposits
|
839,217
|
765,895
|
|||||
Accrued
interest payable
|
2,137
|
2,793
|
|||||
Short-term
borrowings
|
53,078
|
47,694
|
|||||
Long-term
debt
|
8,485
|
12,485
|
|||||
Other
liabilities
|
8,708
|
7,809
|
|||||
TOTAL
LIABILITIES
|
911,625
|
836,676
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Common
stock, par value $.01; shares authorized - 35,000,000;
shares
issued and outstanding - 8,404,609 (2008) and 8,380,530
(2007)
|
84
|
84
|
|||||
Additional
paid in capital
|
29,744
|
29,539
|
|||||
Retained
earnings
|
95,224
|
90,365
|
|||||
Accumulated
other comprehensive income
|
349
|
247
|
|||||
TOTAL
STOCKHOLDERS’ EQUITY
|
125,401
|
120,235
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,037,026
|
$
|
956,911
|
For
the Three Months Ended
|
For
the Nine Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
INTEREST
INCOME
|
|||||||||||||
Interest
and fees on loans
|
$
|
14,179
|
$
|
14,732
|
$
|
42,700
|
$
|
42,566
|
|||||
Interest
and dividends on investment securities:
|
|||||||||||||
Taxable
|
924
|
1,325
|
2,949
|
3,900
|
|||||||||
Tax-exempt
|
95
|
128
|
327
|
387
|
|||||||||
Interest
on federal funds sold
|
79
|
178
|
284
|
988
|
|||||||||
Interest
on deposits with other banks
|
21
|
180
|
88
|
847
|
|||||||||
Total
interest income
|
15,298
|
16,543
|
46,348
|
48,688
|
|||||||||
INTEREST
EXPENSE
|
|||||||||||||
Interest
on deposits
|
4,955
|
5,493
|
15,295
|
16,263
|
|||||||||
Interest
on short-term borrowings
|
344
|
279
|
1,026
|
838
|
|||||||||
Interest
on long-term debt
|
90
|
308
|
456
|
977
|
|||||||||
Total
interest expense
|
5,389
|
6,080
|
16,777
|
18,078
|
|||||||||
NET
INTEREST INCOME
|
9,909
|
10,463
|
29,571
|
30,610
|
|||||||||
Provision
for credit losses
|
875
|
604
|
1,952
|
1,259
|
|||||||||
NET
INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
|
9,034
|
9,859
|
27,619
|
29,351
|
|||||||||
NONINTEREST
INCOME
|
|||||||||||||
Service
charges on deposit accounts
|
923
|
949
|
2,711
|
2,420
|
|||||||||
Other
service charges and fees
|
668
|
501
|
2,169
|
1,489
|
|||||||||
Gain
on sale of investment securities
|
-
|
-
|
-
|
1
|
|||||||||
Other
than temporary impairment of securities
|
(371
|
)
|
-
|
(371
|
)
|
-
|
|||||||
Insurance
agency commissions
|
2,845
|
1,403
|
9,595
|
5,004
|
|||||||||
Gain
(loss) on disposals of premises and equipment
|
1,264
|
(108
|
)
|
1,255
|
(108
|
)
|
|||||||
Loss
on sale of investment in unconsolidated subsidiary
|
(337
|
)
|
-
|
(337
|
)
|
-
|
|||||||
Other
noninterest income
|
254
|
310
|
920
|
1,158
|
|||||||||
Total
noninterest income
|
5,246
|
3,055
|
15,942
|
9,964
|
|||||||||
NONINTEREST
EXPENSE
|
|||||||||||||
Salaries
and wages
|
4,662
|
3,879
|
13,837
|
11,512
|
|||||||||
Employee
benefits
|
1,140
|
944
|
3,708
|
2,959
|
|||||||||
Occupancy
expense
|
558
|
460
|
1,594
|
1,444
|
|||||||||
Furniture
and equipment expense
|
310
|
318
|
894
|
988
|
|||||||||
Data
processing
|
486
|
454
|
1,396
|
1,353
|
|||||||||
Directors’
fees
|
131
|
136
|
426
|
427
|
|||||||||
Amortization
of other intangible assets
|
128
|
56
|
386
|
203
|
|||||||||
Agency
commissions
|
447
|
-
|
1,770
|
-
|
|||||||||
Other
noninterest expenses
|
1,567
|
1,352
|
4,738
|
4,351
|
|||||||||
Total
noninterest expense
|
9,429
|
7,599
|
28,749
|
23,237
|
|||||||||
INCOME
BEFORE INCOME TAXES
|
4,851
|
5,315
|
14,812
|
16,078
|
|||||||||
Income
tax expense
|
1,780
|
1,964
|
5,603
|
5,968
|
|||||||||
NET
INCOME
|
$
|
3,071
|
$
|
3,351
|
$
|
9,209
|
$
|
10,110
|
|||||
Basic earnings per common share
|
$
|
0.37
|
$
|
0.40
|
$
|
1.10
|
$
|
1.21
|
|||||
Diluted earnings per common share
|
$
|
0.37
|
$
|
0.40
|
$
|
1.10
|
$
|
1.20
|
|||||
Dividends paid per common share
|
$
|
0.16
|
$
|
0.16
|
$
|
0.48
|
$
|
0.48
|
Accumulated
|
||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||
Common
|
Paid in
|
Retained
|
Comprehensive
|
Stockholders’
|
||||||||||||
Stock
|
Capital
|
Earnings
|
Income (Loss)
|
Equity
|
||||||||||||
Balances, January 1, 2008
|
$
|
84
|
$
|
29,539
|
$
|
90,365
|
$
|
247
|
$
|
120,235
|
||||||
Adjustment
to initially apply EITF Issue 06-4
|
-
|
-
|
(318
|
)
|
-
|
(318
|
)
|
|||||||||
Comprehensive
income:
|
||||||||||||||||
Net
income
|
-
|
-
|
9,209
|
-
|
9,209
|
|||||||||||
Unrealized
gains on available-for-sale securities, net of taxes
|
-
|
-
|
-
|
102
|
102
|
|||||||||||
Total
comprehensive income
|
|
9,311
|
||||||||||||||
Shares
issued for employee stock-based awards
|
-
|
136
|
-
|
-
|
136
|
|||||||||||
Stock-based
compensation expense
|
-
|
69
|
-
|
-
|
69
|
|||||||||||
Cash
dividends paid ($0.48 per share)
|
-
|
-
|
(4,032
|
)
|
-
|
(4,032
|
)
|
|||||||||
Balances,
September 30, 2008
|
$
|
84
|
$
|
29,744
|
$
|
95,224
|
$
|
349
|
$
|
125,401
|
||||||
Balances,
January 1, 2007
|
$
|
84
|
$
|
29,687
|
$
|
82,279
|
$
|
(723
|
)
|
$
|
111,327
|
|||||
Comprehensive
income:
|
||||||||||||||||
Net
income
|
-
|
-
|
10,110
|
-
|
10,110
|
|||||||||||
Unrealized
gains on available-for-sale securities, net of taxes
|
-
|
-
|
-
|
490
|
490
|
|||||||||||
Total
comprehensive income
|
|
10,600
|
||||||||||||||
Shares
issued for employee stock-based awards
|
-
|
46
|
-
|
-
|
46
|
|||||||||||
Stock-based
compensation expense
|
-
|
51
|
-
|
-
|
51
|
|||||||||||
Repurchase
and retirement of 10,234 shares
|
-
|
(266
|
)
|
-
|
-
|
(266
|
)
|
|||||||||
|
||||||||||||||||
Cash
dividends paid ($0.48 per share)
|
-
|
-
|
(4,022
|
)
|
-
|
(4,022
|
)
|
|||||||||
Balances,
September 30, 2007
|
$
|
84
|
$
|
29,518
|
$
|
88,367
|
$
|
(233
|
)
|
$
|
117,736
|
For the Nine Months Ended September 30,
|
|||||||
2008
|
2007
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
9,209
|
$
|
10,110
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
1,330
|
1,084
|
|||||
Stock-based
compensation expense
|
69
|
51
|
|||||
Discount
accretion on debt securities
|
(164
|
)
|
(144
|
)
|
|||
Provision
for credit losses
|
1,952
|
1,259
|
|||||
Gain
on sale of securities
|
-
|
(1
|
)
|
||||
Other
than temporary impairment of securities
|
371
|
-
|
|||||
(Gain)
loss on disposals of premises and equipment
|
(1,255
|
)
|
108
|
||||
Loss
on sale of investment in unconsolidated subsidiary
|
337
|
-
|
|||||
Loss
(gain) on sale of other real estate owned
|
50
|
(13
|
)
|
||||
Net
changes in:
|
|||||||
Insurance
premiums receivable
|
(81
|
)
|
324
|
||||
Accrued
interest receivable
|
(15
|
)
|
(948
|
)
|
|||
Other
assets
|
(1,592
|
)
|
(766
|
)
|
|||
Accrued
interest payable
|
(656
|
)
|
(103
|
)
|
|||
Other
liabilities
|
579
|
117
|
|||||
Net
cash provided by operating activities
|
10,134
|
11,078
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Proceeds
from maturities and principal payments of securities available for
sale
|
71,189
|
65,646
|
|||||
Proceeds
from sale of investment securities available for sale
|
-
|
500
|
|||||
Purchases
of securities available for sale
|
(56,416
|
)
|
(58,814
|
)
|
|||
Proceeds
from maturities and principal payments of securities
|
|||||||
held
to maturity
|
2,991
|
1,174
|
|||||
Purchases
of securities held to maturity
|
(1,012
|
)
|
(117
|
)
|
|||
Net
increase in loans
|
(90,109
|
)
|
(51,774
|
)
|
|||
Purchases
of premises and equipment
|
(292
|
)
|
(640
|
)
|
|||
Proceeds
from sales of premises and equipment
|
2,773
|
-
|
|||||
Proceeds
from sale of investment in unconsolidated subsidiary
|
600
|
-
|
|||||
Proceeds
from sales of other real estate owned
|
264
|
364
|
|||||
Net
cash used in investing activities
|
(70,012
|
)
|
(43,661
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Net
increase (decrease) in demand, money market and savings
deposits
|
29,990
|
(20,318
|
)
|
||||
Net
increase in certificates of deposit
|
43,332
|
6,259
|
|||||
Net
increase in short-term borrowings
|
5,384
|
10,864
|
|||||
Proceeds
from issuance of long-term debt
|
3,000
|
-
|
|||||
Repayment
of long-term debt
|
(7,000
|
)
|
(9,000
|
)
|
|||
Proceeds
from issuance of common stock
|
136
|
46
|
|||||
Stock
repurchased and retired
|
-
|
(266
|
)
|
||||
Dividends
paid
|
(4,032
|
)
|
(4,022
|
)
|
|||
Net
cash provided by (used in) financing activities
|
70,810
|
(16,437
|
)
|
||||
Net
increase (decrease) in cash and cash equivalents
|
10,932
|
(49,020
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
26,880
|
79,673
|
|||||
Cash
and cash equivalents at end of period
|
$
|
37,812
|
$
|
30,653
|
|||
Supplemental
cash flows information:
|
|||||||
Interest
paid
|
$
|
17,433
|
$
|
18,181
|
|||
Income
taxes paid
|
$
|
7,437
|
$
|
6,474
|
|||
Transfers
from loans to other real estate owned
|
$
|
138
|
$
|
698
|
For the Three Months Ended
|
For the Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
(In thousands, except per share data)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Net
Income
|
$
|
3,071
|
$
|
3,351
|
$
|
9,209
|
$
|
10,110
|
|||||
Weighted
Average Shares Outstanding –
Basic
|
8,388
|
8,380
|
8,382
|
8,380
|
|||||||||
Dilutive
effect of stock-based awards
|
7
|
12
|
8
|
14
|
|||||||||
Weighted
Average Shares Outstanding –
Diluted
|
8,395
|
8,392
|
8,390
|
8,394
|
|||||||||
Earnings
per common share – Basic
|
$
|
0.37
|
$
|
0.40
|
$
|
1.10
|
$
|
1.21
|
|||||
Earnings
per common share – Diluted
|
$
|
0.37
|
$
|
0.40
|
$
|
1.10
|
$
|
1.20
|
September 30,
|
December 31,
|
September 30,
|
||||||||
(Dollars in thousands)
|
2008
|
2007
|
2007
|
|||||||
Impaired
loans with a valuation allowance
|
$
|
2,290
|
$
|
3,413
|
$
|
1,922
|
||||
Impaired
loans with no valuation allowance
|
5,206
|
127
|
1,784
|
|||||||
Total
impaired loans
|
$
|
7,496
|
$
|
3,540
|
$
|
3,706
|
||||
Allowance
for credit losses applicable to impaired loans
|
$
|
318
|
$
|
819
|
$
|
932
|
||||
Allowance
for credit losses applicable to other than impaired loans
|
8,300
|
6,732
|
6,289
|
|||||||
Total
allowance for credit losses
|
$
|
8,618
|
$
|
7,551
|
$
|
7,221
|
||||
Average
recorded investment in impaired loans
|
$
|
4,817
|
$
|
3,958
|
$
|
4,316
|
Weighted
|
Aggregate
|
|||||||||
Number
|
Average
|
Intrinsic
|
||||||||
of Shares
|
Exercise Price
|
Value
|
||||||||
Outstanding at beginning of
year
|
33,797
|
$
|
15.67
|
|||||||
Granted
|
-
|
-
|
||||||||
Exercised
|
(13,106
|
)
|
15.42
|
|||||||
Expired/Cancelled
|
(2,066
|
)
|
18.47
|
|||||||
Outstanding
at end of period
|
18,625
|
15.54
|
$
|
189,258
|
||||||
Exercisable
at end of period
|
18,625
|
$
|
15.54
|
$
|
189,258
|
Options Outstanding and Exercisable
|
||||||||||
|
Weighted Average
|
|||||||||
Options Outstanding
|
Remaining
|
|||||||||
Exercise Price
|
Number
|
Number
|
Contract Life (in years)
|
|||||||
$21.33
|
5,075
|
5,075
|
0.3
|
|||||||
14.00
|
3,255
|
3,255
|
1.3
|
|||||||
13.17
|
10,295
|
10,295
|
3.5
|
|||||||
|
18,625
|
18,625
|
Number
|
Weighted Average Grant
|
||||||
of Shares
|
Date Fair Value
|
||||||
Nonvested
at January 1, 2008
|
3,845
|
$
|
25.31
|
||||
Granted
|
13,783
|
21.93
|
|||||
Vested
|
(769
|
)
|
25.31
|
||||
Cancelled
|
-
|
-
|
|||||
Nonvested
at September 30, 2008
|
16,859
|
$
|
22.55
|
Community
|
|
Insurance products
|
|
Parent
|
|
|
|||||||
(Dollars in thousands)
|
banking
|
|
and services
|
|
Company
|
|
Total
|
|
|||||
2008
|
|||||||||||||
Interest
income
|
$
|
46,299
|
$
|
49
|
$
|
-
|
$
|
46,348
|
|||||
Interest
expense
|
(16,676
|
)
|
-
|
(101
|
)
|
(16,777
|
)
|
||||||
Provision
for credit losses
|
(1,952
|
)
|
-
|
-
|
(1,952
|
)
|
|||||||
Noninterest
income
|
5,865
|
10,077
|
-
|
15,942
|
|||||||||
Noninterest
expense
|
(15,486
|
)
|
(9,128
|
)
|
(4,135
|
)
|
(28,749
|
)
|
|||||
Net
intersegment income (expense)
|
(3,577
|
)
|
(312
|
)
|
3,889
|
-
|
|||||||
Income
before taxes
|
14,473
|
686
|
(347
|
)
|
14,812
|
||||||||
Income
tax (expense) benefit
|
(5,475
|
)
|
(259
|
)
|
131
|
(5,603
|
)
|
||||||
Net
income
|
$
|
8,998
|
$
|
427
|
$
|
(216
|
)
|
$
|
9,209
|
||||
Total
assets
|
$
|
1,013,939
|
$
|
20,332
|
$
|
2,755
|
$
|
1,037,026
|
|||||
2007
|
|||||||||||||
Interest
income
|
$
|
48,688
|
$
|
-
|
$
|
-
|
$
|
48,688
|
|||||
Interest
expense
|
(18,078
|
)
|
-
|
-
|
(18,078
|
)
|
|||||||
Provision
for credit losses
|
(1,259
|
)
|
-
|
-
|
(1,259
|
)
|
|||||||
Noninterest
income
|
4,914
|
5,050
|
-
|
9,964
|
|||||||||
Noninterest
expense
|
(15,251
|
)
|
(4,132
|
)
|
(3,854
|
)
|
(23,237
|
)
|
|||||
Net
intersegment income (expense)
|
(3,457
|
)
|
(274
|
)
|
3,731
|
-
|
|||||||
Income
before taxes
|
15,557
|
644
|
(123
|
)
|
16,078
|
||||||||
Income
tax (expense) benefit
|
(5,792
|
)
|
(255
|
)
|
79
|
(5,968
|
)
|
||||||
Net
income
|
$
|
9,765
|
$
|
389
|
$
|
(44
|
)
|
$
|
10,110
|
||||
Total
assets
|
$
|
927,468
|
$
|
9,279
|
$
|
3,130
|
$
|
939,877
|
Significant
|
|||||||||||||
Other
|
Significant
|
||||||||||||
Quoted
|
Observable
|
Unobservable
|
|||||||||||
Prices
|
Inputs
|
Inputs
|
|||||||||||
(Dollars in thousands)
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||
Securities
available for sale
|
$
|
82,235
|
-
|
$
|
82,235
|
-
|
Significant
|
|||||||||||||
Other
|
Significant
|
||||||||||||
Quoted
|
Observable
|
Unobservable
|
|||||||||||
Prices
|
Inputs
|
Inputs
|
|||||||||||
(Dollars in thousands)
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||
Impaired loans
|
$
|
7,178
|
-
|
-
|
$
|
7,178
|
For the Three Months Ended
|
For the Three Months Ended
|
||||||||||||||||||
September 30, 2008
|
September 30, 2007
|
||||||||||||||||||
Average
|
Income(1)/
|
Yield/
|
Average
|
Income(1)/
|
Yield/
|
||||||||||||||
(Dollars in thousands)
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
|||||||||||||
Earning assets
|
|||||||||||||||||||
Investment
securities
|
|||||||||||||||||||
Taxable
|
$
|
84,713
|
$
|
924
|
4.34
|
%
|
$
|
114,248
|
$
|
1,325
|
4.64
|
%
|
|||||||
Tax-exempt
|
10,320
|
145
|
5.63
|
13,360
|
197
|
5.90
|
|||||||||||||
Loans
(2), (3)
|
854,371
|
14,225
|
6.62
|
738,145
|
14,770
|
8.00
|
|||||||||||||
Federal
funds sold
|
17,921
|
79
|
1.74
|
13,096
|
178
|
5.44
|
|||||||||||||
Interest
bearing deposits
|
4,218
|
21
|
2.01
|
13,473
|
180
|
5.34
|
|||||||||||||
Total
earning assets
|
971,543
|
15,394
|
6.30
|
%
|
892,322
|
16,650
|
7.46
|
%
|
|||||||||||
Cash
and due from banks
|
14,306
|
17,512
|
|||||||||||||||||
Other
assets
|
50,358
|
43,376
|
|||||||||||||||||
Allowance
for credit losses
|
(8,468
|
)
|
(7,002
|
)
|
|||||||||||||||
Total
assets
|
$
|
1,027,739
|
$
|
946,208
|
|||||||||||||||
Interest
bearing liabilities
|
|||||||||||||||||||
Demand
deposits
|
$
|
112,000
|
97
|
0.34
|
%
|
$
|
111,983
|
299
|
1.07
|
%
|
|||||||||
Money
market and savings deposits
|
183,408
|
673
|
1.46
|
177,077
|
811
|
1.83
|
|||||||||||||
Certificates
of deposit $100,000 or more
|
196,810
|
1,953
|
3.95
|
159,917
|
1,945
|
4.87
|
|||||||||||||
Other
time deposits
|
226,110
|
2,232
|
3.93
|
212,341
|
2,438
|
4.59
|
|||||||||||||
Interest
bearing deposits
|
718,328
|
4,955
|
2.74
|
661,318
|
5,493
|
3.32
|
|||||||||||||
Short-term
borrowings
|
53,450
|
344
|
2.56
|
28,884
|
279
|
3.86
|
|||||||||||||
Long-term
debt
|
8,485
|
90
|
4.21
|
22,391
|
308
|
5.50
|
|||||||||||||
Total
interest bearing liabilities
|
780,263
|
5,389
|
2.75
|
%
|
712,593
|
6,080
|
3.41
|
%
|
|||||||||||
Noninterest
bearing deposits
|
111,915
|
108,906
|
|||||||||||||||||
Other
liabilities
|
10,978
|
8,279
|
|||||||||||||||||
Stockholders’
equity
|
124,583
|
116,430
|
|||||||||||||||||
Total
liabilities and stockholders’ equity
|
$
|
1,027,739
|
$
|
946,208
|
|||||||||||||||
Net
interest spread
|
$
|
10,005
|
3.55
|
%
|
$
|
10,570
|
4.05
|
%
|
|||||||||||
Net
interest margin
|
4.10
|
%
|
4.74
|
%
|
For the Nine Months Ended
|
For the Nine Months Ended
|
||||||||||||||||||
September 30, 2008
|
September 30, 2007
|
||||||||||||||||||
Average
|
Income(1)/
|
Yield/
|
Average
|
Income(1)/
|
Yield/
|
||||||||||||||
(Dollars in thousands)
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
|||||||||||||
Earning
assets
|
|||||||||||||||||||
Investment
securities
|
|||||||||||||||||||
Taxable
|
$
|
86,633
|
$
|
2,949
|
4.55
|
%
|
$
|
115,248
|
$
|
3,900
|
4.51
|
%
|
|||||||
Tax-exempt
|
11,395
|
502
|
5.89
|
13,563
|
596
|
5.86
|
|||||||||||||
Loans
(2), (3)
|
824,775
|
42,829
|
6.94
|
716,478
|
42,643
|
7.94
|
|||||||||||||
Federal
funds sold
|
17,893
|
284
|
2.12
|
24,861
|
988
|
5.30
|
|||||||||||||
Interest
bearing deposits
|
4,746
|
88
|
2.49
|
21,533
|
847
|
5.24
|
|||||||||||||
Total
earning assets
|
945,442
|
46,652
|
6.59
|
%
|
891,683
|
48,974
|
7.32
|
%
|
|||||||||||
Cash
and due from banks
|
14,408
|
16,869
|
|||||||||||||||||
Other
assets
|
50,690
|
43,411
|
|||||||||||||||||
Allowance
for credit losses
|
(8,097
|
)
|
(6,714
|
)
|
|||||||||||||||
Total
assets
|
$
|
1,002,443
|
$
|
945,249
|
|||||||||||||||
Interest
bearing liabilities
|
|||||||||||||||||||
Demand
deposits
|
$
|
112,309
|
363
|
0.43
|
%
|
$
|
111,497
|
805
|
0.96
|
%
|
|||||||||
Money
market and savings deposits
|
180,087
|
2,032
|
1.51
|
178,459
|
2,386
|
1.78
|
|||||||||||||
Certificates
of deposit $100,000 or more
|
186,879
|
5,963
|
4.26
|
158,889
|
5,794
|
4.86
|
|||||||||||||
Other
time deposits
|
221,564
|
6,937
|
4.18
|
214,390
|
7,278
|
4.53
|
|||||||||||||
Interest
bearing deposits
|
700,839
|
15,295
|
2.92
|
663,235
|
16,263
|
3.27
|
|||||||||||||
Short-term
borrowings
|
47,409
|
1,026
|
2.89
|
28,841
|
838
|
3.88
|
|||||||||||||
Long-term
debt
|
12,821
|
456
|
4.75
|
24,129
|
977
|
5.40
|
|||||||||||||
Total
interest bearing liabilities
|
761,069
|
16,777
|
2.94
|
%
|
716,205
|
18,078
|
3.37
|
%
|
|||||||||||
Noninterest
bearing deposits
|
106,328
|
105,957
|
|||||||||||||||||
Other
liabilities
|
11,419
|
8,453
|
|||||||||||||||||
Stockholders’
equity
|
123,627
|
114,634
|
|||||||||||||||||
Total
liabilities and stockholders’ equity
|
$
|
1,002,443
|
$
|
945,249
|
|||||||||||||||
Net
interest spread
|
$
|
29,875
|
3.65
|
%
|
$
|
30,896
|
3.95
|
%
|
|||||||||||
Net
interest margin
|
4.22
|
%
|
4.62
|
%
|
For the Three Months Ended
|
For the Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
(Dollars in thousands)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Allowance
balance - beginning of period
|
$
|
8,282
|
$
|
6,885
|
$
|
7,551
|
$
|
6,300
|
|||||
Charge-offs:
|
|||||||||||||
Real
estate
|
(455
|
)
|
(40
|
)
|
(526
|
)
|
(40
|
)
|
|||||
Consumer
|
(63
|
)
|
(52
|
)
|
(198
|
)
|
(174
|
)
|
|||||
Commercial
and other
|
(185
|
)
|
(206
|
)
|
(381
|
)
|
(241
|
)
|
|||||
Totals
|
(703
|
)
|
(298
|
)
|
(1,105
|
)
|
(455
|
)
|
|||||
Recoveries:
|
|||||||||||||
Real
estate
|
10
|
-
|
18
|
-
|
|||||||||
Consumer
|
34
|
12
|
75
|
57
|
|||||||||
Commercial
and other
|
120
|
18
|
127
|
60
|
|||||||||
Totals
|
164
|
30
|
220
|
117
|
|||||||||
Net
charge-offs
|
(539
|
)
|
(268
|
)
|
(885
|
)
|
(338
|
)
|
|||||
Provision
for credit losses
|
875
|
604
|
1,952
|
1,259
|
|||||||||
Allowance
balance - end of period
|
$
|
8,618
|
$
|
7,221
|
$
|
8,618
|
$
|
7,221
|
|||||
Average
loans outstanding during the period
|
$
|
854,371
|
$
|
738,145
|
$
|
824,775
|
$
|
716,478
|
|||||
Net
charge-offs (annualized) as a percentage of average loans outstanding
during the period
|
0.25
|
%
|
0.15
|
%
|
0.14
|
%
|
0.06
|
%
|
|||||
Allowance
for credit losses at period end as a percentage of average
loans
|
1.01
|
%
|
0.98
|
%
|
1.04
|
%
|
1.01
|
%
|
September 30,
|
|
December 31,
|
|
||||
(Dollars in thousands)
|
|
2008
|
|
2007
|
|||
Nonperforming assets
|
|||||||
Nonaccrual
loans
|
$
|
7,496
|
$
|
3,540
|
|||
Other
real estate owned
|
-
|
176
|
|||||
Total
nonperforming assets
|
7,496
|
3,716
|
|||||
Loans
90 days past due and still accruing
|
599
|
1,606
|
|||||
Total
nonperforming assets and past due loans
|
$
|
8,095
|
$
|
5,322
|
September 30,
|
|
December 31,
|
|
||||
(Dollars in thousands)
|
|
2008
|
|
2007
|
|||
Federal Home Loan Bank (FHLB) 5.69%
Advance due June 2008
|
$
|
-
|
$
|
7,000
|
|||
FHLB
4.17% Advance due November 2009
|
3,000
|
3,000
|
|||||
FHLB
3.09% Advance due January 2010
|
3,000
|
-
|
|||||
Acquisition
related debt, 4.08% interest, equal annual installments for five
years
|
2,485
|
2,485
|
|||||
$
|
8,485
|
$
|
12,485
|
Minimum
|
||||||||||
September 30,
|
December 31,
|
Regulatory
|
||||||||
2008
|
2007
|
Requirements
|
||||||||
Tier 1 risk-based
capital
|
11.65
|
%
|
12.15
|
%
|
4.00
|
%
|
||||
Total
risk-based capital
|
12.67
|
%
|
13.14
|
%
|
8.00
|
%
|
||||
Leverage
ratio
|
10.25
|
%
|
10.50
|
%
|
4.00
|
%
|
SHORE
BANCSHARES, INC.
|
||
Date:
November 6, 2008
|
By:
|
/s/
W. Moorhead Vermilye
|
W.
Moorhead Vermilye
|
||
President/Chief
Executive Officer
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||
Date:
November 6, 2008
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By:
|
/s/
Susan E.Leaverton
|
Susan
E. Leaverton, CPA
|
||
Treasurer/Principal
Accounting Officer
|
Exhibit
|
||
Number
|
Description
|
|
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 CEO pursuant to Section
906 of the Sarbanes-Oxley Act (furnished
herewith).
|
|
32.2
|
Certification
of the PAO pursuant to Section
906 of the Sarbanes-Oxley Act (furnished
herewith).
|