Q
|
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
|
R
|
|
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 -
|
|
June
30, 2009 (unaudited) and December 31, 2008
|
2
|
Consolidated
Statements of Income -
|
|
For
the three and six months ended June 30, 2009 and 2008
(unaudited)
|
3
|
Consolidated
Statements of Changes in Stockholders’ Equity -
|
|
For
the six months ended June 30, 2009 and 2008 (unaudited)
|
4
|
Consolidated
Statements of Cash Flows -
|
|
For
the six months ended June 30, 2009 and 2008 (unaudited)
|
5
|
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
17
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
26
|
Item
4. Controls and Procedures
|
26
|
Part
II. Other Information
|
27
|
Item
1A. Risk Factors
|
27
|
Item
4. Submission of Matters to Vote of Security
Holders
|
27
|
Item
6. Exhibits
|
28
|
Signatures
|
28
|
Exhibit
Index
|
29
|
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
|
(Unaudited)
|
|||||||
ASSETS | ||||||||
Cash
and due from banks
|
$ | 20,498 | $ | 16,803 | ||||
Interest
bearing deposits with other banks
|
1,622 | 481 | ||||||
Federal
funds sold
|
85,242 | 10,010 | ||||||
Investment
securities:
|
||||||||
Available
for sale, at fair value
|
80,278 | 79,204 | ||||||
Held
to maturity, at amortized cost – fair value of $9,111 (2009) and $10,390
(2008)
|
8,994 | 10,252 | ||||||
Loans
|
919,088 | 888,528 | ||||||
Less: allowance
for credit losses
|
(10,784 | ) | (9,320 | ) | ||||
Loans,
net
|
908,304 | 879,208 | ||||||
Insurance
premiums receivable
|
1,391 | 1,348 | ||||||
Premises
and equipment, net
|
14,018 | 13,855 | ||||||
Accrued
interest receivable
|
4,355 | 4,606 | ||||||
Goodwill
|
15,954 | 15,954 | ||||||
Other
intangible assets, net
|
5,663 | 5,921 | ||||||
Deferred
income taxes
|
2,579 | 1,579 | ||||||
Other
real estate owned
|
2,212 | 148 | ||||||
Other
assets
|
7,102 | 5,272 | ||||||
TOTAL
ASSETS
|
$ | 1,158,212 | $ | 1,044,641 | ||||
LIABILITIES
|
||||||||
Deposits:
|
||||||||
Noninterest
bearing demand
|
$ | 113,111 | $ | 102,584 | ||||
Interest
bearing demand
|
126,859 | 125,370 | ||||||
Money
market and savings
|
244,233 | 150,958 | ||||||
Certificates
of deposit $100,000 or more
|
259,348 | 235,235 | ||||||
Other
time
|
237,783 | 231,224 | ||||||
Total
deposits
|
981,334 | 845,371 | ||||||
Accrued
interest payable
|
2,368 | 2,350 | ||||||
Short-term
borrowings
|
28,096 | 52,969 | ||||||
Long-term
debt
|
7,947 | 7,947 | ||||||
Other
liabilities
|
10,591 | 8,619 | ||||||
TOTAL
LIABILITIES
|
1,030,336 | 917,256 | ||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Common
stock, par value $.01; shares authorized – 35,000,000; shares issued and
outstanding – 8,418,963 (2009) and 8,404,684 (2008)
|
84 | 84 | ||||||
Warrants
|
1,543 | - | ||||||
Additional
paid in capital
|
29,816 | 29,768 | ||||||
Retained
earnings
|
95,679 | 96,140 | ||||||
Accumulated
other comprehensive income
|
754 | 1,393 | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
127,876 | 127,385 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 1,158,212 | $ | 1,044,641 |
For the Three Months Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
INTEREST
INCOME
|
||||||||||||||||
Interest
and fees on loans
|
$ | 13,754 | $ | 13,961 | $ | 27,371 | $ | 28,521 | ||||||||
Interest
and dividends on investment securities:
|
||||||||||||||||
Taxable
|
768 | 945 | 1,524 | 2,025 | ||||||||||||
Tax-exempt
|
79 | 109 | 164 | 232 | ||||||||||||
Interest
on federal funds sold
|
23 | 83 | 30 | 205 | ||||||||||||
Interest
on deposits with other banks
|
6 | 29 | 7 | 67 | ||||||||||||
Total
interest income
|
14,630 | 15,127 | 29,096 | 31,050 | ||||||||||||
INTEREST
EXPENSE
|
||||||||||||||||
Interest
on deposits
|
4,441 | 4,997 | 8,726 | 10,340 | ||||||||||||
Interest
on short-term borrowings
|
28 | 316 | 77 | 682 | ||||||||||||
Interest
on long-term debt
|
75 | 182 | 149 | 366 | ||||||||||||
Total
interest expense
|
4,544 | 5,495 | 8,952 | 11,388 | ||||||||||||
NET
INTEREST INCOME
|
10,086 | 9,632 | 20,144 | 19,662 | ||||||||||||
Provision
for credit losses
|
1,681 | 615 | 3,616 | 1,077 | ||||||||||||
NET
INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
|
8,405 | 9,017 | 16,528 | 18,585 | ||||||||||||
NONINTEREST
INCOME
|
||||||||||||||||
Service
charges on deposit accounts
|
888 | 917 | 1,697 | 1,788 | ||||||||||||
Other
service charges and fees
|
774 | 765 | 1,512 | 1,501 | ||||||||||||
Investment
securities gains
|
- | - | 49 | - | ||||||||||||
Insurance
agency commissions
|
2,893 | 3,219 | 6,228 | 6,750 | ||||||||||||
Other
noninterest income
|
792 | 293 | 1,211 | 657 | ||||||||||||
Total
noninterest income
|
5,347 | 5,194 | 10,697 | 10,696 | ||||||||||||
NONINTEREST
EXPENSE
|
||||||||||||||||
Salaries
and wages
|
4,759 | 4,568 | 9,299 | 9,175 | ||||||||||||
Employee
benefits
|
1,200 | 1,191 | 2,580 | 2,568 | ||||||||||||
Occupancy
expense
|
587 | 537 | 1,136 | 1,036 | ||||||||||||
Furniture
and equipment expense
|
302 | 298 | 616 | 584 | ||||||||||||
Data
processing
|
580 | 550 | 1,190 | 1,118 | ||||||||||||
Directors’
fees
|
117 | 130 | 285 | 295 | ||||||||||||
Amortization
of other intangible assets
|
129 | 129 | 258 | 258 | ||||||||||||
Insurance
agency commissions expense
|
537 | 712 | 1,087 | 1,323 | ||||||||||||
FDIC
insurance premium expense
|
919 | 60 | 1,163 | 74 | ||||||||||||
Other
noninterest expenses
|
1,563 | 1,554 | 2,962 | 2,889 | ||||||||||||
Total
noninterest expense
|
10,693 | 9,729 | 20,576 | 19,320 | ||||||||||||
INCOME
BEFORE INCOME TAXES
|
3,059 | 4,482 | 6,649 | 9,961 | ||||||||||||
Income
tax expense
|
1,166 | 1,716 | 2,543 | 3,823 | ||||||||||||
NET
INCOME
|
1,893 | 2,766 | 4,106 | 6,138 | ||||||||||||
Preferred
stock dividends and discount accretion
|
1,539 | - | 1,876 | - | ||||||||||||
Net
income available to common shareholders
|
$ | 354 | $ | 2,766 | $ | 2,230 | $ | 6,138 | ||||||||
Basic
earnings per common share
|
$ | 0.04 | $ | 0.33 | $ | 0.27 | $ | 0.73 | ||||||||
Diluted
earnings per common share
|
$ | 0.04 | $ | 0.33 | $ | 0.27 | $ | 0.73 | ||||||||
Dividends
paid per common share
|
$ | 0.16 | $ | 0.16 | $ | 0.32 | $ | 0.32 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||||||
Preferred
|
Common
|
Paid in
|
Retained
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||
Stock
|
Stock
|
Warrants
|
Capital
|
Earnings
|
Income (Loss)
|
Equity
|
||||||||||||||||||||||
Balances,
January 1, 2009
|
$ | - | $ | 84 | $ | - | $ | 29,768 | $ | 96,140 | $ | 1,393 | $ | 127,385 | ||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | 4,106 | - | 4,106 | |||||||||||||||||||||
Unrealized
losses on available-for-sale securities, net of taxes
|
(639 | ) | (639 | ) | ||||||||||||||||||||||||
Total
comprehensive income
|
3,467 | |||||||||||||||||||||||||||
Warrants
issued
|
- | - | 1,543 | - | - | - | 1,543 | |||||||||||||||||||||
Preferred
shares issued pursuant to TARP
|
25,000 | - | - | - | - | - | 25,000 | |||||||||||||||||||||
Discount
from issuance of preferred stock
|
(1,543 | ) | - | - | - | - | - | (1,543 | ) | |||||||||||||||||||
Discount
accretion
|
68 | - | - | - | (68 | ) | - | - | ||||||||||||||||||||
Repurchase
of preferred stock
|
(23,525 | ) | - | - | - | - | - | (23,525 | ) | |||||||||||||||||||
Common
shares issued for employee stock-based awards
|
- | - | - | 2 | - | - | 2 | |||||||||||||||||||||
Stock-based
compensation expense
|
- | - | - | 46 | - | - | 46 | |||||||||||||||||||||
Preferred
stock dividends
|
- | - | - | - | (1,808 | ) | - | (1,808 | ) | |||||||||||||||||||
Cash
dividends paid ($0.32 per share)
|
- | - | - | - | (2,691 | ) | - | (2,691 | ) | |||||||||||||||||||
Balances,
June 30, 2009
|
$ | - | $ | 84 | $ | 1,543 | $ | 29,816 | $ | 95,679 | $ | 754 | $ | 127,876 | ||||||||||||||
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
|
- | - | - | - | 6,138 | - | 6,138 | |||||||||||||||||||||
Unrealized
losses on available-for-sale securities, net of taxes
|
- | - | - | - | - | (454 | ) | (454 | ) | |||||||||||||||||||
Total
comprehensive income
|
5,684 | |||||||||||||||||||||||||||
Shares
issued for employee stock-based awards
|
- | - | - | 77 | - | - | 77 | |||||||||||||||||||||
Stock-based
compensation expense
|
- | - | - | 47 | - | - | 47 | |||||||||||||||||||||
Cash
dividends paid ($0.32 per share)
|
- | - | - | - | (2,687 | ) | - | (2,687 | ) | |||||||||||||||||||
Balances,
June 30, 2008
|
$ | - | $ | 84 | $ | - | $ | 29,663 | $ | 93,498 | $ | (207 | ) | $ | 123,038 |
For the Six Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income
|
$ | 4,106 | $ | 6,138 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Provision
for credit losses
|
3,616 | 1,077 | ||||||
Depreciation
and amortization
|
890 | 889 | ||||||
Discount
accretion on debt securities
|
(131 | ) | (116 | ) | ||||
Stock-based
compensation expense
|
46 | 47 | ||||||
Gain
on sales of securities
|
(49 | ) | - | |||||
Loss
on disposals of premises and equipment
|
- | 9 | ||||||
Loss
on sales of other real estate owned
|
- | 50 | ||||||
Net
changes in:
|
||||||||
Insurance
premiums receivable
|
(43 | ) | (520 | ) | ||||
Accrued
interest receivable
|
251 | 165 | ||||||
Other
assets
|
(2,384 | ) | (1,598 | ) | ||||
Accrued
interest payable
|
18 | (920 | ) | |||||
Other
liabilities
|
1,973 | 1,021 | ||||||
Net
cash provided by operating activities
|
8,293 | 6,242 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds
from maturities and principal payments of securities available for
sale
|
30,828 | 39,193 | ||||||
Proceeds
from sales of investment securities available for sale
|
2,048 | - | ||||||
Purchases
of securities available for sale
|
(34,933 | ) | (23,477 | ) | ||||
Proceeds
from maturities and principal payments of securities held to
maturity
|
2,080 | 2,785 | ||||||
Purchases
of securities held to maturity
|
(824 | ) | (1,012 | ) | ||||
Net
increase in loans
|
(34,776 | ) | (65,734 | ) | ||||
Purchases
of premises and equipment
|
(715 | ) | (193 | ) | ||||
Proceeds
from sales of premises and equipment
|
- | 1,318 | ||||||
Proceeds
from sales of other real estate owned
|
- | 264 | ||||||
Net
cash used in investing activities
|
(36,292 | ) | (46,856 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
increase in demand, money market and savings deposits
|
105,291 | 19,022 | ||||||
Net
increase in certificates of deposit
|
30,672 | 33,739 | ||||||
Net
(decrease) increase in short-term borrowings
|
(24,874 | ) | 10,569 | |||||
Proceeds
from issuance of long-term debt
|
- | 3,000 | ||||||
Repayment
of long-term debt
|
- | (7,000 | ) | |||||
Proceeds
from issuance of preferred stock and warrants
|
25,000 | - | ||||||
Repurchase
of preferred stock
|
(23,525 | ) | - | |||||
Proceeds
from issuance of common stock
|
2 | 77 | ||||||
Preferred
stock dividends paid
|
(1,808 | ) | - | |||||
Common
stock dividends paid
|
(2,691 | ) | (2,687 | ) | ||||
Net
cash provided by financing activities
|
108,067 | 56,720 | ||||||
Net
increase in cash and cash equivalents
|
80,068 | 16,106 | ||||||
Cash
and cash equivalents at beginning of period
|
27,294 | 26,880 | ||||||
Cash
and cash equivalents at end of period
|
$ | 107,362 | $ | 42,986 | ||||
Supplemental
cash flows information:
|
||||||||
Interest
paid
|
$ | 8,934 | $ | 12,309 | ||||
Income
taxes paid
|
$ | 3,123 | $ | 4,979 | ||||
Transfers
from loans to other real estate owned
|
$ | 2,064 | $ | 138 |
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
(In thousands, except per share
data)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
income available to common shareholders
|
$ | 354 | $ | 2,766 | $ | 2,230 | $ | 6,138 | ||||||||
Weighted
average shares outstanding - Basic
|
8,413 | 8,398 | 8,409 | 8,394 | ||||||||||||
Dilutive
effect of stock-based awards
|
4 | 7 | 4 | 8 | ||||||||||||
Weighted
average shares outstanding - Diluted
|
8,417 | 8,405 | 8,413 | 8,402 | ||||||||||||
Earnings
per common share - Basic
|
$ | 0.04 | $ | 0.33 | $ | 0.27 | $ | 0.73 | ||||||||
Earnings
per common share - Diluted
|
$ | 0.04 | $ | 0.33 | $ | 0.27 | $ | 0.73 |
June 30,
|
December 31,
|
June 30,
|
||||||||||
(Dollars in thousands)
|
2009
|
2008
|
2008
|
|||||||||
Impaired
loans with a valuation allowance
|
$ | 1,093 | $ | 2,550 | $ | 4,520 | ||||||
Impaired
loans with no valuation allowance
|
12,602 | 5,565 | 277 | |||||||||
Total
impaired loans
|
$ | 13,695 | $ | 8,115 | $ | 4,797 | ||||||
Allowance
for credit losses applicable to impaired loans
|
$ | 454 | $ | 341 | $ | 991 | ||||||
Allowance
for credit losses applicable to other than impaired loans
|
10,330 | 8,979 | 7,291 | |||||||||
Total
allowance for credit losses
|
$ | 10,784 | $ | 9,320 | $ | 8,282 | ||||||
Average
recorded investment in impaired loans
|
$ | 4,817 | $ | 5,477 | $ | 3,924 |
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
(Dollars in thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
June
30, 2009:
|
||||||||||||||||
Obligations
of U.S. Treasury
|
$ | 6,990 | $ | 1 | $ | - | $ | 6,991 | ||||||||
Obligations
of U.S. Government agencies and corporations
|
47,026 | 975 | 281 | 47,720 | ||||||||||||
Mortgage-backed
securities
|
21,316 | 625 | 62 | 21,879 | ||||||||||||
Federal
Home Loan Bank stock
|
2,822 | - | - | 2,822 | ||||||||||||
Federal
Reserve Bank stock
|
302 | - | - | 302 | ||||||||||||
Other
equity securities
|
561 | 3 | - | 564 | ||||||||||||
$ | 79,017 | $ | 1,604 | $ | 343 | $ | 80,278 | |||||||||
December
31, 2008:
|
||||||||||||||||
Obligations
of U.S. Treasury
|
$ | 1,000 | $ | - | $ | - | $ | 1,000 | ||||||||
Obligations
of U.S. Government agencies and corporations
|
49,996 | 1,451 | - | 51,447 | ||||||||||||
Mortgage-backed
securities
|
22,028 | 879 | 8 | 22,899 | ||||||||||||
Federal
Home Loan Bank stock
|
3,003 | - | - | 3,003 | ||||||||||||
Federal
Reserve Bank stock
|
302 | - | - | 302 | ||||||||||||
Other
equity securities
|
551 | 2 | - | 553 | ||||||||||||
$ | 76,880 | $ | 2,332 | $ | 8 | $ | 79,204 | |||||||||
Held-to-maturity
securities:
|
||||||||||||||||
June
30, 2009:
|
||||||||||||||||
Obligations
of states and political subdivisions
|
$ | 8,994 | $ | 139 | $ | 22 | $ | 9,111 | ||||||||
December
31, 2008:
|
||||||||||||||||
Obligations
of states and political subdivisions
|
$ | 10,252 | $ | 159 | $ | 21 | $ | 10,390 |
Less than
12 Months
|
More than
12 Months
|
Total
|
||||||||||||||||||||||
(Dollars in thousands)
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||||||||||
U.S.
Gov’t. agencies and corporations
|
$ | 17,651 | $ | 281 | $ | - | $ | - | $ | 17,651 | $ | 281 | ||||||||||||
Mortgage-backed
securities
|
3,095 | 62 | - | - | 3,095 | 62 | ||||||||||||||||||
Total
|
$ | 20,746 | $ | 343 | $ | - | $ | - | $ | 20,746 | $ | 343 |
Less than
12 Months
|
More than
12 Months
|
Total
|
||||||||||||||||||||||
(Dollars in thousands)
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
Held-to-maturity
securities::
|
||||||||||||||||||||||||
Obligations
of states and political subdivisions
|
$ | 817 | $ | 6 | $ | 798 | $ | 16 | $ | 1,615 | $ | 22 |
Number
|
Weighted Average Grant
|
|||||||
of Shares
|
Date Fair Value
|
|||||||
Nonvested
at January 1, 2009
|
16,859 | $ | 22.55 | |||||
Granted
|
14,254 | 18.12 | ||||||
Vested
|
(3,708 | ) | 22.63 | |||||
Cancelled
|
- | - | ||||||
Nonvested
at June 30, 2009
|
27,405 | $ | 20.23 |
Weighted
|
Aggregate
|
|||||||||||
Number
|
Average
|
Intrinsic
|
||||||||||
of Shares
|
Exercise Price
|
Value
|
||||||||||
Outstanding
at beginning of year
|
18,550 | $ | 15.52 | |||||||||
Granted
|
- | - | ||||||||||
Exercised
|
(25 | ) | 21.33 | |||||||||
Expired/Cancelled
|
(4,975 | ) | 21.33 | |||||||||
Outstanding
at end of period
|
13,550 | 13.37 | $ | 61,932 | ||||||||
Exercisable
at end of period
|
13,550 | $ | 13.37 | $ | 61,932 |
Options Outstanding and Exercisable
|
|||||||||||||
Options Outstanding
|
Weighted Average
|
||||||||||||
Remaining
|
|||||||||||||
Exercise Price
|
Number
|
Number
|
Contract Life (in years)
|
||||||||||
$
|
14.00
|
3,255 | 3,255 | 0.7 | |||||||||
13.17
|
10,295 | 10,295 | 2.9 | ||||||||||
13,550 | 13,550 |
Community
|
Insurance Products
|
Parent
|
||||||||||||||
(Dollars in thousands)
|
Banking
|
and Services
|
Company
|
Total
|
||||||||||||
2009
|
||||||||||||||||
Interest
income
|
$ | 29,063 | $ | 33 | $ | - | $ | 29,096 | ||||||||
Interest
expense
|
(8,912 | ) | - | (40 | ) | (8,952 | ) | |||||||||
Provision
for credit losses
|
(3,616 | ) | - | - | (3,616 | ) | ||||||||||
Noninterest
income
|
4,134 | 6,563 | - | 10,697 | ||||||||||||
Noninterest
expense
|
(11,837 | ) | (5,666 | ) | (3,073 | ) | (20,576 | ) | ||||||||
Net
intersegment income (expense)
|
(2,799 | ) | (238 | ) | 3,037 | - | ||||||||||
Income
(loss) before taxes
|
6,033 | 692 | (76 | ) | 6,649 | |||||||||||
Income
tax (expense) benefit
|
(2,308 | ) | (264 | ) | 29 | (2,543 | ) | |||||||||
Net
income
|
$ | 3,725 | $ | 428 | $ | (47 | ) | $ | 4,106 | |||||||
Total
assets
|
$ | 1,134,421 | $ | 20,012 | $ | 3,779 | $ | 1,158,212 | ||||||||
2008
|
||||||||||||||||
Interest
income
|
$ | 31,018 | $ | 32 | $ | - | $ | 31,050 | ||||||||
Interest
expense
|
(11,320 | ) | - | (68 | ) | (11,388 | ) | |||||||||
Provision
for credit losses
|
(1,077 | ) | - | - | (1,077 | ) | ||||||||||
Noninterest
income
|
3,607 | 7,089 | - | 10,696 | ||||||||||||
Noninterest
expense
|
(10,306 | ) | (6,189 | ) | (2,825 | ) | (19,320 | ) | ||||||||
Net
intersegment income (expense)
|
(2,431 | ) | (194 | ) | 2,625 | - | ||||||||||
Income
(loss) before taxes
|
9,491 | 738 | (268 | ) | 9,961 | |||||||||||
Income
tax (expense) benefit
|
(3,643 | ) | (283 | ) | 103 | (3,823 | ) | |||||||||
Net
income
|
$ | 5,848 | $ | 455 | $ | (165 | ) | $ | 6,138 | |||||||
Total
assets
|
$ | 995,389 | $ | 20,719 | $ | 3,355 | $ | 1,019,463 |
June 30, 2009
|
December 31, 2008
|
|||||||||||||||
Estimated
|
Estimated
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
(Dollars in thousands)
|
Amount
|
Value
|
Amount
|
Value
|
||||||||||||
Financial
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 107,362 | $ | 107,362 | $ | 27,294 | $ | 27,294 | ||||||||
Investment
securities
|
89,272 | 89,389 | 89,456 | 89,594 | ||||||||||||
Loans
|
919,088 | 939,575 | 888,528 | 914,695 | ||||||||||||
Less: allowance
for loan losses
|
(10,784 | ) |
-
|
(9,320 | ) |
_ -
|
||||||||||
$ | 1,104,938 | $ | 1,136,326 | $ | 995,958 | $ | 1,031,583 | |||||||||
Financial
liabilities:
|
||||||||||||||||
Deposits
|
$ | 981,334 | $ | 990,914 | $ | 845,371 | $ | 861,951 | ||||||||
Short-term
borrowings
|
28,096 | 28,096 | 52,969 | 52,969 | ||||||||||||
Long-term
debt
|
7,947 | 8,011 | 7,947 | 8,060 | ||||||||||||
$ | 1,017,377 | $ | 1,027,021 | $ | 906,287 | $ | 922,980 |
June 30, 2009
|
December 31, 2008
|
|||||||||||||||
Estimated
|
Estimated
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
(Dollars in thousands)
|
Amount
|
Value
|
Amount
|
Value
|
||||||||||||
Unrecognized
financial instruments:
|
||||||||||||||||
Commitments
to extend credit
|
$ | 173,662 | $ | - | $ | 211,423 | $ | - | ||||||||
Standby
letters of credit
|
18,592 | - | 12,508 | - | ||||||||||||
$ | 192,254 | $ | - | $ | 223,931 | $ | - |
Significant
|
||||||||||||||||
Other
|
Significant
|
|||||||||||||||
Quoted
|
Observable
|
Unobservable
|
||||||||||||||
Prices
|
Inputs
|
Inputs
|
||||||||||||||
(Dollars in thousands)
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Securities
available for sale:
|
||||||||||||||||
U.S.
Treasury
|
$ | 6,991 | $ | 6,991 | $ | - | $ | - | ||||||||
U.S.
Government agencies
|
47,720 | - | 47,720 | - | ||||||||||||
Mortgage-backed
securities
|
21,879 | - | 21,879 | - | ||||||||||||
Federal
Home Loan Bank stock
|
2,822 | - | 2,822 | - | ||||||||||||
Federal
Reserve Bank stock
|
302 | - | 302 | - | ||||||||||||
Other
equity securities
|
564 | - | 564 | - | ||||||||||||
$ | 80,278 | $ | 6,991 | $ | 73,287 | $ | - | |||||||||
Interest
rate swap
|
$ | 654 | $ | - | $ | 654 | $ | - |
Significant
|
||||||||||||||||
Other
|
Significant
|
|||||||||||||||
Quoted
|
Observable
|
Unobservable
|
||||||||||||||
Prices
|
Inputs
|
Inputs
|
||||||||||||||
(Dollars in thousands)
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Impaired
loans
|
$ | 12,568 | $ | - | $ | - | $ | 12,568 | ||||||||
Other
real estate owned
|
2,212 | - | - | 2,212 |
For the Three Months Ended
|
For the Three Months Ended
|
|||||||||||||||||||||||
June 30, 2009
|
June 30, 2008
|
|||||||||||||||||||||||
Average
|
Income(1)/
|
Yield/
|
Average
|
Income(1)/
|
Yield/
|
|||||||||||||||||||
(Dollars in thousands)
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
||||||||||||||||||
Earning
assets
|
||||||||||||||||||||||||
Loans
(2), (3)
|
$ | 913,671 | $ | 13,795 | 6.06 | % | $ | 822,781 | $ | 14,003 | 6.85 | % | ||||||||||||
Investment
securities
|
||||||||||||||||||||||||
Taxable
|
75,277 | 768 | 4.09 | 83,654 | 945 | 4.54 | ||||||||||||||||||
Tax-exempt
|
8,110 | 122 | 6.02 | 11,200 | 167 | 6.01 | ||||||||||||||||||
Federal
funds sold
|
55,699 | 23 | 0.16 | 15,194 | 83 | 2.21 | ||||||||||||||||||
Interest
bearing deposits
|
8,129 | 6 | 0.33 | 5,812 | 29 | 2.01 | ||||||||||||||||||
Total
earning assets
|
1,060,886 | 14,714 | 5.56 | % | 938,641 | 15,227 | 6.53 | % | ||||||||||||||||
Cash
and due from banks
|
18,705 | 16,618 | ||||||||||||||||||||||
Other
assets
|
51,595 | 50,315 | ||||||||||||||||||||||
Allowance
for credit losses
|
(10,848 | ) | (8,102 | ) | ||||||||||||||||||||
Total
assets
|
$ | 1,120,338 | $ | 997,472 | ||||||||||||||||||||
Interest
bearing liabilities
|
||||||||||||||||||||||||
Demand
deposits
|
$ | 125,076 | 76 | 0.24 | % | $ | 109,716 | 95 | 0.35 | % | ||||||||||||||
Money
market and savings deposits
|
222,825 | 351 | 0.63 | 183,392 | 659 | 1.45 | ||||||||||||||||||
Certificates
of deposit $100,000 or more
|
245,210 | 1,954 | 3.20 | 183,108 | 1,940 | 4.26 | ||||||||||||||||||
Other
time deposits
|
239,668 | 2,060 | 3.45 | 219,250 | 2,303 | 4.23 | ||||||||||||||||||
Interest
bearing deposits
|
832,779 | 4,441 | 2.14 | 695,466 | 4,997 | 2.89 | ||||||||||||||||||
Short-term
borrowings
|
25,435 | 28 | 0.45 | 45,354 | 316 | 2.80 | ||||||||||||||||||
Long-term
debt
|
7,947 | 75 | 3.78 | 15,101 | 182 | 4.85 | ||||||||||||||||||
Total
interest bearing liabilities
|
866,161 | 4,544 | 2.10 | % | 755,921 | 5,495 | 2.92 | % | ||||||||||||||||
Noninterest
bearing deposits
|
109,652 | 106,035 | ||||||||||||||||||||||
Other
liabilities
|
11,918 | 11,686 | ||||||||||||||||||||||
Stockholders’
equity
|
132,607 | 123,830 | ||||||||||||||||||||||
Total
liabilities and stockholders’ equity
|
$ | 1,120,338 | $ | 997,472 | ||||||||||||||||||||
Net
interest spread
|
$ | 10,170 | 3.46 | % | $ | 9,732 | 3.61 | % | ||||||||||||||||
Net
interest margin
|
3.85 | % | 4.17 | % |
For the Six Months Ended
|
For the Six Months Ended
|
|||||||||||||||||||||||
June 30, 2009
|
June 30, 2008
|
|||||||||||||||||||||||
Average
|
Income(1)/
|
Yield/
|
Average
|
Income(1)/
|
Yield/
|
|||||||||||||||||||
(Dollars in thousands)
|
Balance
|
Expense
|
Rate
|
Balance
|
Expense
|
Rate
|
||||||||||||||||||
Earning
assets
|
||||||||||||||||||||||||
Loans
(2), (3)
|
$ | 906,066 | $ | 27,455 | 6.11 | % | $ | 809,815 | $ | 28,604 | 7.10 | % | ||||||||||||
Investment
securities
|
||||||||||||||||||||||||
Taxable
|
75,067 | 1,524 | 4.09 | 87,638 | 2,025 | 4.65 | ||||||||||||||||||
Tax-exempt
|
8,605 | 253 | 5.92 | 11,938 | 357 | 6.01 | ||||||||||||||||||
Federal
funds sold
|
38,873 | 30 | 0.15 | 15,856 | 205 | 2.61 | ||||||||||||||||||
Interest
bearing deposits
|
5,298 | 7 | 0.28 | 5,013 | 67 | 2.69 | ||||||||||||||||||
Total
earning assets
|
1,033,909 | 29,269 | 5.71 | % | 930,260 | 31,258 | 6.76 | % | ||||||||||||||||
Cash
and due from banks
|
15,395 | 16,482 | ||||||||||||||||||||||
Other
assets
|
50,487 | 50,855 | ||||||||||||||||||||||
Allowance
for credit losses
|
(10,259 | ) | (7,909 | ) | ||||||||||||||||||||
Total
assets
|
$ | 1,089,532 | $ | 989,688 | ||||||||||||||||||||
Interest
bearing liabilities
|
||||||||||||||||||||||||
Demand
deposits
|
$ | 123,104 | 148 | 0.24 | % | $ | 112,465 | 266 | 0.48 | % | ||||||||||||||
Money
market and savings deposits
|
188,165 | 525 | 0.56 | 179,378 | 1,364 | 1.53 | ||||||||||||||||||
Certificates
of deposit $100,000 or more
|
241,997 | 3,966 | 3.30 | 181,831 | 4,010 | 4.44 | ||||||||||||||||||
Other
time deposits
|
236,077 | 4,087 | 3.50 | 218,323 | 4,700 | 4.33 | ||||||||||||||||||
Interest
bearing deposits
|
789,343 | 8,726 | 2.23 | 691,997 | 10,340 | 3.00 | ||||||||||||||||||
Short-term
borrowings
|
32,469 | 77 | 0.48 | 44,354 | 682 | 3.09 | ||||||||||||||||||
Long-term
debt
|
7,947 | 149 | 3.78 | 15,013 | 366 | 4.90 | ||||||||||||||||||
Total
interest bearing liabilities
|
829,759 | 8,952 | 2.18 | % | 751,364 | 11,388 | 3.05 | % | ||||||||||||||||
Noninterest
bearing deposits
|
106,968 | 103,508 | ||||||||||||||||||||||
Other
liabilities
|
11,304 | 11,642 | ||||||||||||||||||||||
Stockholders’
equity
|
141,501 | 123,174 | ||||||||||||||||||||||
Total
liabilities and stockholders’ equity
|
$ | 1,089,532 | $ | 989,688 | ||||||||||||||||||||
Net
interest spread
|
$ | 20,317 | 3.53 | % | $ | 19,870 | 3.71 | % | ||||||||||||||||
Net
interest margin
|
3.96 | % | 4.30 | % |
(1)
|
All
amounts are reported on a tax equivalent basis computed using the
statutory federal income tax rate of 35% exclusive of the alternative
minimum tax rate 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.
|
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
(Dollars in thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Allowance
balance – beginning of period
|
$ | 8,282 | $ | 7,926 | $ | 7,551 | $ | 7,551 | ||||||||
Charge-offs:
|
||||||||||||||||
Real
estate – construction
|
(128 | ) | - | (215 | ) | - | ||||||||||
Real
estate – residential
|
(611 | ) | (59 | ) | (951 | ) | (71 | ) | ||||||||
Real
estate – commercial
|
(173 | ) | - | (173 | ) | - | ||||||||||
Commercial
|
(629 | ) | (154 | ) | (727 | ) | (196 | ) | ||||||||
Consumer
|
(88 | ) | (72 | ) | (199 | ) | (135 | ) | ||||||||
Totals
|
(1,629 | ) | (285 | ) | (2,265 | ) | (402 | ) | ||||||||
Recoveries:
|
||||||||||||||||
Real
estate – construction
|
2 | - | 2 | - | ||||||||||||
Real
estate – residential
|
1 | - | 53 | 8 | ||||||||||||
Real
estate – commercial
|
- | - | - | - | ||||||||||||
Commercial
|
- | 4 | 4 | 7 | ||||||||||||
Consumer
|
20 | 22 | 54 | 41 | ||||||||||||
Totals
|
23 | 26 | 113 | 56 | ||||||||||||
Net
charge-offs
|
(1,606 | ) | (259 | ) | (2,152 | ) | (346 | ) | ||||||||
Provision
for credit losses
|
1,681 | 615 | 3,616 | 1,077 | ||||||||||||
Allowance
balance – end of period
|
$ | 10,784 | $ | 8,282 | $ | 10,784 | $ | 8,282 | ||||||||
Average
loans outstanding during the period
|
$ | 913,671 | $ | 822,781 | $ | 906,066 | $ | 809,815 | ||||||||
Net
charge-offs (annualized) as a percentage of average loans outstanding
during the period
|
0.71 | % | 0.13 | % | 0.95 | % | 0.09 | % | ||||||||
Allowance
for credit losses at period end as a percentage of average
loans
|
1.18 | % | 1.01 | % | 1.19 | % | 1.02 | % |
June 30,
|
December 31,
|
|||||||
(Dollars in thousands)
|
2009
|
2008
|
||||||
Nonperforming
assets
|
||||||||
Nonaccrual
loans
|
||||||||
Real
estate – construction
|
$ | 5,706 | $ | 5,277 | ||||
Real
estate – residential
|
4,611 | 1,015 | ||||||
Real
estate – commercial
|
1,127 | 1,682 | ||||||
Commercial
|
2,204 | 137 | ||||||
Consumer
|
47 | 4 | ||||||
Total
nonaccrual loans
|
13,695 | 8,115 | ||||||
Other
real estate owned
|
2,212 | 148 | ||||||
Total
nonperforming assets
|
15,907 | 8,263 | ||||||
Loans
90 days past due and still accruing
|
8,055 | 1,381 | ||||||
Total
nonperforming assets and past due loans
|
$ | 23,962 | $ | 9,644 |
June 30,
|
December 31,
|
|||||||
(Dollars in thousands)
|
2009
|
2008
|
||||||
FLHB
4.17% Advance due November 2009
|
$ | 3,000 | $ | 3,000 | ||||
FHLB
3.09% Advance due January 2010
|
3,000 | 3,000 | ||||||
Acquisition-related
debt, 4.08% interest, annual installments for five years
|
1,947 | 1,947 | ||||||
$ | 7,947 | $ | 7,947 |
Minimum
|
||||||||||||
June
30,
|
December
31,
|
Regulatory
|
||||||||||
2009
|
2008
|
Requirements
|
||||||||||
Tier
1 risk-based capital ratio
|
11.27 | % | 11.65 | % | 4.00 | % | ||||||
Total
risk-based capital ratio
|
12.34 | % | 12.74 | % | 8.00 | % | ||||||
Leverage
ratio
|
9.60 | % | 10.27 | % | 4.00 | % |
·
|
Appointed
three senior officers from The Centreville National Bank of Maryland
(“CNB”) to The Felton Bank’s loan committee to assist in credit
underwriting and loan relationship management;
and
|
·
|
These
three senior officers, along with other members of CNB’s loan
administration staff, began assisting The Felton Bank in the preparation
and review of its methodology for determining the adequacy of the
allowance for credit losses, including analysis of impaired loans under
SFAS 114.
|
Class III Directors
|
For
|
Withheld
|
Abstain
|
Broker Non-Votes
|
|||||||||||
Lloyd
L. Beatty, Jr.
|
6,749,878
|
37,333
|
- | - | |||||||||||
Paul
M. Bowman
|
6,758,315
|
28,896
|
|
- | - | ||||||||||
Jerry
F. Pierson
|
6,763,075
|
24,136
|
- | - | |||||||||||
W.
Moorhead Vermilye
|
6,749,284
|
|
37,927
|
- | - | ||||||||||
James
A. Judge
|
6,756,608 |
30,603
|
- | - |
Class I Director
|
For
|
Withheld
|
Abstain
|
Broker Non-Votes
|
||||||||||||
John
H. Wilson
|
6,753,934
|
33,277
|
- | - |
For
|
Against
|
Abstain
|
Broker Non-Votes
|
|||||||||
6,768,762
|
12,735 | 5,714 | - |
For
|
Against
|
Abstain
|
Broker Non-Votes
|
|||||||||
6,326,858
|
343,444 | 116,909 | - |
SHORE BANCSHARES, INC. | ||
Date:
August 10, 2009
|
BY:
|
/s/ W. Moorhead Vermilye
|
W.
Moorhead Vermilye
|
||
President/Chief
Executive Officer
|
||
Date:
August 10, 2009
|
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
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act (furnished
herewith).
|