Shore Bancshares Reports First Quarter 2013 Financial Results

        Shore Bancshares Reports First Quarter 2013 Financial Results

PR Newswire

EASTON, Md., April 23, 2013

EASTON, Md., April 23, 2013 /PRNewswire/ --Shore Bancshares, Inc. (NASDAQ -
SHBI) reported net income of $222 thousand or $0.03 per diluted common share
for the first quarter of 2013, compared to a net loss of $5.1 million or
($0.60) per diluted common share for the fourth quarter of 2012, and a net
loss of $3.0 million or $(0.36) per diluted common share for the first quarter
of 2012.

When comparing the first quarter of 2013 to the fourth quarter of 2012, the
primary reasons for the difference in results were a $7.5 million decrease in
the provision for credit losses and a $1.9 million increase in noninterest
income, which were partially offset by an $806 thousand increase in
noninterest expenses. The increase in noninterest income was mainly due to a
$1.3 million loss incurred during the fourth quarter of 2012 to terminate the
ineffective portion of an interest rate cap instrument. When comparing the
first quarter of 2013 to the first quarter of 2012, the principal factors
driving the difference were a $6.2 million decrease in the provision for
credit losses partially offset by a $718 thousand decrease in net interest
income.

"We are cautiously optimistic that the modest profitability we achieved during
the first three months of 2013 will provide a platform on which we can
continue to produce favorable results. The Delmarva economy remains quite
soft with many businesses that traditionally service the real estate industry
still on the sidelines or permanently out of the market," said W. Moorhead
Vermilye, chief executive officer. "The provision for credit losses was $2.2
million for the first quarter, compared to $9.7 million and $8.4 million for
the three months ended December 31, 2012 and March 31, 2012, respectively, and
we are encouraged that nonperforming assets this quarter declined $4.2 million
compared to the linked fourth quarter. We are acutely focused on achieving
ongoing progress resolving troubled assets."

Balance Sheet Review
Total assets were $1.105 billion at March 31, 2013, a 6.8% decrease when
compared to the $1.186 billion at the end of 2012. Total loans increased
slightly to $785.8 million when compared to December 31, 2012, while total
earning assets decreased 7.2% to $1.027 billion primarily due to a decline in
interest-bearing deposits with other banks. Total deposits decreased 7.5% to
$970.2 million mainly due to a decline in money market deposit accounts
associated with the Company's participation in the Promontory Insured Network
Deposits Program ("IND Program"). In December 2012, the Company decided to
partially exit the IND Program as a way to decrease its excess liquidity.
Total stockholders' equity remained relatively unchanged from the end of
2012. For the first three months of 2013, the ratio of average equity to
average assets was 10.18% and the ratio of average tangible equity to average
tangible assets was 8.86%, evidence that our capital levels remain well above
regulatory minimums to be considered well-capitalized.

Review of Quarterly Financial Results
Net interest income was $8.5 million for the first quarter of 2013, compared
to $8.4 million for the fourth quarter of 2012 and $9.2 million for the first
quarter of 2012. The increase in net interest income when compared to the
fourth quarter of 2012 was primarily due to a decline in interest expense that
was more than enough to offset the decline in interest income. The reduced
interest expense was mainly the result of lower balances in money market and
savings deposits due to partially exiting the IND Program, and lower rates
paid on these deposits due to terminating a portion of the interest rate caps
associated with these deposits. The decrease in net interest income when
compared to the first quarter of 2012 was primarily due to lower yields earned
on average earning assets and a decline in higher-yielding average loan
balances. The Company's net interest margin was 3.30% for the first quarter
of 2013, 3.02% for the fourth quarter of 2012 and 3.42% for the first quarter
of 2012.

The provision for credit losses was $2.2 million for the three months ended
March 31, 2013. The comparable amounts were $9.7 million and $8.4 million for
the three months ended December 31, 2012 and March 31, 2012, respectively.
The lower level of provision for credit losses was primarily due to a lower
level of loan charge-offs and a decrease in nonaccrual loans. Net charge-offs
were $2.4 million for the first quarter of 2013, $6.6 million for the fourth
quarter of 2012 and $9.1 million for the first quarter of 2012. The charge
offs in all three quarters were mainly real estate related loans. The ratio
of quarter-to-date annualized net charge-offs to average loans was 1.25% for
the first quarter of 2013, 3.29% for the fourth quarter of 2012 and 4.40% for
the first quarter of 2012. The ratio of the allowance for credit losses to
period-end loans was 2.00% at March 31, 2013, compared to 2.04% at December
31, 2012 and 1.65% at March 31, 2012.

Nonperforming assets at March 31, 2013 decreased $4.2 million when compared to
December 31, 2012. This decrease included a $5.1 million decline in
nonaccrual and 90 days past due and still accruing loans, net of a $707
thousand increase in other real estate owned and a $192 thousand increase in
accruing troubled debt restructurings. The change in the components of
nonperforming assets reflected our continued effort either to develop
concessionary workouts relating to problem loans or remove problem loans from
our portfolio. Nonperforming assets at March 31, 2013 decreased $1.9 million
when compared to March 31, 2012. Nonaccrual and 90 days past due and still
accruing loans, and other real estate owned declined in aggregate $24.4
million while troubled debt restructurings increased $22.5 million. The ratio
of nonperforming assets to total assets was 8.40% at March 31, 2013, compared
to 8.18% at December 31, 2012 and 8.09% at March 31, 2012.

Total noninterest income for the first quarter of 2013 increased $1.9 million
when compared to the fourth quarter of 2012 and declined $84 thousand when
compared to the first quarter of 2012. The increase when compared to the
fourth quarter of 2012 was primarily a result of the previously mentioned $1.3
million loss incurred during the fourth quarter of 2012 to terminate a portion
of an interest rate cap instrument. Also contributing to the increase were
higher insurance agency commissions of $521 thousand, due to contingency
payments which are typically received in the first quarter of each year and
are based on the prior year's performance. The decrease in noninterest income
during the first quarter of 2013 when compared to the first quarter of 2012
was primarily due to lower service charges on deposit accounts ($76 thousand)
and other noninterest income ($99 thousand ) which was partially offset by an
increase in insurance agency commissions ($124 thousand), resulting from
higher contingency payments. The change in other noninterest income was
mainly due to a decline in income from other real estate owned.

Total noninterest expense for the first quarter of 2013 increased $806
thousand when compared to the fourth quarter of 2012 and remained flat when
compared to the first quarter of 2012. The change from the fourth quarter of
2012 was mainly due to employee benefits which increased $211 thousand and
other noninterest expenses which increased $433 thousand. Employee benefits
included higher payroll taxes ($128 thousand) and group insurance costs ($87
thousand) while other noninterest expenses included higher write-downs of
other real estate owned ($421 thousand).

Shore Bancshares Information
Shore Bancshares, Inc. is a financial holding company headquartered in Easton,
Maryland and is the largest independent bank holding company located on
Maryland's Eastern Shore. It is the parent company of two banks, The Talbot
Bank of Easton, Maryland, and CNB; three insurance producer firms, The
Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and
Associates, Inc; a wholesale insurance company, TSGIA, Inc; an insurance
premium finance company, Mubell Finance, LLC; and a registered investment
adviser firm, Wye Financial Services, LLC. Additional information is
available at www.shbi.com.

Forward-Looking Statements
This press release contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
do not represent historical facts, but statements about management's beliefs,
plans and objectives. These statements are evidenced by terms such as
"anticipate," "estimate," "should," "expect," "believe," "intend," and similar
expressions. Although these statements reflect management's good faith
beliefs and projections, they are not guarantees of future performance and
they may not prove true. These projections involve risk and uncertainties
that could cause actual results to differ materially from those addressed in
the forward-looking statements. For a discussion of these risks and
uncertainties, see the section of the periodic reports filed by Shore
Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk
Factors".





Shore Bancshares, Inc.                                         Page 4 of 11
Financial Highlights
(Dollars in thousands,
except per share data)
                            For the Three Months Ended
                            March 31,
                            2013             2012            Change
PROFITABILITY FOR THE
PERIOD
 Net interest income    $    8,477    $     9,195   (7.8)        %
 Provision for credit   2,150            8,370             (74.3)
losses
 Noninterest income     4,490            4,574             (1.8)
 Noninterest expense    10,491           10,498            (0.1)
 Income (loss) before   326              (5,099)           106.4
income taxes
 Income tax expense     104              (2,063)           105.0
(benefit)
 Net income (loss)     $     222   $              107.3
                                             (3,036)
 Return on average      0.08           % (1.05)          % 113          bp
assets
 Return on average      0.79             (10.04)           1,083
equity
 Return on average      1.11             (11.33)           1,244
tangible equity (1)
 Net interest margin    3.30             3.42              (12)
 Efficiency ratio -     80.74            75.98             476
GAAP
 Efficiency ratio -     80.17            75.07             510
Non-GAAP (1)
PER SHARE DATA
 Basic net income       $     0.03   $             108.3        %
(loss) per common share                      (0.36)
 Diluted net income     0.03             (0.36)            108.3
(loss) per common share
 Dividends paid per     -                0.01              (100.0)
common share
 Book value per common  13.51            14.02             (3.6)
share at period end
 Tangible book value
per common share at period  11.60            12.07             (3.9)
end (1)
 Market value at period 6.79             7.09              (4.2)
end
 Market range:
 High                 6.91             7.40              (6.6)
 Low                  5.20             4.91              5.9
AVERAGE BALANCE SHEET DATA
 Loans                  $  783,757      $   832,585    (5.9)        %
 Securities             146,756          134,037           9.5
 Earning assets         1,044,755        1,088,106         (4.0)
 Assets                 1,122,310        1,159,566         (3.2)
 Deposits               987,325          1,011,170         (2.4)
 Stockholders' equity   114,250          121,658           (6.1)
CREDIT QUALITY DATA AT
PERIOD END
 Net charge-offs        $    2,406    $             (73.6)       %
                                             9,114
 Nonaccrual loans       $   31,813     $    49,405   (35.6)
 Loans 90 days past due 22               3,796             (99.4)
and still accruing
 Accruing troubled debt 52,545           30,010            75.1
restructurings
 Total nonperforming    84,380           83,211            1.4
loans
 Other real estate and  8,366            11,418            (26.7)
other assets owned, net
 Total nonperforming    $   92,746     $    94,629   (2.0)
assets
CAPITAL AND CREDIT QUALITY
RATIOS
 Average equity to      10.18          % 10.49           % (31)         bp
average assets
 Average tangible
equity to average tangible  8.86             9.19              (33)
assets (1)
 Annualized net
charge-offs to average      1.25             4.40              (315)
loans
 Allowance for credit   2.00             1.65              35
losses to period-end loans
 Allowance for credit   49.46            27.41             2,205
losses to nonaccrual loans
 Allowance for credit
losses to nonperforming     18.65            16.28             237
loans
 Nonaccrual loans to    4.05             6.03              (198)
total loans
 Nonaccrual loans to    2.88             4.22              (134)
total assets
 Nonperforming assets
to total loans+other real
estate and
 other assets       11.68            11.40             28
owned
 Nonperforming assets   8.40             8.09              31
to total assets
(1) See the reconciliation
table on page 11 of 11.





Shore Bancshares, Inc.                                                    Page 5
                                                                          of 11
Consolidated Balance
Sheets
(In thousands, except per
share data)
                                                               March      March
                                                               31, 2013   31, 2013
                           March 31,   December    March 31,   compared   compared
                                       31,                     to         to
                           2013        2012        2012        December   March
                                                               31, 2012   31, 2012
ASSETS
 Cash and due from      $       $       $       (6.7)    % 29.4     %
banks                       24,808   26,579      19,168
 Interest-bearing       94,090      164,864     130,641     (42.9)     (28.0)
deposits with other banks
 Federal funds sold     2,789       8,750       16,190      (68.1)     (82.8)
 Investments available  142,238     145,508     121,093     (2.2)      17.5
for sale (at fair value)
 Investments held to    2,594       2,657       6,056       (2.4)      (57.2)
maturity
 Loans                  785,753     785,082     819,015     0.1        (4.1)
 Less: allowance for    (15,735)    (15,991)    (13,544)    (1.6)      16.2
credit losses
 Loans, net             770,018     769,091     805,471     0.1        (4.4)
 Premises and           15,502      15,593      15,243      (0.6)      1.7
equipment, net
 Goodwill               12,454      12,454      12,454      -          -
 Other intangible       3,742       3,816       4,082       (1.9)      (8.3)
assets, net
 Other real estate and  8,366       7,659       11,418      9.2        (26.7)
other assets owned, net
 Other assets           28,010      28,836      27,905      (2.9)      0.4
Total  $         $          $         (6.8)      (5.6)
assets                     1,104,611  1,185,807  1,169,721
LIABILITIES
 Noninterest-bearing    $       $        $       0.9        8.1
deposits                   155,412    153,992    143,800
 Interest-bearing       814,747     895,281     884,271     (9.0)      (7.9)
deposits
 Total      970,159     1,049,273   1,028,071   (7.5)      (5.6)
deposits
 Short-term borrowings  11,088      13,761      13,683      (19.4)     (19.0)
 Accrued expenses and   9,016       8,747       8,928       3.1        1.0
other liabilities
 Long-term debt         -           -           455         -          (100.0)
Total 990,263     1,071,781   1,051,137   (7.6)      (5.8)
liabilities
STOCKHOLDERS' EQUITY
 Common stock, par
value $0.01; authorized
 35,000,000 shares   85          85          85          -          -
 Additional paid in     32,151      32,155      32,066      -          0.3
capital
 Retained earnings      81,300      81,078      87,680      0.3        (7.3)
 Accumulated other
comprehensive income       812         708         (1,247)     14.7       165.1
(loss)
Total 114,348     114,026     118,584     0.3        (3.6)
stockholders' equity
 Total $         $          $  
liabilities and            1,104,611  1,185,807  1,169,721  (6.8)      (5.6)
stockholders' equity
Period-end common shares   8,461       8,457       8,457       -          -
outstanding
Book value per common      $       $       $       0.2        (3.6)
share                        13.51    13.48       14.02





Shore Bancshares, Inc.                                          Page 6 of 11
Consolidated Statements of
Operations
(In thousands, except per share
data)
                                   For the Three Months Ended
                                   March 31,
                                   2013           2012          % Change
INTEREST INCOME
 Interest and fees on loans    $   9,907   $  11,011   (10.0)       %
 Interest and dividends on
investment securities:
 Taxable                    643            757           (15.1)
 Tax-exempt                5              38            (86.8)
 Interest on federal funds sold 2              2             -
 Interest on deposits with      50             48            4.2
other banks
 Total interest  10,607         11,856        (10.5)
income
INTEREST EXPENSE
 Interest on deposits           2,122          2,641         (19.7)
 Interest on short-term         8              15            (46.7)
borrowings
 Interest on long-term debt     -              5             (100.0)
 Total interest  2,130          2,661         (20.0)
expense
NET INTEREST INCOME                8,477          9,195         (7.8)
Provision for credit losses        2,150          8,370         (74.3)
NET INTEREST INCOME AFTER
PROVISION
 FOR CREDIT LOSSES                6,327          825           666.9
NONINTEREST INCOME
 Service charges on deposit     572            648           (11.7)
accounts
 Trust and investment fee       390            423           (7.8)
income
 Investment securities gains   -              -             -
 Insurance agency commissions   2,813          2,689         4.6
 Other noninterest income       715            814           (12.2)
 Total        4,490          4,574         (1.8)
noninterest income
NONINTEREST EXPENSE
 Salaries and wages             4,283          4,416         (3.0)
 Employee benefits              1,134          1,170         (3.1)
 Occupancy expense             597            687           (13.1)
 Furniture and equipment        250            251           (0.4)
expense
 Data processing                703            666           5.6
 Directors' fees                121            109           11.0
 Amortization of intangible     74             126           (41.3)
assets
 Insurance agency commissions   461            385           19.7
expense
 FDIC insurance premium expense 366            273           34.1
 Other noninterest expenses     2,502          2,415         3.6
 Total        10,491         10,498        (0.1)
noninterest expense
Income (loss) before income taxes  326            (5,099)       106.4
Income tax expense (benefit)      104            (2,063)       105.0
NET INCOME (LOSS)                $     222  $   (3,036) 107.3
Weighted average shares            8,458          8,457         -
outstanding - basic
Weighted average shares            8,458          8,457         -
outstanding - diluted
Basic net income (loss) per common $    0.03  $          108.3
share                                             (0.36)
Diluted net income (loss) per      0.03           (0.36)        108.3
common share
Dividends paid per common share    -              0.01          (100.0)



Shore Bancshares, Inc.                                           Page 7 of
                                                                 11
Consolidated Average
Balance Sheets
(Dollars in thousands)
                            For the Three Months Ended
                            March 31,
                            2013                    2012
                            Average       Yield/   Average     Yield/
                            balance        rate    balance      rate
Earning assets
 Loans                    $   783,757  5.14   % $          5.33      %
                                                    832,585
 Investment securities
 Taxable                  146,176        1.78     129,767      2.35
 Tax-exempt               580            4.85     4,270        5.36
 Federal funds sold        8,184          0.11     9,794        0.06
 Interest-bearing deposits 106,058        0.19     111,690      0.17
 Total earning assets    1,044,755      4.13   % 1,088,106    4.40      %
Cash and due from banks     24,966                  18,174
Other assets                69,185                  68,163
Allowance for credit losses (16,596)                (14,877)
Total assets                $ 1,122,310             $ 1,159,566
Interest-bearing
liabilities
 Demand deposits           $   173,714  0.17   % $          0.19      %
                                                    153,291
 Money market and savings  244,182        0.97     279,355      1.12
deposits (1)
 Certificates of deposit   216,288        1.39     240,521      1.46
$100,000 or more
 Other time deposits       201,171        1.47     201,743      1.83
 Interest-bearing        835,355        1.03     874,910      1.21
deposits
 Short-term borrowings     11,987         0.27     17,621       0.35
 Long-term debt            -              -        455          4.63
 Total interest-bearing  847,342        1.02   % 892,986      1.20      %
liabilities
Noninterest-bearing         151,970                 136,260
deposits
Accrued expenses and other  8,748                   8,662
liabilities
Stockholders' equity        114,250                 121,658
Total liabilities and       $ 1,122,310             $ 1,159,566
stockholders' equity
Net interest spread                        3.11   %              3.20      %
Net interest margin                        3.30   %              3.42      %

    Interest on money market and savings deposits includes an adjustment to
(1) expense related to interest rate caps and the hedged deposits associated
    with them. This adjustment increased interest expense $416 thousand and
    $460 thousand for the first quarter of 2013 and 2012, respectively.





Shore Bancshares,                                                                          Page 8
Inc.                                                                                       of 11
Financial
Highlights By
Quarter
(Dollars in
thousands, except
per share data)
                   1st         4th         3rd         2nd         1st         1Q 13       1Q 13
                   quarter     quarter     quarter     quarter     quarter
                   2013        2012        2012        2012        2012        compared    compared
                                                                               to          to
                   (1Q 13)     (4Q 12)     (3Q 12)     (2Q 12)     (1Q 12)     4Q 12       1Q 12
PROFITABILITY FOR
THE PERIOD

Taxable-equivalent $       $       $       $       $       1.1      %  (8.0)    %
net interest         8,504   8,413       8,769       9,077       9,243
income
 Less:
Taxable-equivalent 27          32          39          44          48          (15.6)      (43.8)
adjustment
 Net interest  8,477       8,381       8,730       9,033       9,195       1.1         (7.8)
income
 Provision for 2,150       9,650       6,200       3,525       8,370       (77.7)      (74.3)
credit losses
 Noninterest   4,490       2,606       4,001       4,577       4,574       72.3        (1.8)
income
 Noninterest   10,491      9,685       9,709       9,663       10,498      8.3         (0.1)
expense
 Income (loss)
before income      326         (8,348)     (3,178)     422         (5,099)     103.9       106.4
taxes
 Income tax     104         (3,274)     (1,357)     129         (2,063)     103.2       105.0
expense (benefit)
 Net income     $       $        $        $       $   
(loss)                     (5,074)     (1,821)      293      (3,036)     104.4       107.3
                   222
 Return on     0.08      % (1.71)    % (0.61)    % 0.10      % (1.05)    % 179      bp 113      bp
average assets
 Return on     0.79        (17.15)     (6.07)      0.99        (10.04)     1,794       1,083
average equity
 Return on
average tangible   1.11        (19.73)     (6.82)      1.38        (11.33)     2,084       1,244
equity (1)
 Net interest  3.30        3.02        3.15        3.36        3.42        28          (12)
margin
 Efficiency    80.74       87.89       76.03       70.77       75.98       (715)       476
ratio - GAAP
 Efficiency
ratio - Non-GAAP   80.17       77.77       76.95       71.20       75.07       240         510
(1)
PER SHARE DATA
 Basic net      $       $       $       $       $    
income (loss) per           (0.60)     (0.22)      0.03      (0.36)     105.0    %  108.3    %
common share       0.03
 Diluted net
income (loss) per  0.03        (0.60)      (0.22)      0.03        (0.36)      105.0       108.3
common share
 Dividends
paid per common    -           -           -           -           0.01        -           (100.0)
share
 Book value
per common share   13.51       13.48       13.97       14.13       14.02       0.2         (3.6)
at period end
 Tangible book
value per common   11.60       11.56       12.04       12.18       12.07       0.3         (3.9)
share at period
end (1)
 Market value  6.79        5.39        6.02        5.98        7.09        26.0        (4.2)
at period end
 Market range:
 High       6.91        6.98        6.33        7.45        7.40        (1.0)       (6.6)
 Low        5.20        4.65        4.98        5.51        4.91        11.8        5.9
AVERAGE BALANCE
SHEET DATA
 Loans         $        $          $          $          $          (2.0)    %  (5.9)    %
                   783,757    799,512    808,244    816,553    832,585
 Securities    146,756     144,459     137,871     134,299     134,037     1.6         9.5
 Earning       1,044,755   1,108,585   1,108,256   1,086,223   1,088,106   (5.8)       (4.0)
assets
 Assets        1,122,310   1,183,135   1,184,146   1,163,598   1,159,566   (5.1)       (3.2)
 Deposits      987,325     1,042,842   1,040,693   1,021,130   1,011,170   (5.3)       (2.4)
 Stockholders' 114,250     117,700     119,321     118,774     121,658     (2.9)       (6.1)
equity
CREDIT QUALITY
DATA AT PERIOD END
 Net           $       $       $       $       $       (63.6)   %  (73.6)   %
charge-offs          2,406   6,614       6,235       4,079       9,114
 Nonaccrual    $       $        $        $        $        (12.8)      (35.6)
loans               31,813    36,474      39,442      47,958      49,405
 Loans 90 days
past due and still 22          460         4,675       3,519       3,796       (95.2)      (99.4)
accruing
 Accruing
troubled debt      52,545      52,353      50,785      37,231      30,010      0.4         75.1
restructurings
 Total
nonperforming      84,380      89,287      94,902      88,708      83,211      (5.5)       1.4
loans
 Other real
estate and other   8,366       7,659       8,418       11,499      11,418      9.2         (26.7)
assets owned, net
 Total         $       $        $         $         $   
nonperforming       92,746    96,946      103,320     100,207     94,629      (4.3)       (2.0)
assets
CAPITAL AND CREDIT
QUALITY RATIOS
 Average
equity to average  10.18     % 9.95      % 10.08     % 10.21     % 10.49     % 23       bp (31)     bp
assets
 Average
tangible equity to 8.86        8.69        8.81        8.92        9.19        17          (33)
average tangible
assets (1)
 Annualized
net charge-offs to 1.25        3.29        3.07        2.01        4.40        (204)       (315)
average loans
 Allowance for
credit losses to   2.00        2.04        1.60        1.60        1.65        (4)         35
period-end
loans
 Allowance for
credit losses to   49.46       43.84       32.85       27.09       27.41       562         2,205
nonaccrual
loans
 Allowance for
credit losses to   18.65       17.91       13.65       14.64       16.28       74          237
nonperforming
loans
 Nonaccrual
loans to total     4.05        4.65        4.88        5.92        6.03        (60)        (198)
loans
 Nonaccrual
loans to total     2.88        3.08        3.35        4.08        4.22        (20)        (134)
assets
 Nonperforming
assets to total
loans+other real
estate and
 other     11.68       12.23       12.65       12.20       11.40       (55)        28
assets owned
 Nonperforming
assets to total    8.40        8.18        8.77        8.53        8.09        22          31
assets
(1) See the reconciliation table on page
11 of 11.







Shore Bancshares,                                                              Page 9
Inc.                                                                           of 11
Consolidated
Statements of
Operations By Quarter
(In thousands, except
per share data)
                                                                    1Q 13      1Q 13
                                                                    compared   compared
                                                                    to         to
                      1Q 13   4Q 12     3Q 12     2Q 12   1Q 12     4Q 12      1Q 12
INTEREST INCOME
 Interest and fees $     $      $      $     $   
on loans                   10,193    10,604           11,011    (2.8)    % (10.0)   %
                      9,907                       10,890
 Interest and
dividends on
investment
securities:
 Taxable       643     666       685       707     757       (3.5)      (15.1)
 Tax-exempt    5       12        22        32      38        (58.3)     (86.8)
 Interest on       2       3         3         2       2         (33.3)     -
federal funds sold
 Interest on
deposits with other   50      86        79        61      48        (41.9)     4.2
banks
    10,607  10,960    11,393    11,692  11,856    (3.2)      (10.5)
Total interest income
INTEREST EXPENSE
 Interest on       2,122   2,570     2,647     2,643   2,641     (17.4)     (19.7)
deposits
 Interest on       8       9         10        11      15        (11.1)     (46.7)
short-term borrowings
 Interest on       -       -         6         5       5         -          (100.0)
long-term debt

Total interest        2,130   2,579     2,663     2,659   2,661     (17.4)     (20.0)
expense
NET INTEREST INCOME   8,477   8,381     8,730     9,033   9,195     1.1        (7.8)
Provision for credit  2,150   9,650     6,200     3,525   8,370     (77.7)     (74.3)
losses
NET INTEREST INCOME
AFTER PROVISION
 FOR CREDIT LOSSES   6,327   (1,269)   2,530     5,508   825       598.6      666.9
NONINTEREST INCOME
 Service charges   572     653       628       622     648       (12.4)     (11.7)
on deposit accounts
 Trust and         390     365       410       446     423       6.8        (7.8)
investment fee income
 Investment        -       -         278       -       -         -          -
securities gains
 Insurance agency  2,813   2,292     2,427     2,406   2,689     22.7       4.6
commissions
 Other noninterest 715     (704)     258       1,103   814       201.6      (12.2)
income

Total noninterest     4,490   2,606     4,001     4,577   4,574     72.3       (1.8)
income
NONINTEREST EXPENSE
 Salaries and      4,283   4,240     4,386     4,376   4,416     1.0        (3.0)
wages
 Employee benefits 1,134   923       945       956     1,170     22.9       (3.1)
 Occupancy         597     609       625       638     687       (2.0)      (13.1)
expense
 Furniture and     250     235       265       212     251       6.4        (0.4)
equipment expense
 Data processing   703     654       703       694     666       7.5        5.6
 Directors' fees   121     107       131       127     109       13.1       11.0
 Amortization of   74      74        96        96      126       -          (41.3)
intangible assets
 Insurance agency  461     387       275       344     385       19.1       19.7
commissions expense
 FDIC insurance    366     387       376       344     273       (5.4)      34.1
premium expense
 Other noninterest 2,502   2,069     1,907     1,876   2,415     20.9       3.6
expenses

Total noninterest     10,491  9,685     9,709     9,663   10,498    8.3        (0.1)
expense
Income (loss) before  326     (8,348)   (3,178)   422     (5,099)   103.9      106.4
income taxes
Income tax expense    104     (3,274)   (1,357)   129     (2,063)   103.2      105.0
(benefit)
                      $     $      $      $     $   
NET INCOME (LOSS)        (5,074)  (1,821)       (3,036)  104.4      107.3
                       222                        293
Weighted average
shares outstanding -  8,458   8,457     8,457     8,457   8,457     -          -
basic
Weighted average
shares outstanding -  8,458   8,457     8,457     8,457   8,457     -          -
diluted
Basic net income      $     $      $      $     $   
(loss) per common                                          105.0      108.3
share                 0.03   (0.60)   (0.22)   0.03   (0.36)
Diluted net income
(loss) per common     0.03    (0.60)    (0.22)    0.03    (0.36)    105.0      108.3
share
Dividends paid per    -       -         -         -       0.01      -          (100.0)
common share







Shore Bancshares,                                                                                                                       Page 10
Inc.                                                                                                                                    of 11
Consolidated Average Balance
Sheets By Quarter
(Dollars in
thousands)
                                                                                                                             Average balance
                                                                                                                             1Q 13      1Q 13
                                                                                                                             compared   compared
                                                                                                                             to         to
                    1Q 13                4Q 12                3Q 12                2Q 12                1Q 12                4Q 12      1Q 12
                    Average    Yield/   Average    Yield/   Average    Yield/   Average    Yield/   Average    Yield/
                    balance     rate     balance     rate     balance     rate     balance     rate     balance     rate
Earning assets
 Loans            $         5.14   % $         5.09   % $         5.23   % $         5.38   % $         5.33   % (2.0)    % (5.9)    %
                    783,757              799,512              808,244              816,553              832,585
 Investment
securities
 Taxable          146,176     1.78     143,137     1.85     135,257     2.01     130,528     2.18     129,767     2.35     2.1        12.6
 Tax-exempt       580         4.85     1,322       5.05     2,614       5.07     3,771       5.32     4,270       5.36     (56.1)     (86.4)
 Federal funds     8,184       0.11     7,782       0.12     11,971      0.11     11,200      0.10     9,794       0.06     5.2        (16.4)
sold
 Interest-bearing  106,058     0.19     156,832     0.22     150,170     0.21     124,171     0.20     111,690     0.17     (32.4)     (5.0)
deposits
 Total earning   1,044,755   4.13   % 1,108,585   3.94   % 1,108,256   4.10   % 1,086,223   4.35   % 1,088,106   4.40   % (5.8)      (4.0)
assets
Cash and due from   24,966               21,258               20,158               21,424               18,174               17.4       37.4
banks
Other assets        69,185               67,596               69,921               70,458               68,163               2.4        1.5
Allowance for       (16,596)             (14,304)             (14,189)             (14,507)             (14,877)             16.0       11.6
credit losses
Total assets        $                    $                    $                    $                    $                    (5.1)      (3.2)
                    1,122,310           1,183,135           1,184,146           1,163,598           1,159,566
Interest-bearing
liabilities
 Demand deposits   $         0.17   % $         0.18   % $         0.18   % $         0.18   % $         0.19   % 2.5        13.3
                    173,714              169,398              167,423              152,685              153,291
 Money market and
savings deposits    244,182     0.97     281,593     1.21     279,003     1.19     276,527     1.18     279,355     1.12     (13.3)     (12.6)
(1)
 Certificates of
deposit $100,000 or 216,288     1.39     231,232     1.40     238,624     1.46     242,662     1.46     240,521     1.46     (6.5)      (10.1)
more
 Other time        201,171     1.47     204,213     1.59     207,547     1.66     205,046     1.73     201,743     1.83     (1.5)      (0.3)
deposits

Interest-bearing    835,355     1.03     886,436     1.15     892,597     1.18     876,920     1.21     874,910     1.21     (5.8)      (4.5)
deposits
 Short-term        11,987      0.27     13,573      0.27     14,909      0.27     13,818      0.31     17,621      0.35     (11.7)     (32.0)
borrowings
 Long-term debt    -           -        -           -        455         4.58     455         4.63     455         4.63     -          (100.0)
 Total
interest-bearing    847,342     1.02   % 900,009     1.14   % 907,961     1.17   % 891,193     1.20   % 892,986     1.20   % (5.9)      (5.1)
liabilities
Noninterest-bearing 151,970              156,406              148,096              144,210              136,260              (2.8)      11.5
deposits
Accrued expenses
and other           8,748                9,020                8,768                9,421                8,662                (3.0)      1.0
liabilities
Stockholders'       114,250              117,700              119,321              118,774              121,658              (2.9)      (6.1)
equity
Total liabilities   $                    $                    $                    $                    $
and stockholders'   1,122,310           1,183,135           1,184,146           1,163,598           1,159,566           (5.1)      (3.2)
equity
Net interest spread             3.11   %             2.80   %             2.93   %             3.15   %             3.20   %
Net interest margin             3.30   %             3.02   %             3.15   %             3.36   %             3.42   %

    Interest on money market and savings deposits includes an adjustment to
    expense related to interest rate caps and the hedged deposits associated
(1) with them. This adjustment increased interest expense $416 thousand for
    the first quarter of 2013, $552 thousand for the fourth quarter of 2012,
    $524 thousand for the third quarter of 2012, $502 thousand for the
    secondquarter of 2012 and $460 thousand for the first quarter of 2012.







Shore Bancshares,                                                   Page 11 of
Inc.                                                                11
Reconciliation of
Generally Accepted
Accounting
Principles (GAAP)
 and Non-GAAP
Measures
(In thousands,
except per share
data)
                   1Q 13        4Q 12       3Q 12       2Q 12       1Q 12
The following
reconciles return
on average equity
and return on
 average tangible
equity (Note 1):
Net income         $        $         $         $       $   
(loss)             222      (5,074)    (1,821)    293        (3,036)
Net income (loss)  $        $          $         $        $  
- annualized (A)     900      (20,186)   (7,244)    1,178      (12,211)
Net income (loss),
excluding net
amortization and
 impairment       $        $         $         $       $   
charges of           267      (5,029)    (1,763)    351        (2,960)
intangible assets
Net income (loss),
excluding net
amortization and
 impairment
charges of         $        $          $         $        $  
intangible assets  1,083       (20,007)   (7,014)    1,412      (11,905)
- annualized (B)
Average            $         $          $          $          $  
stockholders'      114,250      117,700    119,321    118,774    121,658
equity (C)
Less: Average
goodwill and other (16,242)     (16,313)    (16,401)    (16,497)    (16,606)
intangible assets
Average tangible   $        $          $          $          $  
equity (D)         98,008       101,387    102,920    102,277    105,052
Return on average
equity (GAAP)     0.79       % (17.15)   % (6.07)    % 0.99      % (10.04)    %
(A)/(C)
Return on average
tangible equity    1.11       % (19.73)   % (6.82)    % 1.38      % (11.33)    %
(Non-GAAP)
(B)/(D)
The following
reconciles GAAP
efficiency ratio
and non-GAAP
 efficiency ratio
(Note 2):
Noninterest        $        $        $        $        $   
expense (E)        10,491       9,685      9,709      9,663      10,498
Less:
Amortization of    (74)         (74)        (96)        (96)        (126)
intangible assets
          -            -           -           -           -
Impairment charges
Adjusted           $        $        $        $        $   
noninterest        10,417       9,611      9,613      9,567      10,372
expense (F)
Taxable-equivalent $        $        $        $        $    
net interest       8,504       8,413      8,769      9,077      9,243
income (G)
Noninterest income $        $        $        $        $    
(H)                4,490       2,606      4,001      4,577      4,574
Less: Investment
securities         -            -           (278)       -           -
(gains)/losses
 Other
nonrecurring       -            1,339       -           (217)       -
(gains)/losses
Adjusted           $        $        $        $        $    
noninterest income 4,490       3,945      3,723      4,360      4,574
(I)
Efficiency ratio
(GAAP)            80.74      % 87.89     % 76.03     % 70.77     % 75.98      %
(E)/(G)+(H)
Efficiency ratio
(Non-GAAP)        80.17      % 77.77     % 76.95     % 71.20     % 75.07      %
(F)/(G)+(I)
The following
reconciles book
value per common
share and
tangible
 book value per
common share (Note
1):
Stockholders'      $         $          $          $          $  
equity (J)         114,348      114,026    118,163    119,467    118,584
Less: Goodwill
and other          (16,196)     (16,270)    (16,344)    (16,440)    (16,536)
intangible assets
Tangible equity    $        $         $          $          $  
(K)                98,152       97,756     101,819    103,027    102,048
Shares outstanding 8,461        8,457       8,457       8,457       8,457
(L)
Book value per     $        $        $        $        $    
common share       13.51       13.48      13.97      14.13      14.02
(GAAP) (J)/(L)
Tangible book
value per common   $        $        $        $        $    
share (Non-GAAP)  11.60       11.56      12.04      12.18      12.07
(K)/(L)
The following
reconciles average
equity to average
assets and
 average tangible
equity to average
tangible assets
(Note 1):
Average            $         $          $          $          $  
stockholders'      114,250      117,700    119,321    118,774    121,658
equity (M)
Less: Average
goodwill and other (16,242)     (16,313)    (16,401)    (16,497)    (16,606)
intangible assets
Average tangible   $        $          $          $          $  
equity (N)         98,008       101,387    102,920    102,277    105,052
Average assets (O) $           $           $           $           $
                   1,122,310   1,183,135   1,184,146   1,163,598   1,159,566
Less: Average
goodwill and other (16,242)     (16,313)    (16,401)    (16,497)    (16,606)
intangible assets
Average tangible   $           $           $           $           $
assets (P)         1,106,068   1,166,822   1,167,745   1,147,101   1,142,960
Average
equity/average     10.18      % 9.95      % 10.08     % 10.21     % 10.49      %
assets (GAAP)
(M)/(O)
Average tangible
equity/average
tangible assets    8.86       % 8.69      % 8.81      % 8.92      % 9.19       %
(Non-GAAP)
(N)/(P)
Note 1: Management believes that reporting tangible equity and tangible
assets more closely approximates the adequacy of capital for regulatory
purposes.
Note 2: Management believes that reporting the non-GAAP efficiency ratio more
closely measures its effectiveness of controlling cash-based operating
activities.



SOURCE Shore Bancshares, Inc.

Website: http://www.shbi.com
Contact: W. Moorhead Vermilye, Chief Executive Officer, 410-763-7800
 
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