Shore Bancshares Reports First Quarter 2014 Financial Results

        Shore Bancshares Reports First Quarter 2014 Financial Results

PR Newswire

EASTON, Md., April 24, 2014

EASTON, Md., April 24, 2014 /PRNewswire/ --Shore Bancshares, Inc. (NASDAQ:
SHBI) today reported net income of $1.3 million or $0.15 per diluted common
share for the first quarter of 2014, compared to net income of $1.2 million or
$0.14 per diluted common share for the fourth quarter of 2013, and net income
of $222 thousand or $0.03 per diluted common share for the first quarter of
2013.

When comparing the first quarter of 2014 to the fourth quarter of 2013, the
primary reasons for the improved results were a $573 thousand increase in
noninterest income and a $353 thousand decline in noninterest expense, which
were partially offset by a $501 thousand increase in the provision for credit
losses and a $247 thousand decline in net interest income. When comparing the
first quarter of 2014 to the first quarter of 2013, the primary reasons for
the improved results were a $1.2 million decline in the provision for credit
losses which was impacted by the sale of loans and other real estate owned
(the "Asset Sale") by the Company's wholly-owned subsidiary, The Talbot Bank
of Easton, Maryland ("Talbot Bank"), during the fourth quarter of 2013, a $376
thousand decline in noninterest expense and a $298 thousand increase in
noninterest income, which were partially offset by a $154 thousand decline in
net interest income.

"We are pleased to report improved earnings over the linked quarter and the
first quarter of 2013," said Lloyd L. "Scott" Beatty, Jr., president and chief
executive officer. "Much of this improvement is due to lower credit-related
expenses as a result of the Asset Sale, which was recorded in the third
quarter and completed during the fourth quarter of 2013. With the Asset Sale,
we are able to re-emphasize our focus on healthy loan originations and overall
business development; however, we still see that the slowly improving local
economy is delaying our progress. Our total stockholders' equity to total
assets was 9.97% at March 31, 2014, improving from the 9.80% at the end of
2013."

Balance Sheet Review
Total assets were $1.050 billion at March 31, 2014, a $4.6 million, or less
than 1%, decrease when compared to the $1.054 billion at the end of 2013. The
decrease in total assets included a decline in total loans of $8.3 million, or
1.2%, partially offset by an increase in investment securities of $5.0
million, or 3.3%. Loans held for sale at December 31, 2013 were reclassified
to loans during the first quarter of 2014. Total deposits decreased $4.0
million, or less than 1%, when compared to December 31, 2013. The decrease in
total deposits was mainly due to a decline in noninterest-bearing deposits
($7.3 million) and time deposits ($11.3 million), which was partially offset
by a shift to money market and savings deposits ($11.5 million) and
interest-bearing demand deposits ($3.1 million). Total stockholders' equity
increased $1.3 million, or 1.3%, when compared to the end of 2013. At March
31, 2014, the ratio of total equity to total assets was 9.97% and the ratio of
total tangible equity to total tangible assets was 8.58%.

Total assets at March 31, 2014, decreased $55.1 million, or 5%, when compared
to total assets at March 31, 2013. The decrease in assets was primarily due
to a decline in loans as a result of the Asset Sale during the fourth quarter
of 2013. Total deposits decreased $40.7 million, or 4.2%, when compared to
March 31, 2013. The decrease in total deposits was mainly due to a decline in
time deposits ($44.4 million) and money market and savings deposits ($12.2
million). The decrease in money market deposit accounts was 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 to decrease its excess liquidity and, in June 2013, the Company
fully exited the IND Program in which $20 million in money market deposits
remained. The decrease in time deposits also reduced the Company's excess
liquidity.

Review of Quarterly Financial Results
Net interest income was $8.3 million for the first quarter of 2014, compared
to $8.6 million for the fourth quarter of 2013 and $8.5 million for the first
quarter of 2013. The decrease in net interest income when compared to the
fourth quarter of 2013 was primarily due to lower volumes of average loan
balances, partially offset by lower volumes of and rates paid on time
deposits. The decrease in net interest income when compared to the first
quarter of 2013 was primarily due to lower volumes of average loan balances,
partially offset by lower volumes of and rates paid on money market and
savings deposits, and time deposits. However, the Company's net interest
margin improved to 3.50% for the first quarter of 2014 when compared to the
3.47% for the fourth quarter of 2013 and 3.30% for the first quarter of 2013.
The higher net interest margin when compared to the fourth quarter of 2013
was mainly due to a decline of $211 thousand in reversals of nonaccrual
income. The higher net interest margin for the first quarter of 2014 when
compared to the first quarter of 2013 was mainly due to the impact of exiting
the IND Program, which resulted in a reduction in both the money market
account balances as well as the associated higher rate related to this
program.

The provision for credit losses was $975 thousand for the three months ended
March 31, 2014. The comparable amounts were $474 thousand and $2.2 million
for the three months ended December 31, 2013 and March 31, 2013,
respectively. The higher level of provision for credit losses when comparing
the first quarter of 2014 to the fourth quarter of 2013 was primarily due to
increases in loan charge-offs and nonaccrual loans. The lower level of
provision for credit losses when comparing the first quarter of 2014 to the
first quarter of 2013 was primarily due to decreases in loan charge-offs and
nonaccrual loans. Net charge-offs were $1.6 million for the first quarter of
2014, $1.1 million for the fourth quarter of 2013 and $2.4 million for the
first quarter of 2013. The ratio of annualized net charge-offs to average
loans was 0.93% for the first quarter of 2014, 0.58% for the fourth quarter of
2013 and 1.25% for the first quarter of 2013. The ratio of the allowance for
credit losses to period-end loans was 1.43% at March 31, 2014, compared to
1.51% at December 31, 2013 and 2.00% at March 31, 2013.

At March 31, 2014, nonperforming assets were $23.9 million, an increase of
$1.8 million, or 7.9%, when compared to December 31, 2013. This increase was
primarily due to the addition of one nonaccrual commercial real estate loan,
net of the transfer of one nonaccrual residential real estate loan to other
real estate owned. Additionally, accruing troubled debt restructurings
("TDRs") were $25.3 million at March 31, 2014, a decrease of $755 thousand, or
2.9%, when compared to December 31, 2013. When comparing March 31, 2014 to
March 31, 2013, nonperforming assets decreased $16.3 million, or 40.4%, and
accruing TDRs decreased $27.2 million, or 51.8%. The positive trend in
nonperforming assets and TDRs when comparing March 31, 2014 to March 31, 2013,
was mainly accomplished with the previously-mentioned Asset Sale. At March
31, 2014, the ratio of nonaccrual loans to total assets was 1.83%, compared to
1.72% and 2.88% at December 31, 2013 and March 31, 2013, respectively. In
addition, the ratio of accruing TDRs to total assets at March 31, 2014 was
2.41%, improving from 2.47% at December 31, 2013 and 4.76% at March 31, 2013.

Total noninterest income for the first quarter of 2014 increased $573 thousand
when compared to the fourth quarter of 2013 and $298 thousand when compared to
the first quarter of 2013. The increase for both periods was primarily due to
higher insurance agency commissions, mainly from contingency payments which
are typically received in the first quarter of each year and are based on the
prior year's performance.

Total noninterest expense for the first quarter of 2014 declined $353 thousand
when compared to the fourth quarter of 2013 and $376 thousand when compared to
the first quarter of 2013. The decrease in noninterest expense was primarily
due to lower costs associated with problem assets, which was a positive result
of the Asset Sale. The decrease from the fourth quarter of 2013 was mainly
due to lower write-downs of other real estate owned ($296 thousand), loan
collection ($137 thousand) and marketing ($125 thousand) included in other
noninterest expense, and FDIC insurance premiums ($155 thousand) due to
improved capital ratios at Talbot Bank. These decreases in noninterest
expense were partially offset by an increase in employee benefits of $199
thousand, which included higher payroll taxes ($116 thousand) and group
insurance ($73 thousand). When compared to the first quarter of 2013, the
decrease in noninterest expense for the first quarter of 2014 was primarily
due to lower write-downs of other real estate owned.

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; and an insurance
premium finance company, Mubell Finance, LLC; and a registered investment
adviser firm, Wye Financial Services, LLC. Shore Bancshares, Inc. engages in
the trust services business through the trust department at CNB under the name
"Wye Financial & Trust". Additional information is available at
www.shorebancshares.com.

Forward-Looking Statements
The statements contained herein that are not historical facts are
forward-looking statements (as defined by the Private Securities Litigation
Reform Act of 1995) based on management's current expectations and beliefs
concerning future developments and their potential effects on the Company.
Such statements involve inherent risks and uncertainties, many of which are
difficult to predict and are generally beyond the control of the Company.
There can be no assurance that future developments affecting the Company will
be the same as those anticipated by management. 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 risks 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".

The Company specifically disclaims any obligation to update any factors or to
publicly announce the result of revisions to any of the forward-looking
statements included herein to reflect future events or developments.


                                                               Page 4 of 12
Shore Bancshares, Inc.
Financial Highlights
(Dollars in thousands,
except per share data)
                             For the Three Months Ended
                            March 31,
                            2014             2013            Change
PROFITABILITY FOR THE
PERIOD
 Net interest income    $    8,323    $     8,477   (1.8)        %
 Provision for credit   975              2,150             (54.7)
losses
 Noninterest income     4,788            4,490             6.6
 Noninterest expense    10,115           10,491            (3.6)
 Income before income   2,021            326               519.9
taxes
 Income tax expense    763              104               633.7
 Net income            $    1,258    $            466.7
                                             222
 Return on average      0.49           % 0.08            % 41           bp
assets
 Return on average      4.88             0.79              409
equity
 Return on average      5.97             1.11              486
tangible equity (1)
 Net interest margin    3.50             3.30              20
 Efficiency ratio -     77.01            80.74             (373)
GAAP
 Efficiency ratio -     76.44            80.17             (373)
Non-GAAP (1)
PER SHARE DATA
 Basic net income per   $     0.15   $            400.0        %
common share                                 0.03
 Diluted net income per 0.15             0.03              400.0
common share
 Dividends paid per     -                -                 -
common share
 Book value per common  12.35            13.51             (8.6)
share at period end
 Tangible book value
per common share at period  10.47            11.60             (9.7)
end (1)
 Market value at period 9.51             6.79              40.1
end
 Market range:
 High                 9.99             6.91              44.6
 Low                  9.00             5.20              73.1
AVERAGE BALANCE SHEET DATA
 Loans                  $  707,708      $   783,757    (9.7)        %
 Investment securities  155,556          146,756           6.0
 Earning assets         966,304          1,044,755         (7.5)
 Assets                 1,044,568        1,122,310         (6.9)
 Deposits               923,524          987,325           (6.5)
 Stockholders' equity   104,462          114,250           (8.6)
CREDIT QUALITY DATA AT
PERIOD END
 Net charge-offs        $    1,631    $     2,406   (32.2)       %
 Nonaccrual loans      $   19,156     $    31,813   (39.8)
 Loans 90 days past due 121              22                450.0
and still accruing
 Other real estate      4,672            8,366             (44.2)
owned
 Total nonperforming    23,949           40,201            (40.4)
assets
 Accruing troubled debt 25,333           52,545            (51.8)
restructurings (TDRs)
 Total nonperforming    $   49,282     $    92,746   (46.9)
assets and accruing TDRs
CAPITAL AND CREDIT QUALITY
RATIOS
 Period-end equity to   9.97           % 10.35           % (38)         bp
assets
 Period-end tangible
equity to tangible assets   8.58             9.02              (44)
(1)
 Annualized net
charge-offs to average      0.93             1.25              (32)
loans
 Allowance for credit
losses as a percent of:
 Period-end loans       1.43             2.00              (57)
 Nonaccrual loans      52.56            49.46             310
 Nonperforming assets  42.04            39.14             290
 Accruing TDRs         39.75            29.95             980
 Nonperforming assets   20.43            16.97             346
and accruing TDRs
 As a percent of total
loans:
 Nonaccrual loans      2.72             4.05              (133)
 Accruing TDRs        3.60             6.69              (309)
 Nonaccrual loans and   6.32             10.74             (442)
accruing TDRs
 As a percent of total
loans+other real estate
owned:
 Nonperforming assets   3.38             5.06              (168)
 Nonperforming assets   6.96             11.68             (472)
and accruing TDRs
 As a percent of total
assets:
 Nonaccrual loans      1.83             2.88              (105)
 Nonperforming assets  2.28             3.64              (136)
 Accruing TDRs         2.41             4.76              (235)
 Nonperforming assets   4.70             8.40              (370)
and accruing TDRs
(1) See the reconciliation
table on page 12 of 12.



Shore Bancshares, Inc.                                                   Page 5
                                                                         of 12
Consolidated Balance Sheets
(In thousands, except per share data)
                                                              March      March
                                                              31, 2014   31, 2014
                          March 31,   December    March 31,   compared   compared
                                      31,                     to         to
                          2014        2013        2013        December   March
                                                              31, 2013   31,2013
ASSETS
 Cash and due from     $       $       $       6.7      % (8.6)    %
banks                      22,668   21,238      24,808
 Interest-bearing      109,831     109,384     94,090      0.4        16.7
deposits with other banks
 Federal funds sold    399         468         2,789       (14.7)     (85.7)
 Investment securities
available for sale (at    152,247     147,101     142,238     3.5        7.0
fair value)
 Investment securities 5,074       5,185       2,594       (2.1)      95.6
held to maturity
 Loans held for sale   -           3,521       -           (100.0)    -
 Loans                 703,637     711,919     785,753     (1.2)      (10.5)
 Less: allowance for   (10,069)    (10,725)    (15,735)    (6.1)      (36.0)
credit losses
 Loans, net            693,568     701,194     770,018     (1.1)      (9.9)
 Premises and          15,108      15,198      15,502      (0.6)      (2.5)
equipment, net
 Goodwill              12,454      12,454      12,454      -          -
 Other intangible      3,446       3,520       3,742       (2.1)      (7.9)
assets, net
 Other real estate     4,672       3,779       8,366       23.6       (44.2)
owned, net
 Other assets          30,047      31,082      28,010      (3.3)      7.3
  $         $          $         (0.4)      (5.0)
Total assets              1,049,514  1,054,124  1,104,611
LIABILITIES
 Noninterest-bearing   $       $        $       (4.2)      6.5
deposits                  165,459    172,797    155,412
 Interest-bearing      763,985     760,671     814,747     0.4        (6.2)
deposits
 Total     929,444     933,468     970,159     (0.4)      (4.2)
deposits
 Short-term borrowings 8,070       10,140      11,088      (20.4)     (27.2)
 Accrued expenses and  7,368       7,217       9,016       2.1        (18.3)
other liabilities
 944,882     950,825     990,263     (0.6)      (4.6)
Total liabilities
STOCKHOLDERS' EQUITY
 Common stock, par
value $0.01; authorized
 35,000,000 shares  85          85          85          -          -
 Additional paid in    32,229      32,207      32,151      0.1        0.2
capital
 Retained earnings     72,702      71,444      81,300      1.8        (10.6)
 Accumulated other
comprehensive (loss)      (384)       (437)       812         12.1       (147.3)
income

Total stockholders'       104,632     103,299     114,348     1.3        (8.5)
equity
 $         $          $  
Total liabilities and     1,049,514  1,054,124  1,104,611  (0.4)      (5.0)
stockholders' equity
Period-end common shares  8,471       8,471       8,461       -          0.1
outstanding
Book value per common     $       $       $       1.3        (8.6)
share                       12.35   12.19      13.51



Shore Bancshares, Inc.                                          Page 6 of 12
Consolidated Statements of
Operations
(In thousands, except per share
data)
                                    For the Three Months Ended
                                    March 31,
                                    2014           2013         % Change
INTEREST INCOME
 Interest and fees on loans     $   8,875   $   9,907 (10.4)       %
 Interest and dividends on
investment securities:
 Taxable                     521            643          (19.0)
 Tax-exempt                 3              5            (40.0)
 Interest on federal funds sold  -              2            (100.0)
 Interest on deposits with other 56             50           12.0
banks
 Total interest   9,455          10,607       (10.9)
income
INTEREST EXPENSE
 Interest on deposits            1,127          2,122        (46.9)
 Interest on short-term          5              8            (37.5)
borrowings
 Total interest   1,132          2,130        (46.9)
expense
NET INTEREST INCOME                 8,323          8,477        (1.8)
Provision for credit losses         975            2,150        (54.7)
NET INTEREST INCOME AFTER
PROVISION
 FOR CREDIT LOSSES                 7,348          6,327        16.1
NONINTEREST INCOME
 Service charges on deposit      558            572          (2.4)
accounts
 Trust and investment fee income 431            390          10.5
 Investment securities gains    -              -            -
 Insurance agency commissions    3,077          2,813        9.4
 Other noninterest income        722            715          1.0
 Total         4,788          4,490        6.6
noninterest income
NONINTEREST EXPENSE
 Salaries and wages              4,314          4,283        0.7
 Employee benefits               1,182          1,134        4.2
 Occupancy expense              627            597          5.0
 Furniture and equipment expense 273            250          9.2
 Data processing                 760            703          8.1
 Directors' fees                 112            121          (7.4)
 Amortization of intangible      74             74           -
assets
 Insurance agency commissions    512            461          11.1
expense
 FDIC insurance premium expense  458            366          25.1
 Write-downs of other real       75             672          (88.8)
estate owned
 Other noninterest expenses      1,728          1,830        (5.6)
 Total         10,115         10,491       (3.6)
noninterest expense
Income before income taxes          2,021          326          519.9
Income tax expense                 763            104          633.7
NET INCOME                         $   1,258   $        466.7
                                                   222
Weighted average shares outstanding 8,471          8,458        0.2
- basic
Weighted average shares outstanding 8,484          8,458        0.3
- diluted
Basic net income per common share   $    0.15  $         400.0
                                                   0.03
Diluted net income per common share 0.15           0.03         400.0
Dividends paid per common share     -              -            -



Shore Bancshares, Inc.                                           Page 7
                                                                 of 12
Consolidated Average
Balance Sheets
(Dollars in thousands)
                          For the Three Months Ended
                          March 31,
                          2014                      2013
                          Average       Yield/     Average     Yield/
                          balance        rate      balance      rate
Earning assets
 Loans                  $            5.10    %  $          5.14    %
                          707,708                   783,757
 Loans held for sale     2,425          -          -            -
 Investment securities
 Taxable                155,123        1.36       146,176      1.78
 Tax-exempt             433            4.25       580          4.85
 Federal funds sold      1,708          0.05       8,184        0.11
 Interest-bearing        98,907         0.23       106,058      0.19
deposits
 Total earning assets  966,304        3.98    %  1,044,755    4.13    %
Cash and due from banks   22,708                    24,966
Other assets              66,203                    69,185
Allowance for credit      (10,647)                  (16,596)
losses
Total assets              $ 1,044,568               $
                                                    1,122,310
Interest-bearing
liabilities
 Demand deposits         $            0.14    %  $          0.17    %
                          173,801                   173,714
 Money market and        222,378        0.12       244,182      0.97
savings deposits (1)
 Certificates of deposit 178,792        1.13       216,288      1.39
$100,000 or more
 Other time deposits     186,960        1.08       201,171      1.47
 Interest-bearing      761,931        0.60       835,355      1.03
deposits
 Short-term borrowings   9,345          0.22       11,987       0.27
 Total
interest-bearing          771,276        0.60    %  847,342      1.02    %
liabilities
Noninterest-bearing       161,593                   151,970
deposits
Accrued expenses and      7,237                     8,748
other liabilities
Stockholders' equity      104,462                   114,250
Total liabilities and     $ 1,044,568               $
stockholders' equity                                1,122,310
Net interest spread                      3.38    %               3.11    %
Net interest margin                      3.50    %               3.30    %
(1) Interest on money market and savings deposits for the three months ended
March 31, 2013 included an adjustment to expense
 related to interest rate caps and the hedged deposits associated with
them. This adjustment increased interest expense $416
 thousand for the three months ended March 31, 2013. Interest expense
for the three months ended March 31, 2014 did not
 reflect this adjustment because the interest rate caps were terminated
in June of 2013.



Shore Bancshares, Inc.                                                                     Page 8
                                                                                           of 12
Financial Highlights By Quarter
(Dollars in thousands, except per share
data)
                   1st         4th         3rd         2nd         1st         1Q 14       1Q 14
                   quarter     quarter     quarter     quarter     quarter
                   2014        2013        2013        2013        2013        compared    compared
                                                                               to          to
                   (1Q 14)     (4Q 13)     (3Q 13)     (2Q 13)     (1Q 13)     4Q 13       1Q 13
PROFITABILITY FOR
THE PERIOD

Taxable-equivalent $       $       $       $       $       (2.9)    %  (1.8)    %
net interest         8,347   8,595       8,852       9,028       8,504
income
 Less:
Taxable-equivalent 24          25          24          27          27          (4.0)       (11.1)
adjustment
 Net interest  8,323       8,570       8,828       9,001       8,477       (2.9)       (1.8)
income
 Provision for 975         474         22,460      2,700       2,150       105.7       (54.7)
credit losses
 Noninterest   4,788       4,215       4,792       3,962       4,490       13.6        6.6
income
 Noninterest   10,115      10,468      9,968       9,759       10,491      (3.4)       (3.6)
expense
 Income (loss)
before income      2,021       1,843       (18,808)    504         326         9.7         519.9
taxes
 Income tax    763         668         (7,416)     143         104         14.2        633.7
expense (benefit)
 Net income    $       $       $         $       $       7.1         466.7
(loss)             1,258   1,175       (11,392)     361       222
 Return on     0.49      % 0.44      % (4.24)    % 0.13      % 0.08      % 5        bp 41       bp
average assets
 Return on     4.88        4.50        (39.68)     1.27        0.79        38          409
average equity
 Return on
average tangible   5.97        5.53        (46.03)     1.66        1.11        44          486
equity (1)
 Net interest  3.50        3.47        3.54        3.60        3.30        3           20
margin
 Efficiency    77.01       81.72       73.06       75.13       80.74       (471)       (373)
ratio - GAAP
 Efficiency
ratio - Non-GAAP   76.44       81.14       74.13       74.45       80.17       (470)       (373)
(1)
PER SHARE DATA
 Basic net     $       $       $       $       $    
income (loss) per            0.14      (1.35)      0.04       0.03      7.1      %  400.0    %
common share       0.15
 Diluted net
income (loss) per  0.15        0.14        (1.35)      0.04        0.03        7.1         400.0
common share
 Dividends
paid per common    -           -           -           -           -           -           -
share
 Book value
per common share   12.35       12.19       12.06       13.43       13.51       1.3         (8.6)
at period end
 Tangible book
value per common   10.47       10.31       10.16       11.52       11.60       1.6         (9.7)
share at period
end (1)
 Market value  9.51        9.22        8.80        7.36        6.79        3.1         40.1
at period end
 Market range:
 High       9.99        9.45        9.06        7.75        6.91        5.7         44.6
 Low        9.00        8.50        7.06        5.97        5.20        5.9         73.1
AVERAGE BALANCE
SHEET DATA
 Loans         $        $          $          $          $          (1.4)    %  (9.7)    %
                   707,708    718,070    772,008    785,442    783,757
 Investment    155,556     145,181     124,020     141,193     146,756     7.1         6.0
securities
 Earning       966,304     982,519     993,068     1,005,474   1,044,755   (1.7)       (7.5)
assets
 Assets        1,044,568   1,060,315   1,064,919   1,077,852   1,122,310   (1.5)       (6.9)
 Deposits      923,524     938,293     932,867     943,577     987,325     (1.6)       (6.5)
 Stockholders' 104,462     103,507     113,904     114,208     114,250     0.9         (8.6)
equity
CREDIT QUALITY
DATA AT PERIOD END
 Net           $       $       $        $       $       55.3     %  (32.2)   %
charge-offs          1,631   1,050       26,882      2,712       2,406
 Nonaccrual
loans excluding    $       $        $        $        $   
nonaccrual loans   19,156     14,626      17,501      34,818      31,813      31.0        (39.8)
held for sale
(hfs)
 Loans 90 days
past due and still 121         270         9           3           22          (55.2)      450.0
accruing
 Other real    4,672       3,779       5,776       6,408       8,366       23.6        (44.2)
estate owned
 Total
nonperforming
assets excluding   23,949      18,675      23,286      41,229      40,201      28.2        (40.4)
nonaccrual loans
hfs
 Nonaccrual    -           3,521       7,265       -           -           (100.0)     -
loans hfs
 Total
nonperforming      $       $        $        $        $   
assets including   23,949     22,196      30,551      41,229      40,201      7.9         (40.4)
nonaccrual loans
hfs
 Accruing
troubled debt      $       $        $        $        $   
restructurings     25,333     26,088      29,439      50,278      52,545      (2.9)       (51.8)
(TDRs) excluding
TDRs hfs
 Accruing TDRs -           -           14,842      -           -           -           -
hfs
 Total         $       $        $        $        $   
accruing TDRs      25,333     26,088      44,281      50,278      52,545      (2.9)       (51.8)
including TDRs hfs
 Total
nonperforming
assets and         $       $        $        $        $   
accruing TDRs      49,282     44,763      52,725      91,507      92,746      10.1        (46.9)
excluding
nonaccrual loans
and TDRs hfs
 Nonaccrual    -           3,521       22,107      -           -           (100.0)     -
loans and TDRs hfs
 Total
nonperforming
assets and         $       $        $        $        $   
accruing TDRs      49,282     48,284      74,832      91,507      92,746      2.1         (46.9)
including
nonaccrual loans
and TDRs hfs
(1) See the reconciliation table on
page 12 of 12.



Shore Bancshares, Inc.                                                      Page 9
                                                                            of 12
Financial Highlights By Quarter
(Dollars in thousands, except per
share data)
              1st       4th       3rd       2nd       1st       1Q 14       1Q 14
              quarter   quarter   quarter   quarter   quarter
              2014      2013      2013      2013      2013      compared    compared
                                                                to          to
              (1Q 14)   (4Q 13)   (3Q 13)   (2Q 13)   (1Q 13)   4Q 13       1Q 13
CAPITAL AND
CREDIT
QUALITY
RATIOS

Period-end    9.97    % 9.80    % 9.70    % 10.77   % 10.35   % 17       bp (38)     bp
equity to
assets

Period-end
tangible      8.58      8.41      8.30      9.39      9.02      17          (44)
equity to
tangible
assets (1)

Annualized
net           0.93      0.58      13.81     1.38      1.25      35          (32)
charge-offs
to average
loans

Allowance for
credit losses
as a percent
of (excluding
loans hfs):

Period-end    1.43      1.51      1.57      2.01      2.00      (8)         (57)
loans

Nonaccrual    52.56     73.33     64.57     45.16     49.46     (2,077)     310
loans

Nonperforming 42.04     57.43     48.53     38.14     39.14     (1,539)     290
assets
 Accruing 39.75     41.11     38.39     31.27     29.95     (136)       980
TDRs

Nonperforming
assets and    20.43     23.96     21.43     17.18     16.97     (353)       346
accruing
TDRs

Allowance for
credit losses
as a percent
of (including
loans hfs):

Nonaccrual    52.56     59.10     45.63     45.16     49.46     (654)       310
loans

Nonperforming 42.04     48.32     36.99     38.14     39.14     (628)       290
assets
 Accruing 39.75     41.11     25.52     31.27     29.95     (136)       980
TDRs

Nonperforming
assets and    20.43     22.21     15.10     17.18     16.97     (178)       346
accruing
TDRs
 As a
percent of
total loans
(excluding
loans hfs):

Nonaccrual    2.72      2.05      2.44      4.45      4.05      67          (133)
loans
 Accruing  3.60      3.66      4.10      6.43      6.69      (6)         (309)
TDRs

Nonaccrual
loans and     6.32      5.71      6.54      10.88     10.74     61          (442)
accruing
TDRs
 As a
percent of
total
loans+other
real estate
owned
(excluding
loans hfs):

Nonperforming 3.38      2.61      3.21      5.23      5.06      77          (168)
assets

Nonperforming
assets and    6.96      6.25      7.28      11.60     11.68     71          (472)
accruing
TDRs
 As a
percent of
total assets
(excluding
loans hfs):

Nonaccrual    1.83      1.39      1.66      3.30      2.88      44          (105)
loans

Nonperforming 2.28      1.77      2.21      3.91      3.64      51          (136)
assets
 Accruing  2.41      2.47      2.80      4.77      4.76      (6)         (235)
TDRs

Nonperforming 4.70      4.25      5.01      8.68      8.40      45          (370)
assets and
accruing TDRs
 As a
percent of
total assets
(including
loans hfs):

Nonaccrual    1.83      1.72      2.36      3.30      2.88      11          (105)
loans

Nonperforming 2.28      2.11      2.91      3.91      3.64      17          (136)
assets
 Accruing  2.41      2.47      4.21      4.77      4.76      (6)         (235)
TDRs

Nonperforming
assets and    4.70      4.58      7.12      8.68      8.40      12          (370)
accruing
TDRs
(1) See the reconciliation table on page
12 of 12.



Shore Bancshares, Inc.                                                      Page 10
                                                                            of 12
Consolidated Statements of
Operations By Quarter
(In thousands, except per share
data)
                                                                  1Q 14     1Q 14
                                                                  compared  compared
                                                                  to        to
                      1Q 14   4Q 13   3Q 13      2Q 13    1Q 13   4Q 13     1Q 13
INTEREST INCOME
 Interest and fees $     $     $      $     $  
on loans                         9,767      10,142         (4.0)   % (10.4)  %
                      8,875   9,242                       9,907
 Interest and
dividends on
investment
securities:
 Taxable       521     504     357        568      643     3.4       (19.0)
 Tax-exempt    3       3       5          4        5       -         (40.0)
 Interest on       -       1       -          1        2       (100.0)   (100.0)
federal funds sold
 Interest on
deposits with other   56      57      53         40       50      (1.8)     12.0
banks
    9,455   9,807   10,182     10,755   10,607  (3.6)     (10.9)
Total interest income
INTEREST EXPENSE
 Interest on       1,127   1,230   1,348      1,748    2,122   (8.4)     (46.9)
deposits
 Interest on       5       7       6          6        8       (28.6)    (37.5)
short-term borrowings

Total interest        1,132   1,237   1,354      1,754    2,130   (8.5)     (46.9)
expense
NET INTEREST INCOME   8,323   8,570   8,828      9,001    8,477   (2.9)     (1.8)
Provision for credit  975     474     22,460     2,700    2,150   105.7     (54.7)
losses
NET INTEREST INCOME
(LOSS) AFTER
PROVISION
 FOR CREDIT LOSSES   7,348   8,096   (13,632)   6,301    6,327   (9.2)     16.1
NONINTEREST INCOME
 Service charges   558     599     600        600      572     (6.8)     (2.4)
on deposit accounts
 Trust and         431     429     401        393      390     0.5       10.5
investment fee income
 Investment        -       -       -          913      -       -         -
securities gains
 Insurance agency  3,077   2,477   2,724      2,633    2,813   24.2      9.4
commissions
 Loss on
termination of cash   -       -       -          (1,306)  -       -         -
flow hedge
 Other noninterest 722     710     1,067      729      715     1.7       1.0
income

Total noninterest     4,788   4,215   4,792      3,962    4,490   13.6      6.6
income
NONINTEREST EXPENSE
 Salaries and      4,314   4,336   4,420      4,307    4,283   (0.5)     0.7
wages
 Employee benefits 1,182   983     971        1,006    1,134   20.2      4.2
 Occupancy         627     569     566        612      597     10.2      5.0
expense
 Furniture and     273     252     275        243      250     8.3       9.2
equipment expense
 Data processing   760     773     718        706      703     (1.7)     8.1
 Directors' fees   112     92      86         55       121     21.7      (7.4)
 Amortization of   74      74      74         74       74      -         -
intangible assets
 Insurance agency  512     470     409        458      461     8.9       11.1
commissions expense
 FDIC insurance    458     613     467        367      366     (25.3)    25.1
premium expense
 Write-downs of
other real estate     75      371     219        56       672     (79.8)    (88.8)
owned
 Other noninterest 1,728   1,935   1,763      1,875    1,830   (10.7)    (5.6)
expenses

Total noninterest     10,115  10,468  9,968      9,759    10,491  (3.4)     (3.6)
expense
Income (loss) before  2,021   1,843   (18,808)   504      326     9.7       519.9
income taxes
Income tax expense    763     668     (7,416)    143      104     14.2      633.7
(benefit)
                      $     $     $        $     $  
NET INCOME (LOSS)               (11,392)             7.1       466.7
                      1,258   1,175              361       222
Weighted average
shares outstanding -  8,471   8,463   8,461      8,461    8,458   0.1       0.2
basic
Weighted average
shares outstanding -  8,484   8,474   8,461      8,465    8,458   0.1       0.3
diluted
Basic net income      $     $     $      $     $  
(loss) per common               (1.35)                7.1       400.0
share                 0.15   0.14              0.04    0.03
Diluted net income
(loss) per common     0.15    0.14    (1.35)     0.04     0.03    7.1       400.0
share
Dividends paid per    -       -       -          -        -       -         -
common share



Shore Bancshares, Inc.                                                                                                                  Page 11
                                                                                                                                        of 12
Consolidated Average Balance Sheets By Quarter
(Dollars in thousands)
                                                                                                                             Average balance
                                                                                                                             1Q 14      1Q 14
                                                                                                                             compared   compared
                                                                                                                             to         to
                    1Q 14                4Q 13                3Q 13                2Q 13                1Q 13                4Q 13      1Q 13
                    Average    Yield/   Average    Yield/   Average    Yield/   Average    Yield/   Average    Yield/
                    balance     rate     balance     rate     balance     rate     balance     rate     balance     rate
Earning assets
 Loans            $         5.10   % $         5.07   % $         5.03   % $         5.19   % $         5.14   % (1.4)    % (9.7)    %
                    707,708              718,070              772,008              785,442              783,757
 Loans held for    2,425       -        15,047      2.38     -           -        -           -        -           -        (83.9)     -
sale
 Investment
securities
 Taxable          155,123     1.36     144,699     1.38     123,499     1.15     140,614     1.62     146,176     1.78     7.2        6.1
 Tax-exempt       433         4.25     482         4.39     521         5.27     579         4.81     580         4.85     (10.2)     (25.3)
 Federal funds     1,708       0.05     2,692       0.06     1,618       0.07     2,992       0.10     8,184       0.11     (36.6)     (79.1)
sold
 Interest-bearing  98,907      0.23     101,529     0.22     95,422      0.22     75,847      0.21     106,058     0.19     (2.6)      (6.7)
deposits
 Total earning   966,304     3.98   % 982,519     3.97   % 993,068     4.08   % 1,005,474   4.30   % 1,044,755   4.13   % (1.7)      (7.5)
assets
Cash and due from   22,708               20,900               22,088               22,510               24,966               8.7        (9.0)
banks
Other assets        66,203               70,048               65,001               66,967               69,185               (5.5)      (4.3)
Allowance for       (10,647)             (13,152)             (15,238)             (17,099)             (16,596)             (19.0)     (35.8)
credit losses
Total assets        $                    $                    $                    $                    $                    (1.5)      (6.9)
                    1,044,568           1,060,315           1,064,919           1,077,852           1,122,310
Interest-bearing
liabilities
 Demand deposits   $         0.14   % $         0.15   % $         0.16   % $         0.15   % $         0.17   % (1.5)      0.1
                    173,801              176,492              172,143              162,589              173,714
 Money market and
savings deposits    222,378     0.12     211,294     0.12     207,162     0.12     225,117     0.67     244,182     0.97     5.2        (8.9)
(1)
 Certificates of
deposit $100,000 or 178,792     1.13     190,117     1.16     198,495     1.23     203,641     1.32     216,288     1.39     (6.0)      (17.3)
more
 Other time        186,960     1.08     188,645     1.14     192,878     1.24     197,644     1.30     201,171     1.47     (0.9)      (7.1)
deposits

Interest-bearing    761,931     0.60     766,548     0.64     770,678     0.69     788,991     0.89     835,355     1.03     (0.6)      (8.8)
deposits
 Short-term        9,345       0.22     10,505      0.23     10,695      0.23     10,752      0.24     11,987      0.27     (11.0)     (22.0)
borrowings
 Total
interest-bearing    771,276     0.60   % 777,053     0.63   % 781,373     0.69   % 799,743     0.88   % 847,342     1.02   % (0.7)      (9.0)
liabilities
Noninterest-bearing 161,593              171,745              162,189              154,586              151,970              (5.9)      6.3
deposits
Accrued expenses
and other           7,237                8,010                7,453                9,315                8,748                (9.7)      (17.3)
liabilities
Stockholders'       104,462              103,507              113,904              114,208              114,250              0.9        (8.6)
equity
Total liabilities   $                    $                    $                    $                    $
and stockholders'   1,044,568           1,060,315           1,064,919           1,077,852           1,122,310           (1.5)      (6.9)
equity
Net interest spread             3.38   %             3.34   %             3.39   %             3.42   %             3.11   %
Net interest margin             3.50   %             3.47   %             3.54   %             3.60   %             3.30   %
(1) Interest on money market and savings deposits for the second and first quarters of 2013 included an
adjustment to expense related to interest rate caps and the hedged
 deposits associated with them. This adjustment increased interest expense $279 thousand for the second
quarter of 2013 and $416 thousand for the first quarter of 2013.
 Interest expense for the other quarters presented did not reflect this adjustment
because the interest rate caps were terminated in June of 2013.



Shore Bancshares, Inc.                                                 Page 12 of
                                                                       12
Reconciliation of Generally Accepted Accounting
Principles (GAAP)
 and Non-GAAP Measures
(In thousands, except per share data)
                   1Q 14        4Q 13        3Q 13        2Q 13        1Q 13
The following
reconciles return
on average equity
and return on
 average tangible
equity (Note 1):
Net income (loss) $        $        $          $        $    
                   1,258       1,175        (11,392)      361         222
Net income (loss)  $        $        $          $        $    
- annualized (A)   5,102       4,662        (45,197)     1,448         900
Net income (loss),
excluding net      $        $        $          $        $    
amortization of    1,303       1,220        (11,347)      406         267
intangible assets
Net income (loss),
excluding net
amortization of
intangible
 assets -         $        $        $          $        $    
annualized (B)     5,284       4,840        (45,018)     1,628        1,083
Average            $         $          $          $          $  
stockholders'      104,462      103,507      113,904      114,208      114,250
equity (C)
Less: Average
goodwill and other (15,945)     (16,018)     (16,092)     (16,166)     (16,242)
intangible assets
Average tangible   $        $         $         $         $   
equity (D)         88,517       87,489       97,812       98,042       98,008
Return on average
equity (GAAP)     4.88       % 4.50       % (39.68)    % 1.27       % 0.79       %
(A)/(C)
Return on average
tangible equity    5.97       % 5.53       % (46.03)    % 1.66       % 1.11       %
(Non-GAAP)
(B)/(D)
The following
reconciles GAAP
efficiency ratio
and non-GAAP
 efficiency ratio
(Note 2):
Noninterest        $        $         $        $        $   
expense (E)        10,115       10,468       9,968        9,759        10,491
Less:
Amortization of    (74)         (74)         (74)         (74)         (74)
intangible assets
 Other
nonrecurring       -            -            -            49           -
adjustments
Adjusted           $        $         $        $        $   
noninterest        10,041       10,394       9,894        9,734        10,417
expense (F)
Taxable-equivalent $        $        $        $        $    
net interest       8,347       8,595        8,852        9,028        8,504
income (G)
Nonrecurring       -            -            -            (308)        -
adjustment
Taxable-equivalent
net interest       $        $        $        $        $    
income excluding   8,347       8,595        8,852        8,720        8,504
nonrecurring
adjustment (H)
Noninterest income $        $        $        $        $    
(I)                4,788       4,215        4,792        3,962        4,490
Less: Investment
securities         -            -            -            (913)        -
(gains)/losses
 Other
nonrecurring       -            -            (297)        1,306        -
(gains)/losses
Adjusted           $        $        $        $        $    
noninterest income 4,788       4,215        4,495        4,355        4,490
(J)
Efficiency ratio
(GAAP)            77.01      % 81.72      % 73.06      % 75.13      % 80.74      %
(E)/(G)+(I)
Efficiency ratio
(Non-GAAP)        76.44      % 81.14      % 74.13      % 74.45      % 80.17      %
(F)/(H)+(J)
The following
reconciles book
value per common
share and
tangible
 book value per
common share (Note
1):
Stockholders'      $         $          $          $          $  
equity (K)         104,632      103,299      102,001      113,594      114,348
Less: Goodwill
and other          (15,900)     (15,974)     (16,048)     (16,122)     (16,196)
intangible assets
Tangible equity    $        $         $         $         $   
(L)                88,732       87,325       85,953       97,472       98,152
Shares outstanding 8,471        8,471        8,461        8,461        8,461
(M)
Book value per     $        $        $        $        $    
common share       12.35       12.19        12.06        13.43        13.51
(GAAP) (K)/(M)
Tangible book
value per common   $        $        $        $        $    
share (Non-GAAP)  10.47       10.31        10.16        11.52        11.60
(L)/(M)
The following
reconciles equity
to assets and
 tangible equity
to tangible assets
(Note 1):
Stockholders'      $         $          $          $          $  
equity (N)         104,632      103,299      102,001      113,594      114,348
Less: Goodwill
and other          (15,900)     (15,974)     (16,048)     (16,122)     (16,196)
intangible assets
Tangible equity    $        $         $         $         $   
(O)                88,732       87,325       85,953       97,472       98,152
Assets (P)         $           $            $            $            $
                   1,049,514   1,054,124   1,051,384   1,054,277   1,104,611
Less: Goodwill
and other          (15,900)     (15,974)     (16,048)     (16,122)     (16,196)
intangible assets
Tangible assets    $           $            $            $            $
(Q)                1,033,614   1,038,150   1,035,336   1,038,155   1,088,415
Period-end
equity/assets      9.97       % 9.80       % 9.70       % 10.77      % 10.35      %
(GAAP) (N)/(P)
Period-end
tangible
equity/tangible    8.58       % 8.41       % 8.30       % 9.39       % 9.02       %
assets (Non-GAAP)
(O)/(Q)
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.shorebancshares.com
Contact: George Rapp, Chief Financial Officer, 410-763-7800
 
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