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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________

FORM 10-Q
 
 
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the Quarterly Period Ended March 31, 2005
   
OR
   
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from ________ to ________
 
Commission file number 0-22345

SHORE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

Maryland
  
52-1974638
(State or Other Jurisdiction of
Incorporation or Organization)
  
(I.R.S. Employer
Identification No.)
     
18 East Dover Street, Easton, Maryland
  
21601
(Address of Principal Executive Offices)
  
(Zip Code)

(410) 822-1400
Registrant’s Telephone Number, Including Area Code

N/A
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X   No ___

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X   No ___

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 5,527,145 issued and outstanding shares of common stock as of April 30, 2005.
 

INDEX
 
Part I.
Financial Information
  
     
Item 1.
Financial Statements
Page
     
 
Condensed Consolidated Balance Sheets -
March 31, 2005 (unaudited) and December 31, 2004
3
 
 
  
 
Condensed Consolidated Statements of Income -
For the three months ended March 31, 2005 and 2004 (unaudited)
4
     
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity -
For the three months ended March 31, 2005 and 2004 (unaudited)
5
 
 
  
 
Condensed Consolidated Statements of Cash Flows -
For the three months ended March 31, 2005 and 2004 (unaudited)
6
     
 
Notes to Condensed Consolidated Financial Statements (unaudited)
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
10
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
15
     
Item 4.
Controls and Procedures
16
     
Part II.
Other Information
  
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
16
 
 
  
Item 6.
Exhibits
16
 
 
  
Signatures
 
18
     
Exhibit List
    

-2-

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHORE BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
 
   
March 31,
  
December 31,
  
ASSETS:
  
2005
 
2004
 
   
(unaudited)
      
Cash and due from banks
  
$
22,495
  
$
22,051
  
Interest bearing deposits with other banks
    
898
    
961
  
Federal funds sold
    
34,939
    
20,539
  
Investment securities:
              
Held-to-maturity, at amortized cost (fair value of, $15,374 and $15,802, respectively)
    
15,391
    
15,662
  
Available for sale, at fair value
    
108,499
    
103,434
  
Loans, less allowance for credit losses ($4,758, $4,692, respectively)
    
591,509
    
590,766
  
Insurance premiums receivable
    
540
    
386
  
Premises and equipment, net
    
13,595
    
13,070
  
Accrued interest receivable on loans and investment securities
    
3,561
    
3,275
  
Investment in unconsolidated subsidiary
    
859
    
859
  
Goodwill
    
11,939
    
11,939
  
Other intangible assets
    
2,158
    
2,242
  
Deferred income taxes
    
2,028
    
1,543
  
Other real estate owned
    
391
    
391
  
Other assets
    
3,689
    
3,480
  
TOTAL ASSETS
  
$
812,491
  
$
790,598
  
               
LIABILITIES:
              
Deposits:
              
Noninterest bearing demand
  
$
103,414
  
$
102,672
  
NOW and Super NOW
    
109,222
    
112,327
  
Certificates of deposit $100,000 or more
    
98,810
    
91,315
  
Other time and savings
    
367,336
    
352,358
  
Total Deposits
    
678,782
    
658,672
  
Accrued Interest Payable
    
812
    
630
  
Short term borrowings
    
28,331
    
27,106
  
Long term debt
    
5,000
    
5,000
  
Contingent earn-out payments payable
    
513
    
3,313
  
Income taxes payable
    
1,225
    
-
  
Other liabilities
    
3,188
    
2,901
  
TOTAL LIABILITIES
    
717,851
    
697,622
  
               
STOCKHOLDERS’ EQUITY:
              
Common stock, par value $.01; authorized 35,000,000 shares; issued and outstanding:
              
March 31, 2005    5,527,120
December 31, 2004    5,515,198
    
55
    
55
  
Additional paid in capital
    
28,426
    
28,017
  
Retained earnings
    
67,240
    
65,182
  
Accumulated other comprehensive loss
   
(1,081
)
  
(278
)
TOTAL STOCKHOLDERS’ EQUITY
    
94,640
    
92,976
  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
  
$
812,491
  
$
790,598
  
 
See accompanying notes to Condensed Consolidated Financial Statements.
 
-3-

SHORE BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)

 
  
   
Three months ended March 31,
  
   
2005
  
2004
  
INTEREST INCOME
          
Loans, including fees
  
$
9,599
  
$
7,149
  
Interest and dividends on investment securities:
              
Taxable
   
870
    
1,193
  
Tax-exempt
    
149
    
154
  
Other interest income
    
189
    
54
  
Total interest income
    
10,807
    
8,550
  
               
INTEREST EXPENSE
              
Certificates of deposit, $100,000 or more
   
725
    
557
  
Other deposits
    
1,654
    
1,471
  
Other interest
    
151
    
100
 
               
Total interest expense
    
2,530
    
2,128
  
               
NET INTEREST INCOME
    
8,277
    
6,422
  
PROVISION FOR CREDIT LOSSES
    
180
    
105
  
               
 
              
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
    
8,097
    
6,317
  
               
NONINTEREST INCOME
              
Service charges on deposit accounts
    
562
    
495
  
Gain on sale of securities
    
58
    
16
  
Insurance agency commissions
    
2,084
    
1,909