SHBK Shore Finance Corp (MM)

ONLEY, Va., Oct. 16 /PRNewswire-FirstCall/ -- Shore Financial Corporation (NASDAQ:SHBK) announced today that quarterly earnings were $730,400, or $0.29 per diluted share, for the three months ended September 30, 2007, representing a 27.2% increase over second quarter earnings of $574,200, or $0.23 per diluted share, and a 8.9% increase over earnings of $670,900, or $0.27 per diluted share, for the same period of 2006. The company's is progressing on several strategic initiatives it has undertaken to position itself for future growth and to capitalize on the changing environment in its banking markets. During September, the bank opened its eighth branch location in Pocomoke City, Maryland. This market offers a great opportunity for the bank to expand its footprint while complimenting the bank's existing markets. In Salisbury, Maryland, the bank has begun the site work for a new full service banking facility on an existing branch site. Finally, the bank has completed the design phase and has begun the bidding process for a new full service banking facility in its Cheriton, Virginia market that will be located near the entrance to the Bay Creek Community in Cape Charles, Virginia. During the third quarter, the financial markets experienced significant turmoil, primarily resulting from fallout caused by the subprime mortgage market. This turmoil contributed to the Federal Reserve's decision to lower the fed funds target rate by 50 basis points during September. Although the company has not realized the full impact of the rate cut, it was able to benefit from lower costing wholesale funding opportunities during the quarter. This contributed to continued improvement in the company's net interest margin during the third quarter, resulting in a net interest margin of 3.74% and 3.62% for the three and nine months ended September 30, 2007, respectively. The quarterly margin represents a 28 basis point increase since the first quarter of 2007. Also contributing to the improved margin was the successful introduction of several new products and promotions initiated by the bank to attract new lower costing checking accounts. As a result, net interest income was $2.29 million and $6.57 million, respectively, during the three and nine month periods ended September 30, 2007, compared to $2.08 million and $6.37 million, respectively, during the same periods of 2006. Despite a soft residential real estate market, the company generated loan growth during the quarter. Outstanding loan balances on September 30, 2007 were $216.8 million, compared to $213.7 million and $209.7 million at June 30, 2007 and September 30, 2006 respectively. The bank's asset quality remained strong during the quarter with a non current loan to total loan ratio of 0.75% at September 30, 2007, while the bank's allowance for loan losses to period end loans ratio was 1.32%. Management considers these levels manageable and commensurate with the risk existing in the bank's loan portfolio. The company's noninterest income was $811,900 for the September 2007 quarter, compared to $818,200 for the September 2006 quarter end, while non interest income was $2.45 million and $2.40 million for the nine months ended September 30, 2007 and 2006, respectively. The bank's mortgage banking division has posted significant gains in fee income during 2007 with an increase from $78,700 during the 2006 nine month period to $159,300 during the 2007 comparable period. While fees levied on insufficient funds continues to be down from the 2006 period, other deposit fee categories have experienced substantial growth. The company's noninterest expense was $2.06 million during the September 2007 quarter, compared to $1.91 million during the 2006 three month period. Excluding the 2007 second quarter branch property write off, noninterest expense for the nine months ended September 30, 2007 was $6.13 million, compared to $5.67 million during the 2006 nine month period. The expense for the first nine months of 2007 included additional personnel employed to enhance the company's loan administration, operations, mortgage banking and internet banking divisions, as well as, normal annual salary and benefit adjustments. These additional personnel and enhancements should enable the company to further capitalize on the growth opportunities existing in its markets. Fluctuations in other expense categories were fairly nominal when compare to the 2006 period. Shore Financial Corporation is the only publicly traded company with headquarters on the Eastern Shore of Virginia. Its stock is traded on the NASDAQ Global Stock Market under the symbol SHBK. Its banking subsidiary, Shore Bank, serves the Eastern Shore of Maryland and Virginia through eight full-service banking facilities, twenty-two ATMs and twenty-four hour telephone and online banking services. Through banking subsidiaries and affiliated companies, the bank provides title insurance, trust services, and non deposit investment products. For more information on stock, products and services, visit http://www.shorebank.com/. This press release may contain "forward-looking statements," within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the company and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in economic conditions; significant changes in regulatory requirements; and significant changes in securities markets. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the company's most recent Form 10-K report and other documents filed with the Securities and Exchange Commission. Shore Financial Corporation does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Shore Financial Corporation Earnings Release Financial Highlights: Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 OPERATIONS: Net Interest Income $2,290,300 $2,079,200 $6,565,100 $6,367,400 Noninterest Income $811,900 $818,200 $2,452,900 $2,400,700 Loan Loss Provision $12,400 $13,500 $24,100 $50,200 Noninterest Expense $2,060,500 $1,911,600 $6,278,700 $5,671,400 Income Tax Expense $298,900 $301,400 $773,400 $944,400 Net Income $730,400 $670,900 $1,941,800 $2,102,100 RATIOS AND OTHER: Total Shares Outstanding $2,500,927 $2,492,143 $2,500,927 $2,492,143 Weighted Avg Shares- Basic $2,500,500 $2,492,200 $2,499,400 $2,491,500 Weighted Avg Shares- Diluted $2,518,200 $2,520,900 $2,522,300 $2,517,800 Basic Earnings Per Share $0.29 $0.27 $0.78 $0.84 Diluted Earnings Per Share $0.29 $0.27 $0.77 $0.83 Total Assets 269,119,400 262,926,400 269,119,400 262,926,400 Gross Loans 216,799,400 209,681,300 216,799,400 209,681,300 Deposits 199,676,800 204,830,600 199,676,800 204,830,600 Total Equity 27,460,100 25,435,600 27,460,100 25,435,600 Average Assets 265,514,100 259,335,900 262,322,700 255,908,100 Average Equity 27,232,100 25,002,600 26,923,300 24,589,600 Net Interest Margin 3.74% 3.44% 3.62% 3.57% Return on Average Assets 1.10% 1.03% 0.99% 1.10% Return on Average Equity 10.73% 10.73% 9.62% 11.40% Efficiency Ratio 64.37% 67.02% 66.90% 64.38% DATASOURCE: Shore Financial Corporation CONTACT: Lynn M. Badger of Shore Financial Corporation, +1-757-787-1335, Web site: http://www.shorebank.com/

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