Community Bank Shares of Indiana, Inc. Reports 4th Quarter Earnings.

NEW ALBANY, Ind. -- Community Bank Shares of Indiana, Inc. (NASDAQ:CBIN) reported results for the fourth quarter ended December 31, 2006. The following tables summarize the Company's fourth quarter results (in thousands, except per share data):

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Net income for the three and twelve months ended December 31, 2006 improved 26.8% and 9.7%, respectively, from the same periods in 2005 primarily due to the acquisition of The Scott County State Bank on July 1, 2006. Basic and diluted net income per share for the three months ended December 31, 2006 both decreased by 3.1% from the same period in 2005 while basic and diluted net income per share for the twelve months ended December 31, 2006 decreased by 4.9% and 4.3%, respectively. The decrease in basic and diluted net income per share for the three and twelve month periods is primarily attributable to the increase in outstanding common shares as a result of the aforementioned acquisition. The net income for the year ended December 31, 2005 was also substantially affected by income from a gain on life insurance benefit of $656,000 and a $228,000 gain on sale of equity stock, net of related tax impacts. Excluding these items, basic and diluted net income per share for the twelve months December 31, 2006 increased by 24.8% and 25.0%, respectively, from 2005.

Total assets grew 22.8% from December 31, 2005 to $816.6 million at December 31, 2006, primarily as a result of the acquisition of The Scott County State Bank on July 1, 2006, which resulted in corresponding increases to net loans, total deposits, and non-interest bearing deposits. The Company continues to focus on funding loan growth through increases in core deposits, including non-interest bearing and low-costing deposit accounts.

"We are continuing to add to and refine our existing product offerings to maintain and expand our substantial customer bases in Floyd, Clark, and Scott Counties in Indiana and to continue our growth in Jefferson and Nelson counties in Kentucky. We are actively pursuing non-interest bearing and core deposits to fund our planned loan growth and increase our net interest margin," stated James D. Rickard, President and Chief Executive Officer. "We are very excited about our new Treasury Services department, which will be a significant advantage in our effort to grow non-interest bearing deposits. We have already signed up a number of new remote capture and lockbox customers and will continue to market these services aggressively."

"With our partnership with The Scott County State Bank, we believe we have significantly enhanced our long-term prospects for earnings growth and improved our presence in the southern Indiana market which, ultimately, will create value for our shareholders," continued Mr. Rickard. "As we continue the process of integration with The Scott County State Bank, we will be able to achieve certain economies of scale which will improve our non-interest expense and profitability ratios. I am excited about the future prospects of the Company as we continue in our quest to provide the highest levels of service to our customers."

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The provision for loan losses was $1,488,000 less than last year, primarily as a result of the decreases in impaired loans resulting from positive resolutions of certain significant impaired credits. Although classified loans increased from the previous period primarily due to The Scott County State Bank watch list loans of $4,765,000, the portion of the Company's loans considered impaired decreased which is a significant component in management's calculation of its estimate of the allowance for loan losses. Charge-offs, which had been reserved for in prior periods, as a percentage of net loans increased during the period which along with a decrease in the provision for loans losses, contributed to the decrease in the allowance for loan losses as a percentage of total loans. Also, contributing to the decrease in allowance for loan losses to total loans was the weighted effect of the allowance recorded by The Scott County State Bank of 0.78% of total loans as of December 31, 2006.

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Non-interest income increased by 38.7% for the three months ended December 31, 2006 as compared to the same period in 2005 and decreased by 1.5% for 2006 as compared to 2005. The increase in the 4th quarter non-interest income items is primarily due to the Company's acquisition of The Scott County State Bank on July 1, 2006. Non-interest income for the year ended December 31, 2005 was significantly impacted by a gain on life insurance of $656,000 and a $345,000 gain on sale of equity stock. Excluding these items, non-interest income for the year ended December 31, 2006 grew by $935,000 from the same period in 2005 primarily because of the increase in deposits service charges which resulted from growth in deposits, both organic and through the Scott County State Bank acquisition, and an increase in the deposit account fee structure.

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All categories of non-interest expense increased compared to the three and twelve months ended 2005, with the exception of marketing and advertising for the quarter ended December 31, 2006 as compared to 2005, primarily as a result of the merger with The Scott County State Bank. Excluding non-interest expense related to The Scott County State Bank, the Company's non-interest expense increased approximately 7.0% from 2005 to 2006.

Community Bank Shares of Indiana, Inc. is the parent company of two full-service banking subsidiaries: Your Community Bank in New Albany, Indiana, and The Scott County State Bank in Scottsburg, Indiana. The Company is traded on the NASDAQ under the symbol CBIN.

Statements in this press release relating to the Company's plans, objectives, or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. The Company's actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties, including those discussed in the Company's 2005 Form 10-K and subsequent 10-Qs filed with the Securities and Exchange Commission.

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