Shore Bancshares Reports 2015 Results

EASTON, Md., Jan. 21, 2016 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) reported net income of $2.163 million or $0.17 per diluted common share for the fourth quarter of 2015, compared to net income of $1.909 million or $0.15 per diluted common share for the third quarter of 2015, and net income of $1.226 million or $0.10 per diluted common share for the fourth quarter of 2014.  The Company reported net income of $7.108 million or $0.56 per diluted common share for fiscal year 2015, compared to net income of $5.051 million or $0.46 per diluted common share for fiscal year 2014. 

When comparing the fourth quarter of 2015 to the third quarter of 2015, net income increased due to higher net interest income due to increased loan volume and lower noninterest expenses.  When comparing the fourth quarter of 2015 to the fourth quarter of 2014, the improved results were driven by an increase in net interest income due to higher loan volume, resulting in a shift from lower to higher yielding assets coupled with a decrease in provision for credit losses and a decline in operating expenses.  When comparing fiscal year 2015 to fiscal year 2014, improved earnings were due to an increase in net interest income of $1.5 million, a decline in provision for credit losses of $1.3 million, and the reduction of noninterest expenses of $2.0 million.  These improvements were partially offset by a decrease in noninterest income of $1.4 million.

"2015 was an exciting year for our Company," said Lloyd L "Scott" Beatty Jr. "The removal of the Consent Order from The Talbot Bank was a significant achievement that has enabled us to once again focus on the future. We have already produced consistent quarterly earnings growth and we were able to restore our shareholder dividend during the year.  As we look forward to 2016 we have put plans in place to strengthen our core deposits, continue to grow our loan portfolio and expand our insurance and wealth management businesses thereby reasserting Shore Bancshares as the dominant financial services company in our market."

Balance Sheet ReviewTotal assets were $1.135 billion at December 31, 2015, a $34.7 million, or 3.2%, increase when compared to $1.100 billion at the end of 2014.  The higher amount of total assets is the result of significant loan growth of $84.4 million, primarily in the consumer and commercial real estate loan portfolios of $44.5 and $29.8 million, respectively.  The significant growth in the loan portfolio was partially funded by deposit growth of $26.5 million and a decrease in investment securities of $24.4 million.        

Total deposits at December 31, 2015 increased $26.5 million, or 2.8%, when compared to December 31, 2014.  The increase in total deposits was mainly due to an increase in noninterest-bearing deposits of $35.9 million, partially offset by a decrease in interest-bearing transaction accounts of $9.4 million.  Total stockholders' equity increased $6.5 million, or 4.6%, when compared to the end of 2014 due to current year's earnings, partially offset by common stock dividends paid to shareholders of $506 thousand.  At December 31, 2015, the ratio of total equity to total assets was 12.95% and the ratio of total tangible equity to total tangible assets was 11.93%, higher than the 12.77% and 11.70%, respectively, at December 31, 2014.

Review of Quarterly Financial Results Net interest income was $9.3 million for the fourth quarter of 2015, compared to $9.0 million for the third quarter of 2015 and $8.6 million for the fourth quarter of 2014.  The increase in net interest income for the fourth quarter of 2015 when compared to the third quarter of 2015 was the direct result of increased loan volume and lower rates paid on interest-bearing deposits.  When comparing the fourth quarter of 2015 to the fourth quarter of 2014, significant loan growth resulted in an increase in average loans of $78.1 million.   The Company's net interest margin was 3.45% for the fourth quarter of 2015, compared to 3.43% for the third quarter of 2015 and 3.35% for the fourth quarter of 2014. The increase in net interest margin was primarily due to the increase in loan volume which was partially funded by short term lower yielding investments.

The provision for credit losses was $475 thousand for the fourth quarter of 2015, $410 thousand for the third quarter of 2015 and $650 thousand for the fourth quarter of 2014.  The higher level of provision for credit losses when comparing the fourth quarter of 2015 to the third quarter of 2015 was primarily due to growth in the loan portfolio.  The level of provision for credit losses decreased when comparing the fourth quarter of 2015 to the fourth quarter of 2014, despite the growth in the loan portfolio, primarily due to declines in nonaccrual loans and troubled debt restructurings ("TDRs") as well as net charge-offs.  Net charge-offs were $257 thousand for the fourth quarter of 2015, $229 thousand for the third quarter of 2015 and $1.6 million for the fourth quarter of 2014.  The ratio of annualized net charge-offs to average loans was 0.13% for the fourth quarter of 2015, 0.12% for the third quarter of 2015 and 0.88% for the fourth quarter of 2014.  The ratio of the allowance for credit losses to period-end loans was 1.05% at December 31, 2015, higher than the 1.04% at September 30, 2015 and lower than the 1.08% at December 31, 2014. 

At December 31, 2015, nonperforming assets, excluding TDRs, were $16.4 million, an increase of $321 thousand, or 2.0%, when compared to September 30, 2015 and a decrease of $893 thousand, or 5.2%, when compared to December 31, 2014.  Additionally, accruing TDRs were $15.5 million at December 31, 2015, a decrease of $936 thousand, or 5.7%, when compared to September 30, 2015 and a decrease of $1.2 million, or 7.1% when compared to December 31, 2014.  The positive trend in nonperforming assets and TDRs when comparing December 31, 2015 to both September 30, 2015 and December 31, 2014 was mainly accomplished through continued workout efforts and charge-offs over the last 12 months.  At December 31, 2015, the ratio of nonperforming assets to total assets was 1.44%, slightly higher than the 1.43% at September 30, 2015 and lower than the 1.57% at December 31, 2014.  In addition, the ratio of accruing TDRs to total assets at December 31, 2015 was 1.37%, compared to 1.47% at September 30, 2015 and 1.52% at December 31, 2014, which reflects improved credit quality in the loan portfolio.

Total noninterest income for the fourth quarter of 2015 decreased $267 thousand, or 6.8%, when compared to the third quarter of 2015 and increased $167 thousand, or 4.8%, when compared to the fourth quarter of 2014.  The decrease from the third quarter of 2015 was primarily due to lower retail insurance commissions which are typically higher in the first and third quarters of the Company's fiscal year, resulting in a decline of $347 thousand.  The decline in retail commissions was partially offset by increases in service charges on deposit accounts and a gain on sale of other real estate owned "OREO" property.  The increase from the fourth quarter of 2014 of $167 thousand was the result of increases in service charges on deposit accounts, bank service fees, and a gain on sale of OREO property, offset by a decline in trust and investment fee income.      

Total noninterest expense for the fourth quarter of 2015 decreased $446 thousand, or 4.7%, when compared to the third quarter of 2015 and decreased $560 thousand, or 5.9%, when compared to the fourth quarter of 2014.  The decrease from the third quarter of 2015 was due to decreases in salary and wages which resulted from lower insurance commission expense and lower legal and professional fees.   The decrease from the fourth quarter of 2014 was primarily due to lower legal and professional fees, lower FDIC insurance assessments, lower costs associated with customer collections and decreased write-downs on OREO properties.      

Review of 2015 Financial ResultsNet interest income for 2015 was $35.5 million, an increase of $1.5 million, or 4.4%, when compared to 2014 due to an increase in average earning assets of $41.9 million.  The increase in interest income was primarily due to higher average balances on loans and lower average balances and rates paid on time deposits. Although the yields on loans declined compared to 2014, the funding of loan growth with lower cost liabilities partially offset the decrease in yields on interest earning assets.  The increase in the average balance of loans along with the decrease in rates on interest bearing deposits resulted in the net interest margin remaining unchanged at 3.43% for both 2015 and 2014.  

The provision for credit losses for 2015 and 2014 was $2.1 million and $3.4 million, respectively, while net charge-offs were $1.5 million and $6.4 million, respectively.  The ratio of annualized net charge-offs to average loans was 0.19% for 2015 and 0.90% 2014.

Total noninterest income for 2015 decreased $1.4 million, or 8.1%, when compared to 2014.  The decrease was primarily due to the loss of wholesale insurance commissions and fees of $2.1 million from the formerly owned Tri-State General Insurance Agency ("Tri-State") which was sold late in the second quarter of 2014 for a gain of $114 thousand.  Excluding Tri-State and the gain on sale, noninterest income increased $777 thousand in 2015 compared to 2014.  The increases in noninterest income consisted of service charges on deposit accounts of $460 due to an initiative to raise bank fees and retail insurance commissions and contingencies of $504 thousand, offset by a decrease in trust and investment fee income of $233 thousand.    

Total noninterest expense for 2015 decreased $2.0 million, or 5.1%, when compared to 2014.  The sale of Tri-State reduced noninterest expenses by $1.9 million, primarily insurance agency commissions.  In addition, lower write-downs on OREO property, lower FDIC insurance premium expense due to the upgraded regulatory status and financial performance of The Talbot Bank in the second quarter of 2015, and lower credit costs, almost entirely offset by increases in salary and wages, data processing and legal and professional fees contributed to the decrease in noninterest expense.   

Shore Bancshares InformationShore 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 Maryland chartered commercial banks, The Talbot Bank of Easton, Maryland, and CNB; one retail insurance producer firm, The Avon-Dixon Agency, LLC, with two specialty lines, Elliot Wilson Insurance (Trucking), and Jack Martin and Associates (Marine); and an insurance premium finance company, Mubell Finance, 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 StatementsThe 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 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".

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Shore Bancshares, Inc.