Form 8-K SHORE BANCSHARES INC For: Apr 29

Exhibit 99.1

 

 

18 E. Dover Street

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports First Quarter 2021 Financial Results

 

Easton, Maryland (04/29/2021) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported net income of $3.998 million or $0.34 per diluted common share for the first quarter of 2021, compared to net income of $3.886 million or $0.32 per diluted common share for the fourth quarter of 2020, and net income of $3.118 million or $0.25 per diluted common share for the first quarter of 2020. On March 3, 2021, the Company and Severn Bancorp, Inc. (“Severn”) announced that they had entered into a merger agreement pursuant to which Severn will be merged with and into the Company. The Company anticipates that future quarters will be impacted by the recognition of additional merger-related expenses.

 

When comparing net income for the first quarter of 2021 to the fourth quarter of 2020, net income increased $112 thousand, primarily due to decreases in the provision for credit losses of $625 thousand and interest expenses of $186 thousand, partially offset by decreases in noninterest income of $490 thousand and total interest income of $151 thousand. Total noninterest expenses remained in line with the fourth quarter with a decrease of $57 thousand. When comparing net income for the first quarter of 2021 to the first quarter of 2020, net income increased $880 thousand due to increases in total interest income of $658 thousand, noninterest income of $205 thousand and a decrease in interest expense of $624 thousand. These improvements were partially offset by an increase in noninterest expenses of $150 thousand and a slightly higher provision for credit losses of $75 thousand.

 

“We are pleased with our positive financial results for the quarter and the improving credit profile.” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer. “Our markets are experiencing very positive indications of an improving economy and healthy loan demand. We continued to extend Payroll Protection Program lending to assist small businesses who qualify and continue to see a downward trend in loan deferrals related to the pandemic. Our recently announced new branch location in Ocean City, which is planned to open in 2022, is an excellent opportunity to capitalize on the tremendous growth potential in that market. As our plan for strategic growth in contiguous markets continues and we work on integration with our partners at Severn Bank, we remain focused on core earnings and enhanced returns for our shareholders.”  

 

Ongoing response to COVID-19

 

Employees

Many of our non-branch personnel have returned to our offices and continue to practice social distancing as the Company has implemented enhanced cleaning and disinfecting procedures across all locations. Most of our Company meetings have transitioned to telephonic or video conferencing. We suspended all unnecessary business-related travel, public events, and meetings with outside parties to promote the safety and well-being of our employees. We have encouraged our employees to sign-up and receive the COVID vaccine in accordance with state and local guidelines.

 

Banking Locations

All our branch locations remain open, with normal hours of operation. We have re-opened our branch lobbies to the public with limits on the number of people allowed in the branch at any time. The drive-thru locations have expanded their capabilities to accommodate an array of transactions for our customers. We notified our customers of our changes in operations as well as promoted the use of online and mobile banking.

 

 

Customers

We thank our customers for their commitment and understanding as we continue to find ways to serve them as safely and securely as possible. For our customers impacted by the pandemic, we have provided fee waivers and loan payment deferrals to assist them during this challenging time.

 

Loan Deferrals

As of March 31, 2021, the Company’s outstanding COVID related loan deferral balance amounted to $16.1 million, or 1.10% of the total loan portfolio. The outstanding COVID loan deferral balance at December 31, 2020 was $34.9 million, or 2.40% of the total loan portfolio. The COVID related deferral balances decreased $18.8 million, or 53.9% in the first quarter of 2021, the direct result of loan deferrals expiring at March 31, 2021. The most significant deferral as of March 31, 2021 was a construction loan with a $13.3 million outstanding balance related to a newly renovated strip shopping center in Easton, Maryland. The project is in the completion stage of construction and the borrowers are making interest only payments. At March 31, 2021, the Company had only one hotel loan on deferral. The outstanding balance of the loan at quarter end was $1.4 million and the borrowers are making interest only payments. This hotel is located in Ocean City, Maryland, which is ready for a full-open season and experiencing high demand as a preferred travel destination in 2021.

 

Small Business Administration’s Paycheck Protection Program (“PPP”)

We remain a SBA preferred lender and actively participated in the first and second PPP programs. The first round of PPP lending resulted in 1,488 loans for $126.7 million, of which 387 loans have been forgiven for $52.2 million as of March 31, 2021. The second round of PPP lending which began in 2021, resulted in 660 loans for $54.8 million. As of March 31, 2021, the Company had 1,761 PPP loans totaling $129.1 million that were outstanding, inclusive of loans issued during both the first and second rounds of the PPP.

 

Share Repurchases

At the present time all share repurchases have been suspended due to the current status of our merger with Severn. Once the merger is consummated, the Company intends to resume its current share buyback program in which $546 thousand remains available. The Board of directors and management will re-evaluate the need for an additional stock repurchase program once the current plan is exhausted or expires.

 

Dividends

We currently expect to maintain our quarterly cash dividends based on our strong capital position.

 

Balance Sheet Review

Total assets were $2.040 billion at March 31, 2021, a $106.3 million, or 5.5%, increase when compared to $1.933 billion at the end of 2020. This increase was due to increases in both investment securities held to maturity and interest-bearing deposits with other banks of $60.2 million and $42.3 million, respectively. These increases were funded by an increase in deposits of $99.9 million and proceeds from the maturity and principal payments on investment securities available for sale of $15.5 million.

 

Total deposits increased $99.9 million, or 5.9%, when compared to December 31, 2020. The increase in total deposits consisted of increases in the following categories: Savings and money market accounts of $113.1 million, Noninterest-bearing deposits of $24.7 million and other time deposits of $2.7 million, partially offset by a decrease in checking accounts of $40.6 million. The significant movement within deposit accounts continues to be impacted by direct government stimulus payments to our customers.

 

Total stockholders’ equity increased $1.1 million, or 0.6%, when compared to the end of 2020. At March 31, 2021, the ratio of total equity to total assets was 9.61% and the ratio of total tangible equity to total tangible assets was 8.76%.

 

 

Review of Quarterly Financial Results

Net interest income was $13.80 million for the first quarter of 2021, compared to $13.77 million for the fourth quarter of 2020 and $12.52 million for the first quarter of 2020. The slight increase in net interest income when compared to the fourth quarter of 2020 was primarily due to the largely offsetting nature of a decrease in interest expense on deposits and a decrease in interest and fees on loans. The decrease in interest expense on deposits was due to an 8bps decline on rates paid on interest-bearing deposits, specifically time deposits that matured and renewed during the first quarter of 2021 at lower rates than previously originated. The decrease in interest and fees on loans was primarily due to loan interest recoveries from problem assets experienced in the fourth quarter of 2020, which was absent in the first quarter of 2021, and resulted in a 2bps decline in yields of loans. The increase in net interest income when comparing the first quarter of 2021 to the first quarter of 2020, was the result of higher interest and fees on loans and income from investment securities, coupled with a decrease in interest expense. The primary driver for the increase in interest income on loans was the result of higher average volume of loans of $187 million, which included PPP lending. The average balance of investment securities increased $98.4 million, providing $212 thousand of additional income, despite a decrease in the yields of 59bps. The decrease in interest expenses from the first quarter of 2020 was impacted by the decrease in the rates paid on interest-bearing deposits of 46bps, as well as, the elimination of long-term advances from FHLB which had an average balance of $15 million. The Company’s net interest margin decreased to 3.00% for the first quarter of 2021 from both 3.08% in the fourth quarter of 2020 and 3.48% for the first quarter of 2020. The decline in net interest margin in the first quarter of 2021 when compared to the fourth quarter of 2020 and the first quarter of 2020 was primarily due to excess liquidity, which has yet to be fully invested.

 

The provision for credit losses was $425 thousand for the three months ended March 31, 2021. The comparable amounts were $1.1 million and $350 thousand for the three months ended December 31, 2020 and March 31, 2020, respectively. The ratio of the allowance for credit losses to period-end loans was 0.98% at March 31, 2021. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 1.07% for March 31, 2021, higher than both the 1.04% at December 31, 2020 and the 0.81% at March 31, 2020. The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, as compared to March 31, 2020, were elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic. The allowance percentage, excluding PPP loans, increased only slightly in the first quarter of 2021 as compared to December 31, 2020, reflecting the Company’s ongoing evaluation of the risk of probable losses inherent in the portfolio and the consideration of factors, both positive and negative, which have impacted the portfolio since year end. The decrease in provision for credit losses when compared to the fourth quarter of 2020 was the result of a decline in historical losses and minimal loan growth. The Company reported no net charge offs or recoveries in the first quarter of 2021, compared to net recoveries of $61 thousand for the fourth quarter of 2020 and net charge-offs of $479 thousand for the first quarter of 2020.

 

At March 31, 2021 and December 31, 2020, nonperforming assets were $6.3 million. Despite the balance of nonperforming assets being similar for both the first quarter of 2021 and the fourth quarter of 2020, the composition of these assets was in contrast. When comparing nonperforming assets at March 31, 2021 to December 31, 2020, total nonaccrual loans decreased $575 thousand, or 10.5%, and loans 90 days past due and still accruing increased $384 thousand, or 47.8%. Accruing troubled debt restructurings (“TDRs”) decreased $541 thousand, or 7.7% over the same time period. Other real estate owned properties increased to $205 thousand at March 31, 2021 from $0 at December 31, 2020 as compared to $38 thousand at March 31, 2020. When comparing March 31, 2021 to March 31, 2020, nonperforming assets decreased $6.0 million, or 49.0%, primarily due to a decrease in nonaccrual loans of $6.7 million, or 57.7%. Accruing TDRs decreased $988 thousand, or 13.3%, and other real estate owned increased $167 thousand, or 439.5%, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.63%, 0.68% and 1.25% at March 31, 2021, December 31, 2020 and March 31, 2020, respectively. In addition, the ratio of accruing TDRs to total loans at March 31, 2021 was 0.44%, compared to 0.48% at December 31, 2020 and 0.58% at March 31, 2020.

 

Total noninterest income for the first quarter of 2021 decreased $490 thousand, or 16.1%, when compared to the fourth quarter of 2020 and increased $205 thousand, or 8.7%, when compared to the first quarter of 2020. The decrease compared to the linked quarter in 2020 was primarily due to the absence of swap fee income on loans originated during the fourth quarter of 2020 of $350 thousand and a decrease in service charges on deposit accounts of $108 thousand. The increase in noninterest income compared to the first quarter of 2020 was due to additional income from BOLI contracts of $141 thousand and additional bank service fees of $219 thousand, partially offset by a decrease in service charges on deposit accounts of $192 thousand.

 

Total noninterest expense for the first quarter of 2021 decreased $57 thousand, or less than 1%, when compared to the fourth quarter of 2020 and increased $150 thousand, or 1.4%, when compared to the first quarter of 2020. The decrease in noninterest expense when compared to the fourth quarter of 2020 was primarily related to lower salaries and wages of $224 thousand and legal and professional fees of $146 thousand, partially offset by higher employee benefit costs of $129 thousand. The decrease in salaries and wages was partially attributable to the deferral of costs associated with originating the second round of PPP loans. The increase in employee benefits was the result of higher medical insurance claims. The increase in noninterest expenses when compared to the first quarter of 2020 was primarily due to higher employee benefits, occupancy expense, data processing fees and FDIC insurance premium expense, partially offset by a decrease in salaries and wages and legal and professional expenses.

 

 

Shore Bancshares Information

 

Shore Bancshares 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 Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

 

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 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”.

 

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

 

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.

 

For further information contact: Edward Allen, Executive Vice President and Chief Financial Officer, 410-763-7800

 

 

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)

		For the Three Months Ended
		March 31,
		2021				2020				Change
PROFITABILITY FOR THE PERIOD
Net interest income		$	13,800			$	12,518				10.2	%
Provision for credit losses			425				350				21.4
Noninterest income			2,557				2,352				8.7
Noninterest expense			10,499				10,349				1.4
Income before income taxes			5,433				4,171				30.3
Income tax expense			1,435				1,053				36.3
Net income		$	3,998			$	3,118				28.2
Return on average assets			0.82	%			0.81	%			1	bp
Return on average equity			8.28				6.45				183
Return on average tangible equity (1)			9.40				7.43				197
Net interest margin			3.00				3.48				(48	)
Efficiency ratio - GAAP			64.19				69.60				(541	)
Efficiency ratio - Non-GAAP (1)			63.28				68.46				(518	)
PER SHARE DATA
Basic and diluted net income per common share		$	0.34			$	0.25				36.0	%
Net income		$	0.34			$	0.25				36.0
Dividends paid per common share		$	0.12			$	0.12				—
Book value per common share at period end			16.69				15.62				6.9
Tangible book value per common share at period end (1)			15.06				14.06				7.1
Market value at period end			17.02				10.85				56.9
Market range:
High			18.10				17.56				3.1
Low			12.99				7.63				70.2
AVERAGE BALANCE SHEET DATA
Loans		$	1,450,883			$	1,263,441				14.8	%
Investment securities			227,816				129,410				76.0
Earning assets			1,867,930				1,450,508				28.8
Assets			1,975,951				1,546,991				27.7
Deposits			1,742,666				1,327,162				31.3
Stockholders' equity			195,791				194,332				0.8

 

 

CREDIT QUALITY DATA
Net charge-offs		$	—			$	479				(100.0	)%
Nonaccrual loans		$	4,880			$	11,540				(57.7	)
Loans 90 days past due and still accruing			1,188				721				64.8
Other real estate owned			205				38				439.5
Total nonperforming assets			6,273				12,299				(49.0	)
Accruing troubled debt restructurings (TDRs)			6,456				7,444				(13.3	)
Total nonperforming assets and accruing TDRs		$	12,729			$	19,743				(35.5	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			9.61	%			12.45	%			(284	)bp
Period-end tangible equity to tangible assets (1)			8.76				11.35				(259	)
Annualized net charge-offs to average loans			—				0.15				(15	)
Allowance for credit losses as a percent of:
Period-end loans			0.98	(2)			0.81				17
Nonaccrual loans			293.30				89.93				20,337
Nonperforming assets			228.17				84.38				14,379
Accruing TDRs			221.70				139.41				8,229
Nonperforming assets and accruing TDRs			112.44				52.57				5,987
As a percent of total loans:
Nonaccrual loans			0.33				0.90				(57	)
Accruing TDRs			0.44				0.58				(14	)
Nonaccrual loans and accruing TDRs			0.78				1.49				(71	)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.43				0.96				(53	)
Nonperforming assets and accruing TDRs			0.87				1.55				(68	)
As a percent of total assets:
Nonaccrual loans			0.24				0.73				(49	)
Nonperforming assets			0.31				0.78				(47	)
Accruing TDRs			0.32				0.47				(15	)
Nonperforming assets and accruing TDRs			0.63				1.25				(62	)

 

(1)

See the reconciliation table that begins on page 14 of 15.

(2)

This ratio includes PPP loans of $129.1 million. Excluding these loans, the ratio is 1.07%.

 

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

														March 31, 2021				March 31, 2021
		March 31,				December 31,				March 31,				compared to				compared to
		2021				2020				2020				December 31, 2020				March 31, 2020
ASSETS
Cash and due from banks		$	14,553			$	16,666			$	16,432				(12.7	)%			(11.4	)%
Interest-bearing deposits with other banks			212,533				170,251				79,819				24.8				166.3
Cash and cash equivalents			227,086				186,917				96,251				21.5				135.9
Investment securities available for sale (at fair value)			124,103				139,568				104,375				(11.1	)			18.9
Investment securities held to maturity			125,929				65,706				8,687				91.7				1,349.6
Equity securities, at fair value			1,382				1,395				1,350				(0.9	)			2.4
Restricted securities			3,189				3,626				4,263				(12.1	)			(25.2	)
Loans			1,461,522				1,454,256				1,276,993				0.5				14.5
Less: allowance for credit losses			(14,313	)			(13,888	)			(10,378	)			3.1				(37.9	)
Loans, net			1,447,209				1,440,368				1,266,615				0.5				14.3
Premises and equipment, net			25,308				24,924				24,930				1.5				1.5
Goodwill			17,518				17,518				17,518				—				—
Other intangible assets, net			1,593				1,719				2,108				(7.3	)			(24.4	)
Other real estate owned, net			205				—				38				—				439.5
Right of use assets, net			7,229				4,795				5,019				50.8				44.0
Other assets			58,880				46,779				40,267				25.9				46.2
Total assets		$	2,039,631			$	1,933,315			$	1,571,421				5.5				29.8
LIABILITIES
Noninterest-bearing deposits		$	533,823			$	509,091			$	355,054				4.9				50.3
Interest-bearing deposits			1,266,813				1,191,614				993,740				6.3				27.5
Total deposits			1,800,636				1,700,705				1,348,794				5.9				33.5
Securities sold under retail repurchase agreements			3,501				1,050				2,162				233.4				61.9
Advances from FHLB - long-term			—				—				15,000				—				(100.0	)
Subordinated debt			24,460				24,429				—				0.1				—
Total borrowings			27,961				25,479				17,162
Lease liabilities			7,329				4,874				5,072				50.4				44.5
Accrued expenses and other liabilities			7,601				7,238				4,699				5.0				61.8
Total liabilities			1,843,527				1,738,296				1,375,727				6.1				34.0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares			118				118				125				—				(5.6	)
Additional paid in capital			51,445				52,167				61,067				(1.4	)			(15.8	)
Retained earnings			143,794				141,205				133,044				1.8				8.1
Accumulated other comprehensive income			747				1,529				1,458				(51.1	)			(48.8	)
Total stockholders' equity			196,104				195,019				195,694				0.6				0.2
Total liabilities and stockholders' equity		$	2,039,631			$	1,933,315			$	1,571,421				5.5				29.8
Period-end common shares outstanding			11,752				11,783				12,525				(0.3	)			(6.2	)
Book value per common share		$	16.69			$	16.55			$	15.62				0.8				6.9

 

 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

		For the Three Months Ended
		March 31,
		2021				2020				% Change
INTEREST INCOME
Interest and fees on loans		$	14,366			$	13,795				4.1	%
Interest on investment securities:
Taxable			931				719				29.5
Interest on deposits with other banks			47				172				(72.7	)
Total interest income			15,344				14,686				4.5
INTEREST EXPENSE
Interest on deposits			1,184				2,059				(42.5	)
Interest on short-term borrowings			1				2				(50.0	)
Interest on long-term borrowings			359				107				235.5
Total interest expense			1,544				2,168				(28.8	)
NET INTEREST INCOME			13,800				12,518				10.2
Provision for credit losses			425				350				21.4
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			13,375				12,168				9.9
NONINTEREST INCOME
Service charges on deposit accounts			674				866				(22.2	)
Trust and investment fee income			407				375				8.5
Other noninterest income			1,476				1,111				32.9
Total noninterest income			2,557				2,352				8.7
NONINTEREST EXPENSE
Salaries and wages			4,142				4,296				(3.6	)
Employee benefits			1,844				1,722				7.1
Occupancy expense			814				698				16.6
Furniture and equipment expense			307				317				(3.2	)
Data processing			1,127				1,044				8.0
Directors' fees			149				141				5.7
Amortization of intangible assets			126				144				(12.5	)
FDIC insurance premium expense			185				91				103.3
Other real estate owned expenses, net			1				18				(94.4	)
Legal and professional fees			516				634				(18.6	)
Other noninterest expenses			1,288				1,244				3.5
Total noninterest expense			10,499				10,349				1.4
Income before income taxes			5,433				4,171				30.3
Income tax expense			1,435				1,053				36.3
NET INCOME		$	3,998			$	3,118				28.2
Weighted average shares outstanding - basic			11,745				12,513				(6.1	)
Weighted average shares outstanding - diluted			11,747				12,518				(6.2	)
Basic and diluted net income per common share		$	0.34			$	0.25				36.0
Net income		$	0.34			$	0.25				36.0
Dividends paid per common share			0.12				0.12				—

 

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

 

		For the Three Months Ended
		March 31,
		2021								2020
		Average				Yield/				Average				Yield/
		balance				rate				balance				rate
Earning assets
Loans (1), (2), (3)		$	1,450,883				4.03	%		$	1,263,441				4.40	%
Investment securities
Taxable			227,816				1.63				129,410				2.22
Interest-bearing deposits			189,231				0.10				57,657				1.20
Total earning assets			1,867,930				3.34	%			1,450,508				4.08	%
Cash and due from banks			19,245								17,874
Other assets			103,010								89,154
Allowance for credit losses			(14,234	)							(10,545	)
Total assets		$	1,975,951							$	1,546,991
Interest-bearing liabilities
Demand deposits		$	438,340				0.14	%		$	284,176				0.56	%
Money market and savings deposits			510,881				0.18				410,252				0.46
Certificates of deposit $100,000 or more			130,745				1.26				129,408				1.85
Other time deposits			144,919				1.10				150,645				1.60
Interest-bearing deposits			1,224,885				0.39				974,481				0.85
Securities sold under retail repurchase
agreements and federal funds purchased			2,238				0.18				1,235				0.65
Advances from FHLB - long-term			—				—				15,000				2.87
Subordinated debt			24,443				5.96				—				—
Total interest-bearing liabilities			1,251,566				0.50	%			990,716				0.88	%
Noninterest-bearing deposits			517,781								352,681
Accrued expenses and other liabilities			10,813								9,262
Stockholders' equity			195,791								194,332
Total liabilities and stockholders' equity		$	1,975,951							$	1,546,991
Net interest spread							2.84	%							3.20	%
Net interest margin							3.00	%							3.48	%

 

(1)

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)

Average loan balances include nonaccrual loans.

(3)

Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

 

		1st Quarter				4th Quarter				3rd Quarter				2nd Quarter				1st Quarter				Q1 2021				Q1 2021
		2021				2020				2020				2020				2020				compared to				compared to
		Q1 2021				Q4 2020				Q3 2020				Q2 2020				Q1 2020				Q4 2020				Q1 2020
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income		$	13,836			$	13,799			$	13,317			$	13,068			$	12,554				0.3	%			10.2	%
Less: Taxable-equivalent adjustment			36				34				34				37				36				5.9				—
Net interest income			13,800				13,765				13,283				13,031				12,518				0.3				10.2
Provision for credit losses			425				1,050				1,500				1,000				350				(59.5	)			21.4
Noninterest income			2,557				3,047				2,581				2,769				2,352				(16.1	)			8.7
Noninterest expense			10,499				10,556				9,831				7,663				10,349				(0.5	)			1.4
Income before income taxes			5,433				5,206				4,533				7,137				4,171				4.4				30.3
Income tax expense			1,435				1,320				1,142				1,802				1,053				8.7				36.3
Net income		$	3,998			$	3,886			$	3,391			$	5,335			$	3,118				2.9				28.2
Return on average assets			0.82	%			0.82	%			0.76	%			1.31	%			0.81	%			—	bp			1	bp
Return on average equity			8.28				7.82				6.71				10.79				6.45				46				183
Return on average tangible equity (1)			9.40				8.88				7.63				12.20				7.43				52				197
Net interest margin			3.00				3.08				3.17				3.41				3.48				(8	)			(48	)
Efficiency ratio - GAAP			64.19				62.79				61.97				48.50				69.60				140				(541	)
Efficiency ratio - Non-GAAP (1)			63.28				61.91				61.05				48.58				68.46				137				(518	)
PER SHARE DATA
Basic and diluted net income per common share		$	0.34			$	0.32			$	0.27			$	0.43			$	0.25				6.3	%			36.0	%
Net income		$	0.34			$	0.32			$	0.27			$	0.43			$	0.25				6.3				36.0
Dividends paid per common share			0.12				0.12				0.12				0.12				0.12				—				—
Book value per common share at period end			16.69				16.55				16.28				15.98				15.62				0.8				6.9
Tangible book value per common share at period end (1)			15.06				14.92				14.69				14.42				14.06				0.9				7.1
Market value at period end			17.02				14.60				10.98				11.09				10.85				16.6				56.9
Market range:
High			18.10				15.12				11.77				12.40				17.56				19.7				3.1
Low			12.99				10.25				9.14				8.00				7.63				26.7				70.2

 

 

AVERAGE BALANCE SHEET DATA
Loans		$	1,450,883			$	1,430,013			$	1,406,683			$	1,374,324			$	1,263,441				1.5	%			14.8	%
Investment securities			227,816				179,801				136,017				107,908				129,410				26.7				76.0
Earning assets			1,867,930				1,780,854				1,670,194				1,539,945				1,450,508				4.9				28.8
Assets			1,975,951				1,880,449				1,771,944				1,638,387				1,546,991				5.1				27.7
Deposits			1,742,666				1,646,980				1,548,072				1,427,063				1,327,162				5.8				31.3
Stockholders' equity			195,791				197,591				201,079				198,842				194,332				(0.9	)			0.8
CREDIT QUALITY DATA
Net (recoveries) charge-offs		$	—			$	(61	)		$	(187	)		$	288			$	479				100.0	%			(100.0	)%
Nonaccrual loans		$	4,880			$	5,455			$	6,966			$	11,649			$	11,540				(10.5	)			(57.7	)
Loans 90 days past due and still accruing			1,188				804				1,373				604				721				47.8				64.8
Other real estate owned			205				—				38				38				38				—				439.5
Total nonperforming assets		$	6,273			$	6,259			$	8,377			$	12,291			$	12,299				0.2				(49.0	)
Accruing troubled debt restructurings (TDRs)		$	6,456			$	6,997			$	7,267			$	7,312			$	7,444				(7.7	)			(13.3	)
Total nonperforming assets and accruing TDRs		$	12,729			$	13,256			$	15,644			$	19,603			$	19,743				(4.0	)			(35.5	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			9.61	%			10.09	%			10.88	%			11.64	%			12.45	%			(48	)bp			(284	)bp
Period-end tangible equity to tangible assets (1)			8.76				9.18				9.92				10.63				11.35				(42	)			(259	)
Annualized net (recoveries) charge-offs to average loans			—				(0.02	)			(0.05	)			0.08				0.15				2				(15	)
Allowance for credit losses as a percent of:
Period-end loans (2)			0.98				0.95				0.90				0.79				0.81				3				17
Nonaccrual loans			293.30				254.59				183.42				95.20				89.93				3,871				20,337
Nonperforming assets			228.17				221.89				152.52				90.23				84.38				628				14,379
Accruing TDRs			221.70				198.49				175.82				151.67				139.41				2,321				8,229
Nonperforming assets and accruing TDRs			112.44				104.77				81.67				56.57				52.57				767				5,987
As a percent of total loans:
Nonaccrual loans			0.33				0.38				0.49				0.83				0.90				(5	)			(57	)
Accruing TDRs			0.44				0.48				0.51				0.52				0.58				(4	)			(14	)
Nonaccrual loans and accruing TDRs			0.78				0.86				1.00				1.35				1.49				(8	)			(71	)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.43				0.43				0.59				0.87				0.96				—				(53	)
Nonperforming assets and accruing TDRs			0.87				0.91				1.10				1.39				1.55				(4	)			(68	)
As a percent of total assets:
Nonaccrual loans			0.24				0.28				0.38				0.68				0.73				(4	)			(49	)
Nonperforming assets			0.31				0.32				0.46				0.71				0.78				(1	)			(47	)
Accruing TDRs			0.32				0.36				0.40				0.43				0.47				(4	)			(15	)
Nonperforming assets and accruing TDRs			0.63				0.68				0.86				1.14				1.25				(5	)			(62	)

 

(1)

See the reconciliation table that begins on page 14 of 15.

(2)

As of March 31, 2021 and December 31, 2020, this ratio includes PPP loans of $129.1 million and $122.8 million, respectively. Excluding these loans, the ratio is 1.07%, and 1.04% for March 31, 2021 and December 31, 2020, respectively.

 

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)

 

																						Q1 2021				Q1 2021
																						compared to				compared to
		Q1 2021				Q4 2020				Q3 2020				Q2 2020				Q1 2020				Q4 2020				Q1 2020
INTEREST INCOME
Interest and fees on loans		$	14,366			$	14,541			$	14,139			$	13,945			$	13,795				(1.2	)%			4.1	%
Interest on investment securities:
Taxable			931				910				730				638				719				2.3				29.5
Interest on deposits with other banks			47				44				33				11				172				6.8				(72.7	)
Total interest income			15,344				15,495				14,902				14,594				14,686				(1.0	)			4.5
INTEREST EXPENSE
Interest on deposits			1,184				1,355				1,470				1,556				2,059				(12.6	)			(42.5	)
Interest on short-term borrowings			1				1				1				1				2				—				(50.0	)
Interest on long-term borrowings			359				374				148				6				107				(4.0	)			235.5
Total interest expense			1,544				1,730				1,619				1,563				2,168				(10.8	)			(28.8	)
NET INTEREST INCOME			13,800				13,765				13,283				13,031				12,518				0.3				10.2
Provision for credit losses			425				1,050				1,500				1,000				350				(59.5	)			21.4
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			13,375				12,715				11,783				12,031				12,168				5.2				9.9
NONINTEREST INCOME
Service charges on deposit accounts			674				782				647				544				866				(13.8	)			(22.2	)
Trust and investment fee income			407				439				381				363				375				(7.3	)			8.5
Gains on sales and calls of investment securities			—				—				—				347				—				—				—
Other noninterest income			1,476				1,826				1,553				1,515				1,111				(19.2	)			32.9
Total noninterest income			2,557				3,047				2,581				2,769				2,352				(16.1	)			8.7
NONINTEREST EXPENSE
Salaries and wages			4,142				4,366				4,143				2,130				4,296				(5.1	)			(3.6	)
Employee benefits			1,844				1,715				1,489				1,535				1,722				7.5				7.1
Occupancy expense			814				745				774				702				698				9.3				16.6
Furniture and equipment expense			307				366				294				247				317				(16.1	)			(3.2	)
Data processing			1,127				1,093				1,114				1,037				1,044				3.1				8.0
Directors' fees			149				118				132				113				141				26.3				5.7
Amortization of intangible assets			126				126				125				138				144				—				(12.5	)
FDIC insurance premium expense			185				138				132				124				91				34.1				103.3
Other real estate owned expenses, net			1				38				—				—				18				(97.4	)			(94.4	)
Legal and professional fees			516				662				447				553				634				(22.1	)			(18.6	)
Other noninterest expenses			1,288				1,189				1,181				1,084				1,244				8.3				3.5
Total noninterest expense			10,499				10,556				9,831				7,663				10,349				(0.5	)			1.4
Income before income taxes			5,433				5,206				4,533				7,137				4,171				4.4				30.3
Income tax expense			1,435				1,320				1,142				1,802				1,053				8.7				36.3
NET INCOME		$	3,998			$	3,886			$	3,391			$	5,335			$	3,118				2.9				28.2
Weighted average shares outstanding - basic			11,745				12,004				12,483				12,524				12,513				(2.2	)			(6.1	)
Weighted average shares outstanding - diluted			11,747				12,005				12,483				12,525				12,518				(2.1	)			(6.2	)
Basic and diluted net income per common share		$	0.34			$	0.32			$	0.27			$	0.43			$	0.25				6.3				36.0
Net income		$	0.34			$	0.32			$	0.27			$	0.43			$	0.25				6.3				36.0
Dividends paid per common share			0.12				0.12				0.12				0.12				0.12				—				—

 

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)

 

																																										Average balance
																																										Q1 2021				Q1 2021
																																										compared to				compared to
		Q1 2021								Q4 2020								Q3 2020								Q2 2020								Q1 2020								Q4 2020				Q1 2020
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans (1), (2), (3)			1,450,883				4.03	%		$	1,430,013				4.05	%		$	1,406,683				4.01	%		$	1,374,324				4.09	%		$	1,263,441				4.40	%			1.5	%			14.8	%
Investment securities
Taxable			227,816				1.63				179,801				2.02				136,017				2.14				107,908				2.37				129,410				2.22				26.7				76.0
Interest-bearing deposits			189,231				0.10				171,040				0.10				127,494				0.10				57,713				0.07				57,657				1.20				10.6				228.2
Total earning assets			1,867,930				3.34	%			1,780,854				3.47	%			1,670,194				3.56	%			1,539,945				3.82	%			1,450,508				4.08	%			4.9				28.8
Cash and due from banks			19,245								17,268								18,860								18,167								17,874								11.4				7.7
Other assets			103,010								95,684								94,755								90,981								89,154								7.7				15.5
Allowance for credit losses			(14,234	)							(13,357	)							(11,865	)							(10,706	)							(10,545	)							6.6				35.0
Total assets		$	1,975,951							$	1,880,449							$	1,771,944							$	1,638,387							$	1,546,991								5.1				27.7
Interest-bearing liabilities
Demand deposits		$	438,340				0.14	%		$	420,582				0.18	%		$	370,922				0.19	%		$	298,568				0.20	%		$	284,176				0.56	%			4.2				54.2
Money market and savings deposits			510,881				0.18				459,237				0.20				442,322				0.21				426,963				0.23				410,252				0.46				11.2				24.5
Certificates of deposit $100,000 or more			130,745				1.26				128,642				1.45				127,983				1.68				130,582				1.81				129,408				1.85				1.6				1.0
Other time deposits			144,919				1.10				145,795				1.27				148,223				1.42				150,675				1.54				150,645				1.60				(0.6	)			(3.8	)
Interest-bearing deposits			1,224,885				0.39				1,154,256				0.47				1,089,450				0.54				1,006,788				0.62				974,481				0.85				6.1				25.7
Securities sold under retail repurchase agreements
and federal funds purchased			2,238				0.18				1,101				0.36				1,575				0.25				2,030				0.20				1,235				0.65				103.3				81.2
Advances from FHLB - long-term			—				—				—				—				—				—				824				2.93				15,000				2.87				—				(100.0	)
Subordinated debt			24,443				5.96				24,420				6.09				9,859				5.97				—				—				—				—				100.0				100.0
Total interest-bearing liabilities			1,251,566				0.50	%			1,179,777				0.58	%			1,100,884				0.59	%			1,009,642				0.62	%			990,716				0.88	%			6.1				26.3
Noninterest-bearing deposits			517,781								492,724								458,622								420,275								352,681								5.1				46.8
Accrued expenses and other liabilities			10,813								10,357								11,359								9,628								9,262								4.4				16.7
Stockholders' equity			195,791								197,591								201,079								198,842								194,332								(0.9	)			0.8
Total liabilities and stockholders' equity		$	1,975,951							$	1,880,449							$	1,771,944							$	1,638,387							$	1,546,991								5.1				27.7
Net interest spread							2.84	%							2.89	%							2.97	%							3.20	%							3.20	%
Net interest margin							3.00	%							3.08	%							3.17	%							3.41	%							3.48	%

 

(1)

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)

Average loan balances include nonaccrual loans.

(3)

Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)

 

																						YTD				YTD
		Q1 2021				Q4 2020				Q3 2020				Q2 2020				Q1 2020				3/31/2021				3/31/2020
The following reconciles return on average equity and return on average tangible equity from continuing operations (Note 1):
Net Income		$	3,998			$	3,886			$	3,391			$	5,335			$	3,118			$	3,998			$	3,118
Net Income - annualized (A)		$	16,214			$	15,460			$	13,490			$	21,457			$	12,541			$	16,214			$	12,541
Net income, excluding net amortization of intangible assets		$	4,092			$	3,980			$	3,484			$	5,438			$	3,225			$	4,092			$	3,225
Net income, excluding net amortization of intangible assets - annualized (B)		$	16,595			$	15,833			$	13,860			$	21,872			$	12,971			$	16,595			$	12,971
Average stockholders' equity (C)		$	195,791			$	197,591			$	201,079			$	198,842			$	194,332			$	195,791			$	194,332
Less:  Average goodwill and other intangible assets			(19,178	)			(19,304	)			(19,430	)			(19,560	)			(19,702	)			(19,178	)			(19,702	)
Average tangible equity (D)		$	176,613			$	178,287			$	181,649			$	179,282			$	174,630			$	176,613			$	174,630
Return on average equity (GAAP)  (A)/(C)			8.28	%			7.82	%			6.71	%			10.79	%			6.45	%			8.28	%			6.45	%
Return on average tangible equity (Non-GAAP)  (B)/(D)			9.40	%			8.88	%			7.63	%			12.20	%			7.43	%			9.40	%			7.43	%
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio from continuing operations (Note 2):
Noninterest expense (E)		$	10,499			$	10,556			$	9,831			$	7,663			$	10,349			$	10,499			$	10,349
Less:  Amortization of intangible assets			(126	)			(126	)			(125	)			(138	)			(144	)			(126	)			(144	)
Adjusted noninterest expense (F)		$	10,373			$	10,430			$	9,706			$	7,525			$	10,205			$	10,373			$	10,205
Net interest income (G)			13,800				13,765				13,283				13,031				12,518				13,800				12,518
Add:  Taxable-equivalent adjustment			36				34				34				37				36				36				36
Taxable-equivalent net interest income (H)		$	13,836			$	13,799			$	13,317			$	13,068			$	12,554			$	13,836			$	12,554
Noninterest income (I)		$	2,557			$	3,047			$	2,581			$	2,769			$	2,352			$	2,557				2,352
Less:  Investment securities (gains)			—				—				—				(347	)			—				—				—
Adjusted noninterest income (J)		$	2,557			$	3,047			$	2,581			$	2,422			$	2,352			$	2,557			$	2,352
Efficiency ratio (GAAP)  (E)/(G)+(I)			64.19	%			62.79	%			61.97	%			48.50	%			69.60	%			64.19	%			69.60	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)			63.28	%			61.91	%			61.05	%			48.58	%			68.46	%			63.28	%			68.46	%

 

 

The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (L)		$	196,104			$	195,019			$	198,881			$	200,134			$	195,694
Less:  Goodwill and other intangible assets			(19,111	)			(19,237	)			(19,362	)			(19,488	)			(19,626	)
Tangible equity (M)		$	176,993			$	175,782			$	179,519			$	180,646			$	176,068
Shares outstanding (N)			11,752				11,783				12,218				12,526				12,525
Book value per common share (GAAP)  (L)/(N)		$	16.69			$	16.55			$	16.28			$	15.98			$	15.62
Tangible book value per common share (Non-GAAP) (M)/(N)		$	15.06			$	14.92			$	14.69			$	14.42			$	14.06
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (O)		$	196,104			$	195,019			$	198,881			$	200,134			$	195,694
Less:  Goodwill and other intangible assets			(19,111	)			(19,237	)			(19,362	)			(19,488	)			(19,626	)
Tangible equity (P)		$	176,993			$	175,782			$	179,519			$	180,646			$	176,068
Assets (Q)		$	2,039,631			$	1,933,315			$	1,828,172			$	1,719,524			$	1,571,421
Less:  Goodwill and other intangible assets			(19,111	)			(19,237	)			(19,362	)			(19,488	)			(19,626	)
Tangible assets (R)		$	2,020,520			$	1,914,078			$	1,808,810			$	1,700,036			$	1,551,795
Period-end equity/assets (GAAP)  (O)/(Q)			9.61	%			10.09	%			10.88	%			11.64	%			12.45	%
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)			8.76	%			9.18	%			9.92	%			10.63	%			11.35	%

 

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.