Shore Bancshares Reports 2015 Results

Jan 21, 2016, 16:15 ET from Shore Bancshares, Inc.

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 Review Total 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 Results Net 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 Information Shore 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 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".

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.

Shore Bancshares, Inc.

Page 5 of 12

Financial Highlights

(Dollars in thousands, except per share data)

   For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2015

2014

 Change

2015

2014

 Change

PROFITABILITY FOR THE PERIOD

     Net interest income

$            9,293

$             8,636

7.6

%

$       35,525

$       34,042

4.4

%

     Provision for credit losses

475

650

(26.9)

2,075

3,350

(38.1)

     Noninterest income

3,638

3,471

4.8

15,416

16,781

(8.1)

     Noninterest expense

8,950

9,510

(5.9)

37,350

39,361

(5.1)

     Income before income taxes

3,506

1,947

80.1

11,516

8,112

42.0

     Income tax expense 

1,343

721

86.3

4,408

3,061

44.0

     Net income 

$            2,163

$             1,226

76.4

$         7,108

$         5,051

40.7

     Return on average assets 

0.75

%

0.44

%

31

bp

0.64

%

0.47

%

17

bp

     Return on average equity 

5.85

3.48

237

4.93

4.04

89

     Return on average tangible equity (1)

6.49

3.91

258

5.49

4.68

81

     Net interest margin

3.45

3.35

10

3.43

3.43

-

     Efficiency ratio - GAAP 

69.10

78.40

(930)

73.21

77.31

(410)

     Efficiency ratio - Non-GAAP (1)

68.84

78.28

(944)

72.95

77.12

(417)

PER SHARE DATA

     Basic net income per common share

$              0.17

$               0.10

70.0

%

$           0.56

$           0.46

21.7

%

     Diluted net income per common share

0.17

0.10

70.0

0.56

0.46

21.7

     Dividends paid per common share

0.02

-

100.0

0.04

-

100.0

     Book value per common share at period end

11.64

11.13

4.6

     Tangible book value per common share at period end (1)

10.59

10.08

5.1

     Market value at period end

10.88

9.34

16.5

     Market range:

       High

11.00

9.34

17.8

9.94

10.49

(5.2)

       Low

10.64

9.34

13.9

8.51

8.57

(0.7)

AVERAGE BALANCE SHEET DATA

     Loans

$       785,572

$        707,484

11.0

%

$     748,101

$     707,381

5.8

%

     Investment securities

213,307

232,803

(8.4)

232,288

198,639

16.9

     Earning assets

1,072,728

1,026,061

4.5

1,036,839

994,898

4.2

     Assets

1,137,430

1,103,355

3.1

1,105,666

1,072,622

3.1

     Deposits

978,049

950,720

2.9

949,132

932,546

1.8

     Stockholders' equity

146,597

139,676

5.0

144,176

125,094

15.3

CREDIT QUALITY DATA AT PERIOD END

     Net charge-offs

$               257

$             1,561

(83.5)

%

$         1,454

$         6,380

(77.2)

%

     Nonaccrual loans 

$          12,093

$          13,467

(10.2)

     Loans 90 days past due and still accruing

7

87

100.0

     Other real estate owned

4,252

3,691

15.2

     Total nonperforming assets 

16,352

17,245

(5.2)

     Accruing troubled debt restructurings (TDRs) 

15,495

16,674

(7.1)

     Total nonperforming assets and accruing TDRs 

$          31,847

$          33,919

(6.1)

CAPITAL AND CREDIT QUALITY RATIOS

     Period-end equity to assets

12.95

%

12.77

%

18

bp

     Period-end tangible equity to tangible assets (1)

11.93

11.70

23

     Annualized net charge-offs to average loans

0.13

0.88

(75)

0.19

%

0.90

%

(71)

bp

     Allowance for credit losses as a percent of:

     Period-end loans

1.05

1.08

(3)

     Nonaccrual loans 

68.77

57.14

1,163

     Nonperforming assets 

50.86

44.62

624

     Accruing TDRs 

53.67

46.15

752

     Nonperforming assets and accruing TDRs 

26.11

22.69

342

     As a percent of total loans:

     Nonaccrual loans 

1.52

1.89

(37)

     Accruing TDRs  

1.95

2.35

(40)

     Nonaccrual loans and accruing TDRs 

3.47

4.24

(77)

     As a percent of total loans+other real estate owned:

     Nonperforming assets

2.05

2.41

(36)

     Nonperforming assets and accruing TDRs 

3.98

4.75

(77)

     As a percent of total assets:

     Nonaccrual loans 

1.07

1.22

(15)

     Nonperforming assets 

1.44

1.57

(13)

     Accruing TDRs 

1.37

1.52

(15)

     Nonperforming assets and accruing TDRs 

2.81

3.09

(28)

(1)  See the reconciliation table on page 12 of 12.

 

 

Shore Bancshares, Inc.

Page 6 of 12

Consolidated Balance Sheets

(In thousands, except per share data)

December 31, 2015

December 31,

December 31,

compared to

2015

2014

December 31, 2014

ASSETS

    Cash and due from banks

$          15,080

$            24,211

(37.7)

%

    Interest-bearing deposits with other banks

54,223

68,460

(20.8)

    Federal funds sold

4,508

3,552

26.9

  Cash and cash equivalents

73,811

96,223

(23.3)

    Investment securities available for sale (at fair value)

212,165

236,108

(10.1)

    Investment securities held to maturity 

4,191

4,630

(9.5)

    Loans

795,114

710,746

11.9

    Less: allowance for credit losses

(8,316)

(7,695)

8.1

    Loans, net

786,798

703,051

11.9

    Premises and equipment, net

16,864

16,275

3.6

    Goodwill

11,931

11,931

-

    Other intangible assets, net

1,211

1,331

(9.0)

    Other real estate owned, net

4,252

3,691

15.2

    Other assets

23,920

27,162

(11.9)

                         Total assets

$    1,135,143

$       1,100,402

3.2

LIABILITIES

    Noninterest-bearing deposits

$        229,686

$          193,814

18.5

    Interest-bearing deposits

745,778

755,190

(1.2)

                Total deposits

975,464

949,004

2.8

    Short-term borrowings

6,672

4,808

38.8

    Accrued expenses and other liabilities

6,040

6,121

(1.3)

                          Total liabilities

988,176

959,933

2.9

STOCKHOLDERS' EQUITY

    Common stock, par value $0.01; authorized  

       35,000,000 shares

126

126

-

    Additional paid in capital

63,816

63,532

0.4

    Retained earnings

83,097

76,495

8.6

    Accumulated other comprehensive (loss) income

(72)

316

(122.8)

                          Total stockholders' equity

146,967

140,469

4.6

                          Total liabilities and stockholders' equity

$    1,135,143

$       1,100,402

3.2

Period-end common shares outstanding

12,631

12,618

0.1

Book value per common share

$            11.64

$              11.13

4.6

 

 

Shore Bancshares, Inc.

Page 7 of 12

Consolidated Statements of Operations

(In thousands, except per share data)

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2015

2014

% Change

2015

2014

% Change

INTEREST INCOME

    Interest and fees on loans 

$      9,142

$      8,665

5.5

%

$    35,126

$    35,140

(0.0)

%

    Interest and dividends on investment securities:

        Taxable

854

917

(6.9)

3,602

2,957

21.8

        Tax-exempt 

2

3

(33.3)

10

12

(16.7)

    Interest on federal funds sold

1

-

100.0

3

1

200.0

    Interest on deposits with other banks

48

40

20.0

130

179

(27.4)

                   Total interest income

10,047

9,625

4.4

38,871

38,289

1.5

INTEREST EXPENSE

    Interest on deposits

750

985

(23.9)

3,331

4,229

(21.2)

    Interest on short-term borrowings

4

4

-

15

18

(16.7)

                   Total interest expense

754

989

(23.8)

3,346

4,247

(21.2)

NET INTEREST INCOME

9,293

8,636

7.6

35,525

34,042

4.4

Provision for credit losses

475

650

(26.9)

2,075

3,350

(38.1)

NET INTEREST INCOME AFTER PROVISION 

  FOR CREDIT LOSSES

8,818

7,986

10.4

33,450

30,692

9.0

NONINTEREST INCOME

    Service charges on deposit accounts

806

629

28.1

2,867

2,407

19.1

    Trust and investment fee income

348

478

(27.2)

1,627

1,860

(12.5)

    Investment securities gains 

-

23

(100.0)

-

23

(100.0)

    Insurance agency commissions

1,760

1,736

1.4

8,274

9,525

(13.1)

    Other noninterest income

724

605

19.7

2,648

2,966

(10.7)

                      Total noninterest income

3,638

3,471

4.8

15,416

16,781

(8.1)

NONINTEREST EXPENSE

    Salaries and wages

4,366

4,305

1.4

17,540

17,600

(0.3)

    Employee benefits

890

956

(6.9)

3,905

4,092

(4.6)

    Occupancy expense 

583

570

2.3

2,420

2,339

3.5

    Furniture and equipment expense

215

234

(8.1)

926

975

(5.0)

    Data processing

809

766

5.6

3,260

3,006

8.4

    Directors' fees

114

99

15.2

470

474

(0.8)

    Amortization of intangible assets

33

33

-

133

201

(33.8)

    Insurance agency commissions expense

-

-

-

-

906

(100.0)

    FDIC insurance premium expense

281

402

(30.1)

1,214

1,636

(25.8)

    Write-downs of other real estate owned

39

192

(79.7)

127

658

(80.7)

    Legal and professional fees

440

619

(28.9)

2,380

2,055

15.8

    Other noninterest expenses

1,180

1,334

(11.5)

4,975

5,419

(8.2)

                      Total noninterest expense

8,950

9,510

(5.9)

37,350

39,361

(5.1)

Income before income taxes

3,506

1,947

80.1

11,516

8,112

42.0

Income tax expense 

1,343

721

86.3

4,408

3,061

44.0

NET INCOME 

$      2,163

$      1,226

76.4

$      7,108

$      5,051

40.7

Weighted average shares outstanding - basic

12,631

12,615

0.1

12,629

10,945

15.4

Weighted average shares outstanding - diluted

12,645

12,625

0.2

12,639

10,956

15.4

Basic net income per common share

$        0.17

$        0.10

70.0

$        0.56

$        0.46

21.7

Diluted net income per common share

0.17

0.10

70.0

0.56

0.46

21.7

Dividends paid per common share

0.02

-

-

0.04

-

-

 

 

Shore Bancshares, Inc.

Page 8 of 12

Consolidated Average Balance Sheets

(Dollars in thousands)

For the Three Months Ended

For the Twelve Months Ended

December 31,

December 31,

2015

2014

2015

2014

Average 

Yield/

Average 

Yield/

Average 

Yield/

Average 

Yield/

balance

rate 

balance

rate 

balance

rate

balance

rate

Earning assets

  Loans 

$     785,572

4.63

%

$     707,484

4.87

%

$     748,101

4.71

%

$     707,381

4.98

%

  Investment securities

   Taxable

213,097

1.60

232,371

1.58

231,960

1.55

198,207

1.49

   Tax-exempt

210

5.30

432

4.19

328

4.54

432

4.20

  Federal funds sold

3,886

0.12

2,962

0.07

2,991

0.10

1,883

0.06

  Interest-bearing deposits

69,963

0.27

82,812

0.19

53,459

0.24

86,995

0.21

    Total earning assets

1,072,728

3.72

%

1,026,061

3.73

%

1,036,839

3.76

%

994,898

3.86

%

Cash and due from banks

16,628

24,329

18,497

22,973

Other assets

56,512

61,370

58,502

64,200

Allowance for credit losses

(8,438)

(8,405)

(8,172)

(9,449)

Total assets

$ 1,137,430

$ 1,103,355

$ 1,105,666

$ 1,072,622

Interest-bearing liabilities

  Demand deposits

$     190,237

0.13

%

$     183,251

0.13

%

$     180,810

0.13

%

$     177,828

0.14

%

  Money market and savings deposits 

255,974

0.14

233,441

0.12

243,731

0.14

225,616

0.12

  Certificates of deposit $100,000 or more

139,663

0.80

163,813

1.06

149,181

0.93

170,252

1.10

  Other time deposits

158,011

0.80

173,695

0.95

164,239

0.84

180,848

1.01

    Interest-bearing deposits

743,885

0.40

754,200

0.52

737,961

0.45

754,544

0.56

  Short-term borrowings

6,199

0.23

6,356

0.23

6,226

0.24

8,061

0.22

    Total interest-bearing liabilities

750,084

0.40

%

760,556

0.52

%

744,187

0.45

%

762,605

0.56

%

Noninterest-bearing deposits

234,164

196,520

211,171

178,002

Accrued expenses and other liabilities

6,585

6,603

6,132

6,921

Stockholders' equity

146,597

139,676

144,176

125,094

Total liabilities and stockholders' equity

$ 1,137,430

$ 1,103,355

$ 1,105,666

$ 1,072,622

Net interest spread

3.32

%

3.21

%

3.31

%

3.30

%

Net interest margin

3.45

%

3.35

%

3.43

%

3.43

%

 

 

Shore Bancshares, Inc.

Page 9 of 12

Financial Highlights By Quarter

(Dollars in thousands, except per share data)

4th quarter

3rd quarter

2nd quarter

1st quarter

4th quarter

4Q 15

4Q 15

2015

2015

2015

2015

2014

compared to

compared to

(4Q 15)

(3Q 15)

(2Q 15)

(1Q 15)

(4Q 14)

3Q 15

4Q 14

PROFITABILITY FOR THE PERIOD

     Taxable-equivalent net interest income

$             9,315

$            9,027

$            8,701

$            8,560

$              8,659

3.2

%

7.6

%

     Less:  Taxable-equivalent adjustment

22

17

18

21

23

41.2

4.3

     Net interest income

9,293

9,010

8,683

8,539

8,636

3.1

7.6

     Provision for credit losses

475

410

540

650

650

15.9

(26.9)

     Noninterest income

3,638

3,905

3,788

4,085

3,471

(6.8)

4.8

     Noninterest expense

8,950

9,396

9,300

9,704

9,510

(4.7)

(5.9)

     Income before income taxes

3,506

3,109

2,631

2,270

1,947

12.8

80.1

     Income tax expense 

1,343

1,200

1,004

861

721

11.9

86.3

     Net income

$             2,163

$            1,909

$            1,627

$            1,409

$              1,226

13.3

76.4

     Return on average assets 

0.75

%

0.68

%

0.60

%

0.53

%

0.44

%

7

bp

31

bp

     Return on average equity 

5.85

5.23

4.56

4.03

3.48

62

237

     Return on average tangible equity (1)

6.49

5.81

5.08

4.50

3.91

68

258

     Net interest margin

3.45

3.43

3.43

3.43

3.35

2

10

     Efficiency ratio - GAAP 

69.10

72.66

74.47

76.74

78.40

(356)

(930)

     Efficiency ratio - Non-GAAP (1)

68.84

72.39

74.20

76.48

78.28

(355)

(944)

PER SHARE DATA

     Basic net income per common share

$               0.17

$              0.15

$              0.13

$              0.11

$                0.10

13.3

%

70.0

%

     Diluted net income per common share

0.17

0.15

0.13

0.11

0.10

13.3

70.0

     Dividends paid per common share

0.02

0.02

-

-

-

100.0

100.0

     Book value per common share at period end

11.64

11.55

11.35

11.31

11.13

0.8

4.6

     Tangible book value per common share at period end (1)

10.59

10.51

10.31

10.26

10.08

0.8

5.1

     Market value at period end

10.88

9.72

9.43

9.18

9.34

11.9

16.5

     Market range:

        High

11.00

9.72

9.55

9.30

9.34

13.2

17.8

        Low

10.64

9.37

9.43

9.03

9.34

13.6

13.9

AVERAGE BALANCE SHEET DATA

     Loans

$        785,572

$       763,306

$       727,800

$       714,780

$          707,484

2.9

%

11.0

%

     Investment securities

213,307

230,222

241,684

244,300

232,803

(7.3)

(8.4)

     Earning assets

1,072,728

1,044,230

1,016,172

1,013,490

1,026,061

2.7

4.5

     Assets

1,137,430

1,111,361

1,085,857

1,087,401

1,103,355

2.3

3.1

     Deposits

978,049

953,826

931,637

932,460

950,720

2.5

2.9

     Stockholders' equity

146,597

144,897

143,266

141,884

139,676

1.2

5.0

CREDIT QUALITY DATA AT PERIOD END

     Net charge-offs

$                257

$               229

$               421

$               547

$              1,561

12.2

%

(83.5)

%

     Nonaccrual loans 

$           12,093

$          13,143

$          14,009

$          12,913

$            13,467

(8.0)

(10.2)

     Loans 90 days past due and still accruing

7

4

35

36

87

75.0

100.0

     Other real estate owned

4,252

2,884

2,498

3,469

3,691

47.4

15.2

     Total nonperforming assets 

$           16,352

$          16,031

$          16,542

$          16,418

$            17,245

2.0

(5.2)

     Accruing troubled debt restructurings (TDRs) 

$           15,495

$          16,431

$          18,353

$          16,644

$            16,674

(5.7)

(7.1)

     Total nonperforming assets and accruing TDRs 

$           31,847

$          32,462

$          34,895

$          33,062

$            33,919

(1.9)

(6.1)

CAPITAL AND CREDIT QUALITY RATIOS

     Period-end equity to assets

12.95

%

13.05

%

13.22

%

13.05

%

12.77

%

(10)

bp

18

bp

     Period-end tangible equity to tangible assets (1)

11.93

12.02

12.16

11.98

11.70

(9)

23

     Annualized net charge-offs to average loans

0.13

0.12

0.23

0.31

0.88

1

(75)

     Allowance for credit losses as a percent of:

     Period-end loans      

1.05

1.04

1.07

1.08

1.08

1

(3)

     Nonaccrual loans 

68.77

61.61

56.51

60.39

54.14

716

1,463

     Nonperforming assets 

50.86

50.51

47.86

47.50

44.62

35

624

     Accruing TDRs 

53.67

49.28

43.14

46.85

46.15

439

752

     Nonperforming assets and accruing TDRs 

26.11

24.95

22.69

23.59

22.69

116

342

    As a percent of total loans:

    Nonaccrual loans 

1.52

1.69

1.89

1.79

1.89

(17)

(37)

    Accruing TDRs 

1.95

2.11

2.48

2.31

2.35

(16)

(40)

    Nonaccrual loans and accruing TDRs 

3.47

3.80

4.37

4.10

4.24

(33)

(77)

    As a percent of total loans+other real estate owned:

    Nonperforming assets 

2.05

2.06

2.22

2.26

2.41

(1)

(36)

    Nonperforming assets and accruing TDRs 

3.98

4.16

4.69

4.56

4.75

(18)

(77)

    As a percent of total assets:

    Nonaccrual loans 

1.07

1.18

1.29

1.18

1.22

(11)

(15)

    Nonperforming assets 

1.44

1.43

1.53

1.50

1.57

1

(13)

    Accruing TDRs 

1.37

1.47

1.69

1.52

1.52

(10)

(15)

    Nonperforming assets and accruing TDRs 

2.81

2.90

3.22

3.02

3.09

(9)

(28)

(1)  See the reconciliation table on page 12 of 12.

 

 

Shore Bancshares, Inc.

Page 10 of 12

Consolidated Statements of Operations By Quarter

(In thousands, except per share data)

4Q 15

4Q 15

compared to

compared to

4Q 15

3Q 15

2Q 15

1Q 15

4Q 14

3Q 15

4Q 14

INTEREST INCOME

    Interest and fees on loans 

$         9,142

$         8,912

$         8,581

$         8,491

$         8,665

2.6

%

5.5

%

    Interest and dividends on investment securities:

        Taxable

854

892

932

924

917

(4.3)

(6.9)

        Tax-exempt

2

2

3

3

3

-

(33.3)

    Interest on federal funds sold

1

1

-

1

-

-

100.0

    Interest on deposits with other banks

48

30

26

26

40

60.0

20.0

                   Total interest income

10,047

9,837

9,542

9,445

9,625

2.1

4.4

INTEREST EXPENSE

    Interest on deposits

750

824

856

901

985

(9.0)

(23.9)

    Interest on short-term borrowings

4

3

3

5

4

33.3

-

                   Total interest expense

754

827

859

906

989

(8.8)

(23.8)

NET INTEREST INCOME

9,293

9,010

8,683

8,539

8,636

3.1

7.6

Provision for credit losses

475

410

540

650

650

15.9

(26.9)

NET INTEREST INCOME AFTER PROVISION

  FOR CREDIT LOSSES

8,818

8,600

8,143

7,889

7,986

2.5

10.4

NONINTEREST INCOME

    Service charges on deposit accounts

806

769

658

634

629

4.8

28.1

    Trust and investment fee income

348

360

450

469

478

(3.3)

(27.2)

    Investment securities gains 

-

-

-

-

23

-

(100.0)

    Insurance agency commissions 

1,760

2,107

1,932

2,475

1,736

(16.5)

1.4

    Other noninterest income

724

669

748

507

605

8.2

19.7

                      Total noninterest income

3,638

3,905

3,788

4,085

3,471

(6.8)

4.8

NONINTEREST EXPENSE

    Salaries and wages

4,366

4,468

4,393

4,313

4,305

(2.3)

1.4

    Employee benefits

890

935

924

1,156

956

(4.8)

(6.9)

    Occupancy expense 

583

600

611

626

570

(2.8)

2.3

    Furniture and equipment expense

215

223

233

255

234

(3.6)

(8.1)

    Data processing

809

800

868

783

766

1.1

5.6

    Directors' fees

114

117

116

123

99

(2.6)

15.2

    Amortization of intangible assets

33

34

33

33

33

(2.9)

-

    FDIC insurance premium expense

281

243

306

384

402

15.6

(30.1)

    Write-downs of other real estate owned

39

7

54

27

192

457.1

(79.7)

    Legal and professional fees

440

642

573

725

619

(31.5)

(28.9)

    Other noninterest expenses

1,180

1,327

1,189

1,279

1,334

(11.1)

(11.5)

                      Total noninterest expense

8,950

9,396

9,300

9,704

9,510

(4.7)

(5.9)

Income before income taxes

3,506

3,109

2,631

2,270

1,947

12.8

80.1

Income tax expense 

1,343

1,200

1,004

861

721

11.9

86.3

NET INCOME 

$         2,163

$         1,909

$         1,627

$         1,409

$         1,226

13.3

76.4

Weighted average shares outstanding - basic

12,631

12,630

12,629

12,625

12,617

0.0

0.1

Weighted average shares outstanding - diluted

12,645

12,640

12,638

12,633

12,626

0.0

0.2

Basic net income per common share

$            0.17

$            0.15

$            0.13

$            0.11

$            0.10

13.3

70.0

Diluted net incomeper common share

0.17

0.15

0.13

0.11

0.10

13.3

70.0

Dividends paid per common share

0.02

0.02

-

-

-

-

-

 

 

Shore Bancshares, Inc.

Page 11 of 12

Consolidated Average Balance Sheets By Quarter

(Dollars in thousands)

Average balance

4Q 15

4Q 15

compared to

compared to

4Q 15

3Q 15

2Q 15

1Q 15

4Q 14

3Q 15

4Q 14

Average 

Yield/

Average 

Yield/

Average 

Yield/

Average 

Yield/

Average 

Yield/

balance

rate

balance

rate

balance

rate

balance

rate

balance

rate

Earning assets

  Loans 

$       785,572

4.63

%

$       763,306

4.64

%

$       727,800

4.74

%

$       714,780

4.83

%

$       707,484

4.87

%

2.9

%

11.0

%

  Investment securities

   Taxable

213,097

1.60

229,979

1.55

241,254

1.55

243,869

1.52

232,371

1.58

(7.3)

(8.3)

   Tax-exempt

210

5.30

243

5.01

430

4.21

431

4.19

432

4.19

(13.6)

(51.4)

  Federal funds sold

3,886

0.12

2,341

0.10

2,931

0.09

2,801

0.09

2,962

0.07

66.0

31.2

  Interest-bearing deposits

69,963

0.27

48,361

0.25

43,757

0.24

51,609

0.20

82,812

0.19

44.7

(15.5)

    Total earning assets

1,072,728

3.72

%

1,044,230

3.74

%

1,016,172

3.77

%

1,013,490

3.79

%

1,026,061

3.73

%

2.7

4.5

Cash and due from banks

16,628

17,434

18,723

21,268

24,329

(4.6)

(31.7)

Other assets

56,512

57,891

59,045

60,611

61,370

(2.4)

(7.9)

Allowance for credit losses

(8,438)

(8,194)

(8,083)

(7,968)

(8,405)

3.0

0.4

Total assets

$    1,137,430

$    1,111,361

$    1,085,857

$    1,087,401

$    1,103,355

2.3

3.1

Interest-bearing liabilities

  Demand deposits

$       190,237

0.13

%

$       184,471

0.13

%

$       171,274

0.12

%

$       177,071

0.13

%

$       183,251

0.13

%

3.1

3.8

  Money market and savings deposits 

255,974

0.14

242,830

0.14

238,173

0.14

237,755

0.14

233,441

0.12

5.4

9.7

  Certificates of deposit $100,000 or more

139,663

0.80

148,617

0.92

152,478

0.97

156,154

1.00

163,813

1.06

(6.0)

(14.7)

  Other time deposits

158,011

0.80

163,224

0.82

166,277

0.85

169,584

0.90

173,695

0.95

(3.2)

(9.0)

    Interest-bearing deposits

743,885

0.40

739,142

0.44

728,202

0.47

740,564

0.49

754,200

0.52

0.6

(1.4)

  Short-term borrowings

6,199

0.23

6,501

0.24

4,872

0.23

7,340

0.27

6,356

0.23

(4.6)

(2.5)

    Total interest-bearing liabilities

750,084

0.40

%

745,643

0.44

%

733,074

0.47

%

747,904

0.49

%

760,556

0.52

%

0.6

(1.4)

Noninterest-bearing deposits

234,164

214,684

203,435

191,896

196,520

9.1

19.2

Accrued expenses and other liabilities

6,585

6,137

6,082

5,717

6,603

7.3

(0.3)

Stockholders' equity

146,597

144,897

143,266

141,884

139,676

1.2

5.0

Total liabilities and stockholders' equity

$    1,137,430

$    1,111,361

$    1,085,857

$    1,087,401

$    1,103,355

2.3

3.1

Net interest spread

3.32

%

3.30

%

3.30

%

3.30

%

3.21

%

Net interest margin

3.45

%

3.43

%

3.43

%

3.43

%

3.35

%

 

 

Shore Bancshares, Inc.

Page 12 of 12

Reconciliation of Generally Accepted Accounting Principles (GAAP) 

  and Non-GAAP Measures

(In thousands, except per share data)

YTD

YTD

4Q 15

3Q 15

2Q 15

1Q 15

4Q 14

12/31/2015

12/31/2014

The following reconciles return on average equity and return on

  average tangible equity (Note 1):

Net income

$          2,163

$         1,909

$         1,627

$         1,409

$         1,226

$         7,108

$        5,051

Net income - annualized (A)

$          8,581

$         7,574

$         6,526

$         5,714

$         4,864

$         7,108

$        5,051

Net income, excluding net amortization of intangible assets

$          2,183

$         1,930

$         1,647

$         1,429

$         1,246

$         7,189

$        5,173

Net income, excluding net amortization of intangible 

  assets - annualized (B)

$          8,661

$         7,657

$         6,606

$         5,795

$         4,943

$         7,189

$        5,173

Average stockholders' equity (C)

$       146,597

$     144,897

$     143,266

$     141,884

$     139,676

$     144,176

$    125,094

Less:  Average goodwill and other intangible assets

(13,155)

(13,182)

(13,215)

(13,248)

(13,281)

(13,200)

(14,448)

Average tangible equity (D)

$       133,442

$     131,715

$     130,051

$     128,636

$     126,395

$     130,976

$    110,646

Return on average equity (GAAP)  (A)/(C)

5.85

%

5.23

%

4.56

%

4.03

%

3.48

%

4.93

%

4.04

%

Return on average tangible equity (Non-GAAP)  (B)/(D)

6.49

%

5.81

%

5.08

%

4.50

%

3.91

%

5.49

%

4.68

%

The following reconciles GAAP efficiency ratio and non-GAAP 

  efficiency ratio (Note 2):

Noninterest expense (E)

$          8,950

$         9,396

$         9,300

$         9,704

$         9,510

$       37,350

$      39,361

Less:  Amortization of intangible assets

(33)

(34)

(33)

(33)

(33)

(133)

(201)

Adjusted noninterest expense (F)

$          8,917

$         9,362

$         9,267

$         9,671

$         9,477

$       37,217

$      39,160

Taxable-equivalent net interest income (G)

$          9,315

$         9,027

$         8,701

$         8,560

$         8,659

$       35,604

$      34,134

Taxable-equivalent net interest income excluding nonrecurring adjustment (H)

$          9,315

$         9,027

$         8,701

$         8,560

$         8,659

$       35,604

$      34,134

Noninterest income (I)

$          3,638

$         3,905

$         3,788

$         4,085

$         3,471

$       15,416

$      16,781

Less:  Investment securities (gains)/losses

-

-

-

-

(23)

-

(23)

          Other nonrecurring (gains)/losses

-

-

-

-

-

-

(114)

Adjusted noninterest income (J)

$          3,638

$         3,905

$         3,788

$         4,085

$         3,448

$       15,416

$      16,644

Efficiency ratio (GAAP)  (E)/(G)+(I) 

69.10

%

72.66

%

74.47

%

76.74

%

78.40

%

73.21

%

77.31

%

Efficiency ratio (Non-GAAP)  (F)/(H)+(J)

68.84

%

72.39

%

74.20

%

76.48

%

78.28

%

72.95

%

77.12

%

The following reconciles book value per common share and tangible 

  book value per common share (Note 1):

Stockholders' equity (K)

$       146,967

$     145,887

$     143,402

$     142,746

$     140,469

Less:  Goodwill and other intangible assets

(13,142)

(13,162)

(13,195)

(13,228)

(13,262)

Tangible equity (L)

$       133,825

$     132,725

$     130,207

$     129,518

$     127,207

Shares outstanding (M)

12,631

12,630

12,630

12,625

12,618

Book value per common share (GAAP)  (K)/(M)

$          11.64

$         11.55

$         11.35

$         11.31

$         11.13

Tangible book value per common share (Non-GAAP)  (L)/(M)

$          10.59

$         10.51

$         10.31

$         10.26

$         10.08

The following reconciles equity to assets and

  tangible equity to tangible assets (Note 1):

Stockholders' equity (N)

$       146,967

$     145,887

$     143,402

$     142,746

$     140,469

Less:  Goodwill and other intangible assets

(13,142)

(13,162)

(13,195)

(13,228)

(13,262)

Tangible equity (O)

$       133,825

$     132,725

$     130,207

$     129,518

$     127,207

Assets (P)

$    1,135,143

$  1,117,813

$  1,084,352

$  1,094,128

$  1,100,402

Less:  Goodwill and other intangible assets

(13,142)

(13,162)

(13,195)

(13,228)

(13,262)

Tangible assets (Q)

$    1,122,001

$  1,104,651

$  1,071,157

$  1,080,900

$  1,087,140

Period-end equity/assets (GAAP)  (N)/(P)

12.95

%

13.05

%

13.22

%

13.05

%

12.77

%

Period-end tangible equity/tangible assets (Non-GAAP)  (O)/(Q)

11.93

%

12.02

%

12.16

%

11.98

%

11.70

%

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.  

 

 

SOURCE Shore Bancshares, Inc.



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