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      Shore Bancshares Reports Second Quarter and First-Half Results

      Shore Bancshares Logo (PRNewsfoto/Shore Bancshares, Inc.)

      News provided by

      Shore Bancshares, Inc.

      Jul 23, 2020, 16:15 ET

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      EASTON, Md., July 23, 2020 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) (the "Company") reported income from continuing operations of $5.335 million or $0.43 per diluted common share for the second quarter of 2020, compared to income from continuing operations of $3.118 million or $0.25 per diluted common share for the first quarter of 2020, and income from continuing operations of $4.228 million or $0.33 per diluted common share for the second quarter of 2019. Income from continuing operations for the first half of 2020 was $8.453 million or $0.68 per diluted common share, compared to income from continuing operations of $8.056 million or $0.63 per diluted common share for the first half of 2019.

      When comparing income from continuing operations for the second quarter of 2020 to the first quarter of 2020, net income increased $2.2 million, primarily due to a decrease in noninterest expenses of $2.7 million. In addition, net interest income and noninterest income increased $513 thousand and $417 thousand, respectively, partially offset by an increase in the provision for credit losses of $650 thousand. When comparing income from continuing operations for the second quarter of 2020 to the second quarter of 2019, net income increased $1.1 million due to a decrease in noninterest expense of $1.3 million, coupled with increases in net interest income of $738 thousand and noninterest income of $160 thousand, partially offset by an increase in the provision for credit losses of $800 thousand.

      "During these uncertain times in the midst of the current health and economic crisis, the Company has remained a viable source of strength in our communities," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer.  "The first half of 2020 has been challenging, but the resolve of our committed team has produced very positive results. Our earnings remain healthy despite increases to our provision for credit losses during the second quarter, deposit growth has been remarkable, loan growth remains on budget, and the Company's strong capital position enables us to weather the current economic climate."  

      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.

      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. The Company has provided total loan deferrals of $221.1 million which consists of 15.7% of the total loan portfolio as of June 30, 2020. The most significant deferrals by loan type or industry were as follows: hospitality of $80.4 million, retail stores of $58.6 million, other commercial of $66.7 million, residential 1-4 family rentals of $10.0 million and restaurants of $5.3 million.

      Small Business Administration's Paycheck Protection Program ("PPP")
      We remain an SBA preferred lender and are actively participating in the PPP program. From the inception of the program through June 30, 2020, we had provided loans for 1,427 small business customers totaling $123.0 million. We will continue to process applications until the government funding is completely exhausted.

      Share Repurchases
      We have suspended all share buybacks of our Company's common stock until further notice.

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

      Balance Sheet Review
      Total assets were $1.720 billion at June 30, 2020, a $160.3 million, or 10.3%, increase when compared to $1.559 billion at the end of 2019.  The increase was primarily due to the $158.6 million, or 12.7% increase in gross loans, of which $123.0 million related to PPP loans.  The increase in gross loans was funded by an increase in deposits of $163.4 million, or 12.2%.   

      Total deposits increased $163.4 million, or 12.2%, when compared to December 31, 2019.  The increase in total deposits consisted of increases in all deposit categories. Noninterest-bearing deposits increased $86.4 million, checking accounts increased $42.7 million, savings and money market accounts increased $32.7 million and time deposits increased $1.6 million. A significant amount of the PPP loan proceeds resided in deposit accounts as of June 30, 2020. The Company expects these funds to be utilized over the coming weeks and months, which may or may not result in a decline in deposit balances.

      Total stockholders' equity increased $7.3 million, or 3.8%, when compared to the end of 2019. At June 30, 2020, the ratio of total equity to total assets was 11.64% and the ratio of total tangible equity to total tangible assets was 10.63%.

      Total assets at June 30, 2020 increased $231.0 million, or 15.5%, when compared to total assets at June 30, 2019, primarily the result of loan growth of $167.0 million and an increase in cash and cash equivalents of $87.0 million. Investment securities (including restricted securities) decreased $55.0 million, which was used to partially fund loan growth. 

      Total deposits at June 30, 2020 increased $255.7 million, or 20.5%, when compared to June 30, 2019. The increase in total deposits included growth within interest-bearing checking accounts of $112.8 million, noninterest-bearing deposits of $96.1 million, savings and money market accounts of $55.7 million and time deposits of $11.2 million. Brokered deposits of $20.0 million rolled off by June 30, 2020 as they were no longer needed as a funding source. 

      Total stockholders' equity increased $8.8 million, or 4.6%, when compared to June 30, 2019.

      Review of Quarterly Financial Results
      Net interest income was $13.0 million for the second quarter of 2020, compared to $12.5 million for the first quarter of 2020 and $12.3 million for the second quarter of 2019. The increase in net interest income when compared to the first quarter of 2020 was primarily due to the decrease in the average rate paid on interest-bearing deposits of 23bps, coupled with the payoff of FHLB borrowings which reduced interest expense by $101 thousand. The increase in the average balance in noninterest bearing deposits of $67.6 million also contributed to lower interest expense for the quarter by reducing the Company's reliance on interest-bearing sources of funding. The significant growth in the average balance of loans of $110.9 million helped offset the decreased yield on loans of 31bps, which was primarily the result of adding the $123.0 million of PPP loans which had an average yield of 2.36% for the second quarter of 2020, inclusive of the stated interest rate of 1.0% and the net accretion of origination fees and costs. Also impacting total earning assets for the second quarter of 2020 was the decrease in the average balance of taxable investment securities of $21.5 million coupled with the decrease in yield on interest-bearing deposits with other banks of 113bps. Net interest income increased when compared to the second quarter of 2019 due to a decrease in interest expense of $893 thousand, or 36.4%. The decrease in interest expense was the direct result of the significant decline in both long-term and short-term borrowings which both carried higher rates than interest bearing deposits. In addition, the rates paid on interest bearing deposits declined by a combined 37bps.  The average balance of loans increased $153.1 million, when compared to the second quarter of 2019 which provided an additional $196 thousand of interest income, but was offset by the decline in the average balance in taxable securities of $52.0 million and the decrease in the yield on interest-bearing deposits with other banks of 240bps. The Company's net interest margin decreased to 3.41% for the second quarter of 2020 from 3.48% in the first quarter of 2020 and down from 3.54% in the second quarter of 2019. 

      The provision for credit losses was $1.0 million for the three months ended June 30, 2020.  The comparable amounts were $350 thousand and $200 thousand for the three months ended March 31, 2020 and June 30, 2019, respectively. The ratio of the allowance for credit losses to period-end loans was 0.79% at June 30, 2020. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.86% at June 30, 2020, higher than both the 0.81% at March 31, 2020 and the 0.83% at June 30, 2019. The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, and the increase in provision for loan losses as compared to both the prior periods were increases in qualitative factors and, in particular, elevated unemployment statistics, the impact of the COVID-19 pandemic, as well as an increase in loan volume. Net charge-offs were $288 thousand for the second quarter of 2020, compared to $479 thousand for the first quarter of 2020 and $313 thousand for the second quarter of 2019. The charge-offs in the second quarter related to continued workout efforts on nonperforming assets.

      At June 30, 2020 and March 31, 2020, nonperforming assets were $12.3 million. Total nonperforming assets were $15.6 million at June 30, 2019. Total nonperforming assets decreased by $8 thousand between the linked quarters, which consisted of an increase in nonaccruals of $109 thousand, offset by a decrease in loans 90 days and still accruing of $117 thousand. Accruing troubled debt restructurings ("TDRs") decreased $132 thousand, or 1.8%, over the same time period. When comparing June 30, 2020 to June 30, 2019, nonperforming assets decreased $3.3 million, or 21.0%, and accruing TDRs decreased $456 thousand, or 5.9%. The decrease in nonperforming assets from June 30, 2019 to June 30, 2020 was due to diligent workout efforts by the Company to reduce nonaccrual loans and other real estate owned properties. The ratio of nonperforming assets and accruing TDRs to total assets was 1.14% at June 30, 2020, 1.25% at March 31, 2020 and 1.56% at June 30, 2019.  In addition, the ratio of accruing TDRs to total loans at June 30, 2020 was 0.52%, compared to 0.58% at March 31, 2020 and 0.63% at June 30, 2019.

      Total noninterest income for the second quarter of 2020 increased $417 thousand, or 17.7%, when compared to the first quarter of 2020 and increased $160 thousand, or 6.1%, when compared to the second quarter of 2019. The increase from the first quarter of 2020 was primarily due to sales of available for sale securities at a gain of $347 thousand. The increase from the second quarter of 2019 was due to additional income from BOLI purchased late in the fourth quarter of 2019, offset by lower service charges on deposit accounts and gains on sales of securities.

      Total noninterest expense from continuing operations for the second quarter of 2020 decreased $2.7 million, or 26.0%, when compared to the first quarter of 2020 and decreased $1.3 million, or 14.7%, when compared to the second quarter of 2019. The decrease in noninterest expense when compared to the first quarter of 2020 and the second quarter of 2019 was primarily in salaries and wages, due to the increased volume in PPP loans which resulted in heightened FASB 91 costs being deferred for the period. These loan origination costs were deferred at origination along with the related origination fees. The net fees have and will continue to be accreted to interest income as a yield adjustment over the lives of the related PPP loans, which for most was 24 months at the time of origination. The recognition of these deferred fees and costs as a component of interest income will be accelerated upon forgiveness or repayment of the PPP loans. As previously stated, the Company funded 1,427 PPP loans during the second quarter of 2020 and does not anticipate this level of volume resulting in a reduction of salaries and wages expense in future quarters.

      Review of Six-Month Financial Results
      Net interest income for the first six months of 2020 was $25.5 million, an increase of $862 thousand, or 3.5% when compared to the first six months of 2019.  The increase was due to lower interest expense of $991 thousand which was a result of reduced interest expense on short and long-term borrowings of $455 thousand and lower costs on deposits of $536 thousand. These cost savings in interest expense were partially offset by a decrease in total interest income of $129 thousand. The decrease in interest income was the result of a decline in the average balance in taxable investment securities of $43.8 million, almost entirely offset by an increase in the average balance on loans of $107.3 million, despite a decline in loan yields of 31bps. This resulted in a net interest margin of 3.45% for the first six months of 2020 compared to 3.57% for the first six months of 2019.   

      The provision for credit losses for the six months ended June 30, 2020 and 2019 was $1.4 million and $300 thousand, respectively, while net charge-offs were $767 thousand and $338 thousand, respectively.  The increase in provision for credit losses was the result of higher charge-offs in 2020 and qualitative factors related to economic conditions and the COVID-19 pandemic.  The ratio of allowance to total loans decreased over the first six months of the year from 0.84% at December 31, 2019 to 0.79% at June 30, 2020. As previously discussed, this ratio decreased as a result of the PPP loans' inclusion in the balance of total loans. Additionally, a reduction in specific reserves for certain legacy credits through charge-offs during the six months ended June 30, 2020 reduced the allowance to total loans ratio. The general reserve component of the allowance to legacy, non-impaired and non-PPP loans increased from 0.75% at December 31, 2019 to 0.89% at June 30, 2020, primarily resulting from increased qualitative allocations related to the COVID-19 pandemic. The ratio of annualized net charge-offs to average loans was 0.12% for the first half of 2020 and 0.06% for the first half of 2019. Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as changes within the Company's portfolio are known.

      Total noninterest income from continuing operations for the six months ended June 30, 2020 increased $324 thousand, or 6.8%, when compared to the same period in 2019. The increase in noninterest income primarily consisted of increases in BOLI income, gains on sales of securities and other fees on bank services, partially offset by a decrease in service charges on deposit accounts. 

      Total noninterest expense from continuing operations for the six months ended June 30, 2020 decreased $316 thousand, or 1.7%, when compared to the same period in 2019. The decrease was a result of lower salaries and wages due to FASB 91 deferrals, lower FDIC insurance premiums and other real estate owned expenses, partially offset by higher employee benefit costs. The deferred costs for salaries and wages are being recognized over the lives of the related loans as previously mentioned.

      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.

      Shore Bancshares, Inc.
      Financial Highlights (Unaudited)
      (Dollars in thousands, except per share data)




      For the Three Months Ended


      For the Six Months Ended




      June 30, 


      June 30, 




      2020


      2019


       Change


      2020


      2019


       Change


      PROFITABILITY FOR THE PERIOD


















      Net interest income


      $

      13,031


      $

      12,293


      6.0

      %

      $

      25,549


      $

      24,687


      3.5

      %

      Provision for credit losses



      1,000



      200


      400.0



      1,350



      300


      350.0


      Noninterest income



      2,769



      2,609


      6.1



      5,121



      4,797


      6.8


      Noninterest expense



      7,663



      8,985


      (14.7)



      18,012



      18,328


      (1.7)


      Income from continuing operations before

       income taxes



      7,137



      5,717


      24.8



      11,308



      10,856


      4.2


      Income tax expense



      1,802



      1,489


      21.0



      2,855



      2,800


      2.0


      Income from continuing operations 


      $

      5,335


      $

      4,228


      26.2


      $

      8,453


      $

      8,056


      4.9




















      Loss from discontinued operations before
      income taxes



      —



      (4)


      100.0



      —



      (103)


      100.0


      Income tax benefit



      —



      —


      —



      —



      (25)


      100.0


      Loss from discontinued operations 



      —



      (4)


      100.0



      —



      (78)


      100.0


      Net income


      $

      5,335


      $

      4,224


      26.3


      $

      8,453


      $

      7,978


      6.0




















      From Continuing Operations:


















      Return on average assets



      1.31

      %


      1.16

      %

      15

      bp


      1.07

      %


      1.11

      %

      (4)

      bp

      Return on average equity



      10.79



      8.97


      182



      8.65



      8.69


      (4)


      Return on average tangible equity (1)



      12.20



      10.31


      189



      9.84



      10.02


      (18)


      Net interest margin



      3.41



      3.54


      (13)



      3.45



      3.57


      (12)


      Efficiency ratio - GAAP



      48.50



      60.29


      (1,179)



      58.73



      62.16


      (343)


      Efficiency ratio - Non-GAAP (1)



      48.58



      59.09


      (1,051)



      58.33



      60.93


      (260)




















      PER SHARE DATA


















      Basic net income per common share


















      Income from continuing operations


      $

      0.43


      $

      0.33


      30.3

      %

      $

      0.68


      $

      0.63


      7.9

      %

      Loss from discontinued operations



      —



      —


      —



      —



      (0.01)


      100.0


      Net income


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.62


      9.7


      Diluted net income per common share


















      Income from continuing operations


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.63


      7.9


      Loss from discontinued operations



      —



      —


      —



      —



      (0.01)


      100.0


      Net income


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.62


      9.7




















      Dividends paid per common share


      $

      0.12


      $

      0.10


      20.0


      $

      0.24


      $

      0.20


      20.0


      Book value per common share at period end



      15.98



      14.97


      6.7










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



      14.42



      13.40


      7.6










      Market value at period end



      11.09



      16.34


      (32.1)










      Market range:


















      High



      12.40



      16.48


      (24.8)



      17.56



      16.48


      6.6


      Low



      8.00



      14.84


      (46.1)



      7.63



      14.00


      (45.5)




















      AVERAGE BALANCE SHEET DATA


















      Loans


      $

      1,374,324


      $

      1,221,215


      12.5

      %

      $

      1,318,883


      $

      1,211,618


      8.9

      %

      Investment securities



      107,908



      159,878


      (32.5)



      118,659



      162,429


      (26.9)


      Earning assets



      1,539,945



      1,399,418


      10.0



      1,495,227



      1,397,086


      7.0


      Assets



      1,638,387



      1,468,093


      11.6



      1,592,689



      1,464,214


      8.8


      Deposits



      1,427,063



      1,233,951


      15.6



      1,377,112



      1,224,876


      12.4


      Stockholders' equity



      198,842



      189,101


      5.2



      196,587



      187,048


      5.1






































      CREDIT QUALITY DATA


















      Net charge-offs


      $

      288


      $

      313


      (8.0)

      %

      $

      767


      $

      338


      126.9

      %



















      Nonaccrual loans


      $

      11,649


      $

      14,592


      (20.2)










      Loans 90 days past due and still accruing



      604



      439


      37.6










      Other real estate owned



      38



      524


      (92.7)










      Total nonperforming assets



      12,291



      15,555


      (21.0)










      Accruing troubled debt restructurings (TDRs)



      7,312



      7,768


      (5.9)










      Total nonperforming assets and accruing TDRs


      $

      19,603


      $

      23,323


      (15.9)














































      CAPITAL AND CREDIT QUALITY RATIOS


















      Period-end equity to assets



      11.64

      %


      12.85

      %

      (121)

      bp









      Period-end tangible equity to tangible assets (1)



      10.63



      11.66


      (103)




























      Annualized net charge-offs to average loans



      0.08



      0.10


      (2)



      0.12

      %


      0.06

      %

      6

      bp



















      Allowance for credit losses as a percent of:


















      Period-end loans (2)



      0.79



      0.83


      (4)










      Nonaccrual loans



      95.20



      70.62


      2,458










      Nonperforming assets



      90.23



      66.25


      2,398










      Accruing TDRs



      151.67



      132.66


      1,901










      Nonperforming assets and accruing TDRs



      56.57



      44.18


      1,239




























      As a percent of total loans:


















      Nonaccrual loans



      0.83



      1.18


      (35)










      Accruing TDRs



      0.52



      0.63


      (11)










      Nonaccrual loans and accruing TDRs



      1.35



      1.80


      (45)




























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


















      Nonperforming assets



      0.87



      1.25


      (38)










      Nonperforming assets and accruing TDRs



      1.39



      1.88


      (49)




























      As a percent of total assets:


















      Nonaccrual loans



      0.68



      0.98


      (30)










      Nonperforming assets



      0.71



      1.04


      (33)










      Accruing TDRs



      0.43



      0.52


      (9)










      Nonperforming assets and accruing TDRs



      1.14



      1.56


      (42)












      (1)

      See the reconciliation table on page 18 of 18.

      (2)

      As of 6/30/2020, this ratio includes PPP loans of $123.0 million. Excluding these loans, the ratio is 0.86%.


      Shore Bancshares, Inc.
      Consolidated Balance Sheets (Unaudited)
      (In thousands, except per share data)













      June 30, 2020




      June 30, 



      December 31, 



      June 30, 


      compared to




      2020



      2019



      2019


      December 31, 2019


      ASSETS













      Cash and due from banks


      $

      24,585


      $

      18,465


      $

      18,541


      33.1

      %

      Interest-bearing deposits with other banks



      101,699



      76,506



      20,739


      32.9


      Cash and cash equivalents



      126,284



      94,971



      39,280


      33.0















      Investment securities available for sale (at fair value)



      86,020



      122,791



      145,410


      (29.9)


      Investment securities held to maturity



      11,710



      8,786



      5,905


      33.3


      Equity securities, at fair value



      1,388



      1,342



      1,325


      3.4


      Restricted securities



      3,626



      4,190



      5,095


      (13.5)















      Loans



      1,407,249



      1,248,654



      1,240,295


      12.7


      Less: allowance for credit losses



      (11,090)



      (10,507)



      (10,305)


      5.5


      Loans, net



      1,396,159



      1,238,147



      1,229,990


      12.8















      Premises and equipment, net



      24,668



      23,821



      22,710


      3.6


      Goodwill



      17,518



      17,518



      17,518


      —


      Other intangible assets, net



      1,970



      2,252



      2,540


      (12.5)


      Other real estate owned, net



      38



      74



      524


      (48.6)


      Right of use assets, net



      4,879



      4,771



      3,663


      2.3


      Other assets



      45,264



      40,572



      14,602


      11.6















      Total assets


      $

      1,719,524


      $

      1,559,235


      $

      1,488,562


      10.3















      LIABILITIES













      Noninterest-bearing deposits


      $

      442,996


      $

      356,618


      $

      346,916


      24.2


      Interest-bearing deposits



      1,061,732



      984,716



      902,084


      7.8


      Total deposits



      1,504,728



      1,341,334



      1,249,000


      12.2















      Short-term borrowings



      1,064



      1,226



      25,508


      (13.2)


      Long-term borrowings



      —



      15,000



      15,000


      (100.0)


      Lease liabilities



      4,941



      4,792



      3,663


      3.1


      Accrued expenses and other liabilities



      8,657



      4,081



      4,084


      112.1


      Total liabilities



      1,519,390



      1,366,433



      1,297,255


      11.2















      COMMITMENTS AND CONTINGENCIES


























      STOCKHOLDERS' EQUITY













      Common stock, par value $0.01; authorized 35,000,000
      shares



      125



      125



      128


      —


      Additional paid in capital



      61,129



      61,045



      65,376


      0.1


      Retained earnings



      136,876



      131,425



      125,996


      4.1


      Accumulated other comprehensive income (loss)



      2,004



      207



      (193)


      868.1


      Total stockholders' equity



      200,134



      192,802



      191,307


      3.8















      Total liabilities and stockholders' equity


      $

      1,719,524


      $

      1,559,235


      $

      1,488,562


      10.3















      Period-end common shares outstanding



      12,526



      12,500



      12,780


      0.2


      Book value per common share


      $

      15.98


      $

      15.42


      $

      14.97


      3.6


      Shore Bancshares, Inc.
      Consolidated Statements of Income (Unaudited)
      (In thousands, except per share data)




      For the Three Months Ended



      For the Six Months Ended




      June 30, 


      June 30, 




      2020


      2019


      % Change


      2020


      2019


      % Change


      INTEREST INCOME


















      Interest and fees on loans


      $

      13,945


      $

      13,749


      1.4

      %

      $

      27,740


      $

      27,248


      1.8

      %

      Interest on investment securities:


















      Taxable



      638



      887


      (28.1)



      1,357



      1,885


      (28.0)


      Interest on deposits with other banks



      11



      113


      (90.3)



      183



      276


      (33.7)


      Total interest income



      14,594



      14,749


      (1.1)



      29,280



      29,409


      (0.4)




















      INTEREST EXPENSE


















      Interest on deposits



      1,556



      2,204


      (29.4)



      3,615



      4,151


      (12.9)


      Interest on short-term borrowings



      1



      145


      (99.3)



      3



      358


      (99.2)


      Interest on long-term borrowings



      6



      107


      (94.4)



      113



      213


      —


      Total interest expense



      1,563



      2,456


      (36.4)



      3,731



      4,722


      (21.0)




















      NET INTEREST INCOME



      13,031



      12,293


      6.0



      25,549



      24,687


      3.5


      Provision for credit losses



      1,000



      200


      400.0



      1,350



      300


      350.0




















      NET INTEREST INCOME AFTER PROVISION


















      FOR CREDIT LOSSES



      12,031



      12,093


      (0.5)



      24,199



      24,387


      (0.8)




















      NONINTEREST INCOME


















      Service charges on deposit accounts



      544



      1,028


      (47.1)



      1,410



      1,962


      (28.1)


      Trust and investment fee income



      363



      385


      (5.7)



      738



      757


      (2.5)


      Gains on sales and calls of investment securities



      347



      —


      —



      347



      —


      —


      Other noninterest income



      1,515



      1,196


      26.7



      2,626



      2,078


      26.4


      Total noninterest income



      2,769



      2,609


      6.1



      5,121



      4,797


      6.8























      NONINTEREST EXPENSE


















      Salaries and wages



      2,130



      3,792


      (43.8)



      6,426



      7,558


      (15.0)


      Employee benefits



      1,535



      1,068


      43.7



      3,257



      2,322


      40.3


      Occupancy expense



      702



      668


      5.1



      1,400



      1,359


      3.0


      Furniture and equipment expense



      247



      295


      (16.3)



      564



      558


      1.1


      Data processing



      1,037



      919


      12.8



      2,081



      1,829


      13.8


      Directors' fees



      113



      116


      (2.6)



      254



      202


      25.7


      Amortization of intangible assets



      138



      155


      (11.0)



      282



      317


      (11.0)


      FDIC insurance premium expense



      124



      181


      (31.5)



      215



      386


      (44.3)


      Other real estate owned expenses, net



      —



      60


      (100.0)



      18



      293


      (93.9)


      Legal and professional fees



      553



      559


      (1.1)



      1,187



      1,160


      2.3


      Other noninterest expenses



      1,084



      1,172


      (7.5)



      2,328



      2,344


      (0.7)


      Total noninterest expense



      7,663



      8,985


      (14.7)



      18,012



      18,328


      (1.7)




















      Income from continuing operations before income taxes



      7,137



      5,717


      24.8



      11,308



      10,856


      4.2


      Income tax expense



      1,802



      1,489


      21.0



      2,855



      2,800


      2.0




















      Income from continuing operations



      5,335



      4,228


      26.2



      8,453



      8,056


      4.9




















      Loss from discontinued operations before income taxes



      —



      (4)


      100.0



      —



      (103)


      100.0


      Income tax benefit



      —



      —


      —



      —



      (25)


      100.0




















      Loss from discontinued operations



      —



      (4)


      100.0



      —



      (78)


      100.0




















      NET INCOME


      $

      5,335


      $

      4,224


      26.3


      $

      8,453


      $

      7,978


      6.0




















      Weighted average shares outstanding - basic



      12,524



      12,779


      (2.0)



      12,519



      12,774


      (2.0)


      Weighted average shares outstanding - diluted



      12,525



      12,784


      (2.0)



      12,521



      12,779


      (2.0)




















      Basic net income per common share


















      Income from continuing operations


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.63


      7.9


      Loss from discontinued operations



      —



      —


      —



      —



      (0.01)


      100.0


      Net income


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.62


      9.7




















      Diluted net income per common share


















      Income from continuing operations


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.63


      7.9


      Loss from discontinued operations



      —



      —


      -



      —



      (0.01)


      100.0


      Net income


      $

      0.43


      $

      0.33


      30.3


      $

      0.68


      $

      0.62


      9.7




















      Dividends paid per common share



      0.12



      0.10


      20.0



      0.24



      0.20


      20.0


      Shore Bancshares, Inc.
      Consolidated Average Balance Sheets (Unaudited)
      (Dollars in thousands)




      For the Three Months Ended


      For the Six Months Ended




      June 30, 


      June 30, 




      2020


      2019


      2020


      2019




      Average


      Yield/


      Average


      Yield/


      Average


      Yield/


      Average


      Yield/




      balance


      rate


      balance


      rate


      balance


      rate


      balance


      rate


      Earning assets






















      Loans (1), (2), (3)


      $

      1,374,324


      4.09

      %

      $

      1,221,215


      4.53

      %

      $

      1,318,883


      4.24

      %

      $

      1,211,618


      4.55

      %

      Investment securities






















      Taxable



      107,908


      2.37



      159,878


      2.22



      118,659


      2.30



      162,429


      2.34


      Interest-bearing deposits



      57,713


      0.07



      18,325


      2.47



      57,685


      0.64



      23,039


      2.42


      Total earning assets



      1,539,945


      3.82

      %


      1,399,418


      4.24

      %


      1,495,227


      3.95

      %


      1,397,086


      4.26

      %

      Cash and due from banks



      18,167





      17,225





      18,020





      17,211




      Other assets



      90,981





      61,906





      90,068





      60,340




      Allowance for credit losses



      (10,706)





      (10,456)





      (10,626)





      (10,423)




      Total assets


      $

      1,638,387




      $

      1,468,093




      $

      1,592,689




      $

      1,464,214
















































      Interest-bearing liabilities






















      Demand deposits


      $

      298,568


      0.20

      %

      $

      234,775


      0.65

      %

      $

      291,372


      0.37

      %

      $

      237,271


      0.63

      %

      Money market and savings deposits



      426,963


      0.23



      385,272


      0.84



      418,608


      0.34



      384,508


      0.84


      Brokered deposits



      —


      —



      20,866


      2.52



      —


      —



      21,470


      2.44


      Certificates of deposit $100,000 or more



      130,582


      1.81



      107,549


      1.54



      129,995


      1.83



      103,067


      1.40


      Other time deposits



      150,675


      1.54



      145,900


      1.31



      150,659


      1.58



      143,226


      1.16


      Interest-bearing deposits



      1,006,788


      0.62



      894,362


      0.99



      990,634


      0.73



      889,542


      0.94


      Short-term borrowings



      2,030


      0.20



      21,557


      2.70



      1,632


      0.37



      27,239


      2.65


      Long-term borrowings



      824


      2.93



      15,000


      2.86



      7,912


      2.87



      15,000


      2.86


      Total interest-bearing liabilities



      1,009,642


      0.62

      %


      930,919


      1.06

      %


      1,000,178


      0.75

      %


      931,781


      1.02

      %

      Noninterest-bearing deposits



      420,275





      339,589





      386,478





      335,334




      Accrued expenses and other liabilities



      9,628





      8,484





      9,446





      10,051




      Stockholders' equity



      198,842





      189,101





      196,587





      187,048




      Total liabilities and stockholders' equity


      $

      1,638,387




      $

      1,468,093




      $

      1,592,689




      $

      1,464,214


























      Net interest spread





      3.20

      %




      3.18

      %




      3.20

      %




      3.24

      %

      Net interest margin





      3.41

      %




      3.54

      %




      3.45

      %




      3.57

      %



      (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 amortized 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)




      2nd Quarter


      1st Quarter


      4th Quarter


      3rd Quarter


      2nd Quarter


      Q2 2020


      Q2 2020



      2020


      2020


      2019


      2019


      2019


      compared to


      compared to



      Q2 2020


      Q1 2020


      Q4 2019


      Q3 2019


      Q2 2019


      Q1 2020


      Q2 2019

      PROFITABILITY FOR THE PERIOD




















      Taxable-equivalent net interest income


      $

      13,068


      $

      12,554


      $

      12,808


      $

      12,724


      $

      12,334


      4.1

      %

      6.0

      Less: Taxable-equivalent adjustment



      37



      36



      44



      44



      41


      2.8


      (9.8)

      Net interest income



      13,031



      12,518



      12,764



      12,680



      12,293


      4.1


      6.0

      Provision for credit losses



      1,000



      350



      200



      200



      200


      185.7


      400.0

      Noninterest income



      2,769



      2,352



      2,694



      2,529



      2,609


      17.7


      6.1

      Noninterest expense



      7,663



      10,349



      9,845



      9,384



      8,985


      (26.0)


      (14.7)

      Income from continuing operations
      before income taxes



      7,137



      4,171



      5,413



      5,625



      5,717


      71.1


      24.8

      Income tax expense



      1,802



      1,053



      1,399



      1,411



      1,489


      71.1


      21.0

      Income from continuing operations



      5,335



      3,118



      4,014



      4,214



      4,228


      71.1


      26.2





















      Loss from discontinued operations
      before income taxes



      —



      —



      —



      (10)



      (4)


      —


      100.0

      Income tax benefit



      —



      —



      —



      (2)



      —


      —


      —

      Loss from discontinued operations 



      —



      —



      —



      (8)



      (4)


      —


      100.0





















      Net income


      $

      5,335


      $

      3,118


      $

      4,014


      $

      4,206


      $

      4,224


      71.1


      26.3





















      From Continuing Operations:




















      Return on average assets



      1.31

      %


      0.81

      %


      1.03

      %


      1.10

      %


      1.16

      %

      50

      bp

      15

      Return on average equity



      10.79



      6.45



      8.24



      8.66



      8.97


      434


      182

      Return on average tangible equity (1)



      12.20



      7.43



      9.43



      9.90



      10.31


      477


      189

      Net interest margin



      3.41



      3.48



      3.47



      3.52



      3.54


      (7)


      (13)

      Efficiency ratio - GAAP



      48.50



      69.60



      63.69



      61.70



      60.29


      (2,110)


      (1,179)

      Efficiency ratio - Non-GAAP (1)



      48.58



      68.46



      62.58



      60.58



      59.09


      (1,988)


      (1,051)





















      PER SHARE DATA




















      Basic net income per common share




















      Income from continuing operations


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0

      %

      30.3

      Loss from discontinued operations



      —



      —



      —



      —



      —


      —


      —

      Net income


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3

      Diluted net income per common share




















      Income from continuing operations


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3

      Loss from discontinued operations



      —



      —



      —



      —



      —


      —


      —

      Net income


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3





















      Dividends paid per common share



      0.12



      0.12



      0.12



      0.10



      0.10


      —


      20.0

      Book value per common share at period
      end



      15.98



      15.62



      15.42



      15.22



      14.97


      2.3


      6.7

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



      14.42



      14.06



      13.84



      13.66



      13.40


      2.6


      7.6

      Market value at period end



      11.09



      10.85



      17.36



      15.41



      16.34


      2.2


      (32.1)

      Market range:




















      High



      12.40



      17.56



      17.90



      17.00



      16.48


      (29.4)


      (24.8)

      Low



      8.00



      7.63



      15.01



      14.90



      14.84


      4.8


      (46.1)









































      AVERAGE BALANCE SHEET DATA




















      Loans


      $

      1,374,324


      $

      1,263,441


      $

      1,246,355


      $

      1,235,374


      $

      1,221,215


      8.8

      %

      12.5

      Investment securities



      107,908



      129,410



      145,544



      155,324



      159,878


      (16.6)


      (32.5)

      Earning assets



      1,539,945



      1,450,508



      1,463,490



      1,432,252



      1,399,418


      6.2


      10.0

      Assets



      1,638,387



      1,546,991



      1,553,017



      1,513,790



      1,468,093


      5.9


      11.6

      Deposits



      1,427,063



      1,327,162



      1,334,047



      1,280,057



      1,233,951


      7.5


      15.6

      Stockholders' equity



      198,842



      194,332



      193,239



      193,120



      189,101


      2.3


      5.2





















      CREDIT QUALITY DATA




















      Net charge-offs


      $

      288


      $

      479


      $

      131


      $

      67


      $

      313


      (39.9)

      %

      (8.0)





















      Nonaccrual loans


      $

      11,649


      $

      11,540


      $

      10,590


      $

      12,530


      $

      14,592


      0.9


      (20.2)

      Loans 90 days past due and still accruing



      604



      721



      1,326



      712



      439


      (16.2)


      37.6

      Other real estate owned



      38



      38



      74



      74



      524


      —


      (92.7)

      Total nonperforming assets


      $

      12,291


      $

      12,299


      $

      11,990


      $

      13,316


      $

      15,555


      (0.1)


      (21.0)





















      Accruing troubled debt restructurings (TDRs)


      $

      7,312


      $

      7,444


      $

      7,501


      $

      7,588


      $

      7,768


      (1.8)


      (5.9)





















      Total nonperforming assets and accruing TDRs


      $

      19,603


      $

      19,743


      $

      19,491


      $

      20,904


      $

      23,323


      (0.7)


      (15.9)





















      CAPITAL AND CREDIT QUALITY RATIOS




















      Period-end equity to assets



      11.64

      %


      12.45

      %


      12.37

      %


      12.42

      %


      12.85

      %

      (81)

      bp

      (121)

      Period-end tangible equity to tangible assets (1)



      10.63



      11.35



      11.24



      11.29



      11.66


      (72)


      (103)





















      Annualized net charge-offs to average loans



      0.08



      0.15



      0.04



      0.02



      0.10


      (7)


      (2)





















      Allowance for credit losses as a percent of:




















      Period-end loans (2)



      0.79



      0.81



      0.84



      0.85



      0.83


      (2)


      (4)

      Nonaccrual loans



      95.20



      89.93



      99.22



      83.30



      70.62


      527


      2,458

      Nonperforming assets



      90.23



      84.38



      87.63



      78.39



      66.25


      585


      2,398

      Accruing TDRs



      151.67



      139.41



      140.07



      137.56



      132.66


      1,226


      1,901

      Nonperforming assets and accruing TDRs



      56.57



      52.57



      53.91



      49.93



      44.18


      400


      1,239





















      As a percent of total loans:




















      Nonaccrual loans



      0.83



      0.90



      0.85



      1.01



      1.18


      (7)


      (35)

      Accruing TDRs



      0.52



      0.58



      0.60



      0.61



      0.63


      (6)


      (11)

      Nonaccrual loans and accruing TDRs



      1.35



      1.49



      1.45



      1.63



      1.80


      (14)


      (45)





















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




















      Nonperforming assets



      0.87



      0.96



      0.96



      1.08



      1.25


      (9)


      (38)

      Nonperforming assets and accruing TDRs



      1.39



      1.55



      1.56



      1.69



      1.88


      (16)


      (49)





















      As a percent of total assets:




















      Nonaccrual loans



      0.68



      0.73



      0.68



      0.80



      0.98


      (5)


      (30)

      Nonperforming assets



      0.71



      0.78



      0.77



      0.85



      1.04


      (7)


      (33)

      Accruing TDRs



      0.43



      0.47



      0.48



      0.49



      0.52


      (4)


      (9)

      Nonperforming assets and accruing TDRs



      1.14



      1.25



      1.25



      1.34



      1.56


      (11)


      (42)



      (1)

      See the reconciliation table on page 18 of 18.

      (2)

      As of 6/30/2020, this ratio includes PPP loans of $123.0 million. Excluding these loans, the ratio is 0.86%.

      Shore Bancshares, Inc.
      Consolidated Statements of Income By Quarter (Unaudited)
      (In thousands, except per share data)



















      Q2 2020


      Q2 2020



















      compared to


      compared to




      Q2 2020


      Q1 2020


      Q4 2019


      Q3 2019


      Q2 2019


      Q1 2020


      Q2 2019


      INTEREST INCOME





















      Interest and fees on loans


      $

      13,945


      $

      13,795


      $

      14,043


      $

      14,100


      $

      13,749


      1.1

      %

      1.4

      %

      Interest on investment securities:





















      Taxable



      638



      719



      827



      870



      887


      (11.3)


      (28.1)


      Interest on deposits with other banks



      11



      172



      295



      223



      113


      (93.6)


      (90.3)


      Total interest income



      14,594



      14,686



      15,165



      15,193



      14,749


      (0.6)


      (1.1)























      INTEREST EXPENSE





















      Interest on deposits



      1,556



      2,059



      2,287



      2,288



      2,204


      (24.4)


      (29.4)


      Interest on short-term borrowings



      1



      2



      6



      117



      145


      (50.0)


      (99.3)


      Interest on long-term borrowings



      6



      107



      108



      108



      107


      (94.4)


      (94.4)


      Total interest expense



      1,563



      2,168



      2,401



      2,513



      2,456


      (27.9)


      (36.4)























      NET INTEREST INCOME



      13,031



      12,518



      12,764



      12,680



      12,293


      4.1


      6.0


      Provision for credit losses



      1,000



      350



      200



      200



      200


      185.7


      400.0























      NET INTEREST INCOME AFTER PROVISION





















      FOR CREDIT LOSSES



      12,031



      12,168



      12,564



      12,480



      12,093


      (1.1)


      (0.5)























      NONINTEREST INCOME





















      Service charges on deposit accounts



      544



      866



      958



      990



      1,028


      (37.2)


      (47.1)


      Trust and investment fee income



      363



      375



      382



      383



      385


      (3.2)


      (5.7)


      Gains on sales and calls of investment securities



      347



      —



      —



      —



      —


      —


      —


      Other noninterest income



      1,515



      1,111



      1,354



      1,156



      1,196


      36.4


      26.7


      Total noninterest income



      2,769



      2,352



      2,694



      2,529



      2,609


      17.7


      6.1





























      NONINTEREST EXPENSE





















      Salaries and wages



      2,130



      4,296



      4,002



      3,853



      3,792


      (50.4)


      (43.8)


      Employee benefits



      1,535



      1,722



      1,662



      1,299



      1,068


      (10.9)


      43.7


      Occupancy expense



      702



      698



      702



      697



      668


      0.6


      5.1


      Furniture and equipment expense



      247



      317



      286



      263



      295


      (22.1)


      (16.3)


      Data processing



      1,037



      1,044



      989



      972



      919


      (0.7)


      12.8


      Directors' fees



      113



      141



      137



      140



      116


      (19.9)


      (2.6)


      Amortization of intangible assets



      138



      144



      144



      144



      155


      (4.2)


      (11.0)


      FDIC insurance premium expense



      124



      91



      (42)



      —



      181


      36.3


      (31.5)


      Other real estate owned expenses, net



      —



      18



      (1)



      133



      60


      (100.0)


      (100.0)


      Legal and professional fees



      553



      634



      568



      495



      559


      (12.8)


      (1.1)


      Other noninterest expenses



      1,084



      1,244



      1,398



      1,388



      1,172


      (12.9)


      (7.5)


      Total noninterest expense



      7,663



      10,349



      9,845



      9,384



      8,985


      (26.0)


      (14.7)























      Income from continuing operations before income taxes



      7,137



      4,171



      5,413



      5,625



      5,717


      71.1


      24.8


      Income tax expense



      1,802



      1,053



      1,399



      1,411



      1,489


      71.1


      21.0























      Income from continuing operations



      5,335



      3,118



      4,014



      4,214



      4,228


      71.1


      26.2























      Loss from discontinued operations before income taxes



      —



      —



      —



      (10)



      (4)


      —


      100.0


      Income tax benefit



      —



      —



      —



      (2)



      —


      —


      —























      Loss from discontinued operations



      —



      —



      —



      (8)



      (4)


      —


      100.0












































      NET INCOME


      $

      5,335


      $

      3,118


      $

      4,014


      $

      4,206


      $

      4,224


      71.1


      26.3























      Weighted average shares outstanding - basic



      12,524



      12,513



      12,588



      12,764



      12,779


      0.1


      (2.0)


      Weighted average shares outstanding - diluted



      12,525



      12,518



      12,593



      12,769



      12,784


      0.1


      (2.0)























      Basic net income per common share





















      Income from continuing operations


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3


      Loss from discontinued operations



      —



      —



      —



      —



      —


      —


      —


      Net income


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3


      Diluted net income per common share





















      Income from continuing operations


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3


      Loss from discontinued operations



      —



      —



      —



      —



      —


      —


      —


      Net income


      $

      0.43


      $

      0.25


      $

      0.32


      $

      0.33


      $

      0.33


      72.0


      30.3























      Dividends paid per common share



      0.12



      0.12



      0.12



      0.10



      0.10


      —


      20.0


      Shore Bancshares, Inc.
      Consolidated Average Balance Sheets By Quarter (Unaudited)
      (Dollars in thousands)





























      Average balance





























      Q2 2020


      Q2 2020





























      compared to


      compared to




      Q2 2020


      Q1 2020


      Q4 2019


      Q3 2019


      Q2 2019


      Q1 2020


      Q2 2019




      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)



      1,374,324


      4.09

      %

      $

      1,263,441


      4.40

      %

      $

      1,246,355


      4.48

      %

      $

      1,235,374


      4.54

      %

      $

      1,221,215


      4.53

      %

      8.8

      %

      12.5

      %

      Investment securities































      Taxable



      107,908


      2.37



      129,410


      2.22



      145,544


      2.27



      155,324


      2.24



      159,878


      2.22


      (16.6)


      (32.5)


      Interest-bearing deposits



      57,713


      0.07



      57,657


      1.20



      71,591


      1.63



      41,554


      2.13



      18,325


      2.47


      0.1


      214.9


      Total earning assets



      1,539,945


      3.82

      %


      1,450,508


      4.08

      %


      1,463,490


      4.12

      %


      1,432,252


      4.22

      %


      1,399,418


      4.24

      %

      6.2


      10.0


      Cash and due from banks



      18,167





      17,874





      20,382





      18,127





      17,225




      1.6


      5.5


      Other assets



      90,981





      89,154





      79,586





      73,823





      61,906




      2.0


      47.0


      Allowance for credit losses



      (10,706)





      (10,545)





      (10,441)





      (10,412)





      (10,456)




      1.5


      2.4


      Total assets


      $

      1,638,387




      $

      1,546,991




      $

      1,553,017




      $

      1,513,790




      $

      1,468,093




      5.9


      11.6

































      Interest-bearing liabilities































      Demand deposits


      $

      298,568


      0.20

      %

      $

      284,176


      0.56

      %

      $

      284,193


      0.76

      %

      $

      252,386


      0.70

      %

      $

      234,775


      0.65

      %

      5.1


      27.2


      Money market and savings deposits



      426,963


      0.23



      410,252


      0.46



      397,662


      0.51



      389,268


      0.67



      385,272


      0.84


      4.1


      10.8


      Brokered deposits



      —


      —



      —


      —



      8,135


      2.15



      14,568


      2.29



      20,866


      2.52


      —


      (100.0)


      Certificates of deposit $100,000 or
      more



      130,582


      1.81



      129,408


      1.85



      126,411


      1.85



      119,200


      1.78



      107,549


      1.54


      0.9


      21.4


      Other time deposits



      150,675


      1.54



      150,645


      1.60



      149,197


      1.58



      149,708


      1.49



      145,900


      1.31


      —


      3.3


      Interest-bearing deposits



      1,006,788


      0.62



      974,481


      0.85



      965,598


      0.94



      925,130


      0.98



      894,362


      0.99


      3.3


      12.6


      Short-term borrowings



      2,030


      0.20



      1,235


      0.65



      1,889


      1.26



      17,729


      2.64



      21,557


      2.70


      64.4


      (90.6)


      Long-term borrowings



      824


      2.93



      15,000


      2.87



      15,000


      2.86



      15,000


      2.86



      15,000


      2.86


      (94.5)


      (94.5)


      Total interest-bearing liabilities



      1,009,642


      0.62

      %


      990,716


      0.88

      %


      982,487


      0.97

      %


      957,859


      1.04

      %


      930,919


      1.06

      %

      1.9


      8.5


      Noninterest-bearing deposits



      420,275





      352,681





      368,449





      354,927





      339,589




      19.2


      23.8


      Accrued expenses and other liabilities



      9,628





      9,262





      8,842





      7,884





      8,484




      4.0


      13.5


      Stockholders' equity



      198,842





      194,332





      193,239





      193,120





      189,101




      2.3


      5.2


      Total liabilities and stockholders' equity


      $

      1,638,387




      $

      1,546,991




      $

      1,553,017




      $

      1,513,790




      $

      1,468,093




      5.9


      11.6

































      Net interest spread





      3.20

      %




      3.20

      %




      3.15

      %




      3.18

      %




      3.18

      %





      Net interest margin





      3.41

      %




      3.48

      %




      3.47

      %




      3.52

      %




      3.54

      %







      (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 amortized 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




      Q2 2020


      Q1 2020


      Q4 2019


      Q3 2019


      Q2 2019


      6/30/2020


      6/30/2019

























      The following reconciles return on average equity and return
      on average tangible equity from continuing operations (Note 1):














































      Income from continuing operations


      $

      5,335


      $

      3,118


      $

      4,014


      $

      4,214


      $

      4,228


      $

      8,453


      $

      8,056


      Income from continuing operations - annualized (A)


      $

      21,457


      $

      12,541


      $

      15,925


      $

      16,719


      $

      16,958


      $

      16,999


      $

      16,246

























      Net income, excluding net amortization of intangible assets


      $

      5,438


      $

      3,225


      $

      4,121


      $

      4,321


      $

      4,344


      $

      8,663


      $

      8,293

























      Net income, excluding net amortization of intangible assets -
      annualized (B)


      $

      21,872


      $

      12,971


      $

      16,350


      $

      17,143


      $

      17,424


      $

      17,421


      $

      16,723

























      Average stockholders' equity (C)


      $

      198,842


      $

      194,332


      $

      193,239


      $

      193,120


      $

      189,101


      $

      196,587


      $

      187,048


      Less:  Average goodwill and other intangible assets



      (19,560)



      (19,702)



      (19,846)



      (19,991)



      (20,138)



      (19,631)



      (20,209)


      Average tangible equity (D)


      $

      179,282


      $

      174,630


      $

      173,393


      $

      173,129


      $

      168,963


      $

      176,956


      $

      166,839

























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



      10.79

      %


      6.45

      %


      8.24

      %


      8.66

      %


      8.97

      %


      8.65

      %


      8.69

      %

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



      12.20

      %


      7.43

      %


      9.43

      %


      9.90

      %


      10.31

      %


      9.84

      %


      10.02

      %
























      The following reconciles GAAP efficiency ratio and non-
      GAAP efficiency ratio from continuing operations (Note 2):














































      Noninterest expense (E)


      $

      7,663


      $

      10,349


      $

      9,845


      $

      9,384


      $

      8,985


      $

      18,012


      $

      18,328


      Less:  Amortization of intangible assets



      (138)



      (144)



      (144)



      (144)



      (155)



      (282)



      (317)


      Adjusted noninterest expense (F)


      $

      7,525


      $

      10,205


      $

      9,701


      $

      9,240


      $

      8,830


      $

      17,730


      $

      18,011

























      Net interest income (G)



      13,031



      12,518



      12,764



      12,680



      12,293



      25,549



      24,687


      Add:  Taxable-equivalent adjustment



      37



      36



      44



      44



      41



      73



      75


      Taxable-equivalent net interest income (H)


      $

      13,068


      $

      12,554


      $

      12,808


      $

      12,724


      $

      12,334


      $

      25,622


      $

      24,762

























      Noninterest income (I)


      $

      2,769


      $

      2,352


      $

      2,694


      $

      2,529


      $

      2,609


      $

      5,121



      4,797


      Less:  Investment securities (gains)



      (347)



      —



      —



      —



      —



      (347)



      —


      Adjusted noninterest income (J)


      $

      2,422


      $

      2,352


      $

      2,694


      $

      2,529


      $

      2,609


      $

      4,774


      $

      4,797

























      Efficiency ratio (GAAP)  (E)/(G)+(I)



      48.50

      %


      69.60

      %


      63.69

      %


      61.70

      %


      60.29

      %


      58.73

      %


      62.16

      %

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



      48.58

      %


      68.46

      %


      62.58

      %


      60.58

      %


      59.09

      %


      58.33

      %


      60.93

      %

























      The following reconciles book value per common share and

       tangible book value per common share (Note 1):














































      Stockholders' equity (L)


      $

      200,134


      $

      195,694


      $

      192,802


      $

      193,963


      $

      191,307








      Less:  Goodwill and other intangible assets



      (19,488)



      (19,626)



      (19,770)



      (19,914)



      (20,058)








      Tangible equity (M)


      $

      180,646


      $

      176,068


      $

      173,032


      $

      174,049


      $

      171,249































      Shares outstanding (N)



      12,526



      12,525



      12,500



      12,742



      12,780































      Book value per common share (GAAP)  (L)/(N)


      $

      15.98


      $

      15.62


      $

      15.42


      $

      15.22


      $

      14.97








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


      $

      14.42


      $

      14.06


      $

      13.84


      $

      13.66


      $

      13.40






















































      The following reconciles equity to assets and tangible equity
      to tangible assets (Note 1):














































      Stockholders' equity (O)


      $

      200,134


      $

      195,694


      $

      192,802


      $

      193,963


      $

      191,307








      Less:  Goodwill and other intangible assets



      (19,488)



      (19,626)



      (19,770)



      (19,914)



      (20,058)








      Tangible equity (P)


      $

      180,646


      $

      176,068


      $

      173,032


      $

      174,049


      $

      171,249































      Assets (Q)


      $

      1,719,524


      $

      1,571,421


      $

      1,559,235


      $

      1,561,679


      $

      1,488,562








      Less:  Goodwill and other intangible assets



      (19,488)



      (19,626)



      (19,770)



      (19,914)



      (20,058)








      Tangible assets (R)


      $

      1,700,036


      $

      1,551,795


      $

      1,539,465


      $

      1,541,765


      $

      1,468,504































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



      11.64

      %


      12.45

      %


      12.37

      %


      12.42

      %


      12.85

      %







      Period-end tangible equity/tangible assets (Non-GAAP)
      (P)/(R)



      10.63

      %


      11.35

      %


      11.24

      %


      11.29

      %


      11.66

      %










      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.

      Modal title

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