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Section 1: 8-K (FORM 8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 30, 2020

 

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland 000-22345 52-1974638
(State or other jurisdiction of (Commission file number) (IRS Employer
incorporation or organization)   Identification No.)

 

28969 Information Lane, Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (410) 763-7800

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common stock, par value $.01 per share SHBI Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

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Item 2.02. Result of Operation and Financial Condition.

 

On April 30, 2020 Shore Bancshares, Inc. (the “Company”) issued a press release setting forth the Company’s first quarter 2020 financial results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

 

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.

 

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EXHIBIT INDEX

 

Exhibit    
Number   Description
     
99.1   Press Release, dated April 30, 2020 (filed herewith)

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  SHORE BANCSHARES, INC.
   
Dated: April 30, 2020 By: /s/ Lloyd L. Beatty, Jr.
    Lloyd L. Beatty, Jr.
    President and Chief Executive Officer

 

 

 

 

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(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

 

28969 Information Lane

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports First Quarter 2020 Financial Results

 

Easton, Maryland (04/30/2020) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported income from continuing operations of $3.118 million or $0.25 per diluted common share for the first quarter of 2020, compared to income from continuing operations of $4.014 million or $0.32 per diluted common share for the fourth quarter of 2019, and income from continuing operations of $3.828 million or $0.30 per diluted common share for the first quarter of 2019.

 

When comparing income from continuing operations for the first quarter of 2020 to the fourth quarter of 2019, net income decreased $896 thousand due to an increase in noninterest expenses of $504 thousand and decreases in noninterest income and net interest income of $342 thousand and $246 thousand, respectively. In addition, the provision for credit losses increased in the first quarter of 2020 by $150 thousand due to economic stress related to the COVID-19 pandemic. When comparing income from continuing operations for the first quarter of 2020 to the first quarter of 2019, income decreased $710 thousand due to an increase in noninterest expense of $1.0 million and an increase in provision for credit losses of $250 thousand, partially offset by increases in noninterest income of $164 thousand and net interest income of $124 thousand, respectively.

 

“As we navigate through these challenging times, we remain committed to our customers and all their banking needs” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer.  “Our branches have remained open to serve individuals throughout Maryland, Delaware and the Eastern Shore of Virginia. We are participating in the Payment Protection Program (“PPP”) to ensure our small business customers get the vital resources they need. To date we have processed over 1,000 PPP loans for our small business customers totaling approximately $114 million as of April 30, 2020.  We have collateral pledged to the Federal Home Loan Bank of approximately $300 million that can be utilized for borrowing purposes as well as $15 million in lines with correspondent banks should it be necessary to meet liquidity demands. Our capital position remains strong. We understand how vitally important we are and will continue our commitment and support to our customers, employees and shareholders.”

 

Response to COVID-19

 

Employees

Our employees have been exceptional during this unprecedented time by remaining flexible and committed to finding ways to continue servicing our clients with minimal disruption. The dedication and commitment of our staff across our footprint continues to be the heart and soul of community banking at its finest. Many of our non-branch personnel have transitioned to working remotely and those remaining in our offices continue to practice social distancing as the Company has implemented enhanced cleaning and disinfecting procedures across all locations. All Company meetings have transitioned to telephonic or video conferencing, all made possible by our dedicated IT staff. We suspended all unnecessary business-related travel, public events, and meetings with outside parties to promote the safety and well-being of our employees.

 

 
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Banking Locations

All our branch locations remain open, with limited hours of operation. For the safety of our employees and customers we closed our branch lobbies to the public and established procedures for clients to make appointments in our branches for critical needs. 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.

 

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

We remain an SBA preferred lender and are actively participating in the PPP program. As previously stated above, we have provided loans for over 800 of our small business customers totaling $104 million as of April 30, 2020. 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 $1.571 billion at March 31, 2020, a $12.2 million, or less than 1%, increase when compared to $1.559 billion at the end of 2019. The increase was primarily due to the $28.3 million, or 2.3% increase in gross loans. The increase in gross loans was funded primarily by a decrease in investment securities available for sale of $18.4 million and deposit growth of $7.5 million during the first quarter of 2020.

 

Total deposits increased $7.5 million, or less than 1%, when compared to December 31, 2019. The increase in total deposits consisted of an increase in interest-bearing deposits of $9.0 million, partially offset by a decrease in noninterest bearing deposits of $1.6 million. The growth in interest-bearing deposits was represented by increases in savings and money market accounts of $9.2 million, time deposits greater than $100 thousand of $3.4 million and other time deposits of $2.2 million. These increases were partially offset by a decrease in checking accounts of $5.8 million.

 

Total stockholders’ equity increased $2.9 million, or 1.5%, when compared to the end of 2019. At March 31, 2020, the ratio of total equity to total assets was 12.45% and the ratio of total tangible equity to total tangible assets was 11.35%.

 

Review of Quarterly Financial Results

Net interest income was $12.5 million for the first quarter of 2020, compared to $12.8 million for the fourth quarter of 2019 and $12.4 million for the first quarter of 2019. The decrease in net interest income when compared to the fourth quarter of 2019 was primarily due to the decrease in yields on total earnings assets, which included loans of 8bps, taxable investment securities of 5bps and interest-bearing deposits with other banks of 43bps. The average balances of taxable investment securities and interest-bearing deposits with other banks also experienced a decrease $16.1 million and $13.9 million, respectively, which decreases were partially offset by an increase in the average balance of loans of $17.1 million. Also impacting net interest income when comparing the first quarter of 2020 to the fourth quarter of 2019, was the liability side of the balance sheet which experienced a decrease of $233 thousand in total interest-bearing liability costs. This reduction was attributed to lower rates paid on interest-bearing deposits and short-term borrowings of 9bps and 61bps, respectively. Net interest income increased when compared to the first quarter of 2019 due to an increase in the average balance of loans of $61.5 million, or 5.1%, resulting in $298 thousand of additional interest income, almost entirely offset by a decrease in the average balance of taxable investment securities of $35.6 million, resulting in a decline in interest income of $279 thousand. When comparing the first quarter of 2020 and 2019 on the liability side of the balance sheet, total interest-bearing liability costs decreased $98 thousand. This reduction was attributed to a decline in the average balance of short-term borrowings of $31.7 million, or 96.3%, which resulted in a decrease in expense of $211 thousand, which was partially offset by an increase in the average balance of interest-bearing deposits of $89.8 million, or 10.2%, resulting in an increase in expense of $112 thousand. The Company’s net interest margin increased to 3.48% from 3.47% in the fourth quarter of 2019 and down from 3.61% in the first quarter of 2019.

 

 
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The provision for credit losses was $350 thousand for the three months ended March 31, 2020. The comparable amounts were $200 thousand and $100 thousand for the three months ended December 31, 2019 and March 31, 2019, respectively. The ratio of the allowance for credit losses to period-end loans was 0.81% at March 31, 2020, lower than both the 0.84% at December 31, 2019 and lower than the 0.86% at March 31, 2019. The primary driver of the reduction in the percentage of the allowance to total loans as compared to both of the prior periods was due to a reduction in specific reserves carried as part of the allowance, which totaled $337 thousand, $975 thousand, and $812 thousand at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. The provision increased during the first quarter of 2020 over prior periods largely due to an increase in loan volume as well as management's consideration of the COVID-19 pandemic. These contributors to the increase in provision for the first quarter 2020, were offset in part due to a decline in specific reserves of $638 thousand from December 31, 2019, which resulted from charge-offs during the period. The addition of charge-offs related to loans with specific reserves provided for in prior periods to our historical loss history, coupled with recoveries during the period dictated a less than one-to-one increase in our historical reserves as compared to the prior recorded specific reserve balances. Considerations related to the COVID-19 pandemic contributed to an increase in our qualitative reserves to legacy non-impaired loans from 0.75% at December 31, 2019 to 0.78% at March 31, 2020. 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. The effects of the pandemic may require the Company to fund additional increases in the allowance for credit losses in future periods.

 

At March 31, 2020, nonperforming assets were $12.3 million, an increase of $309 thousand, or 2.6%, when compared to December 31, 2019. The increase in nonperforming assets was primarily due to an increase in nonaccrual loans of $950 thousand, or 9.0%, partially offset by a decrease in loans 90 days or more past due and still accruing of $605 thousand, or 45.6% and other real estate owned of $36 thousand, or 48.6%. The increase in nonaccrual loans was due to a specific relationship with a commercial customer of $1.5 million, which the Bank has been monitoring for several quarters. Accruing troubled debt restructurings (“TDRs”) decreased $57 thousand, or less than 1%, over the same time period. When comparing March 31, 2020 to March 31, 2019, nonperforming assets decreased $4.1 million, or 24.9%, and accruing TDRs decreased $384 thousand, or 4.9%. The decrease in nonperforming assets 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 1.25% for both March 31, 2020 and December 31, 2019 and 1.63% at March 31, 2019, respectively. In addition, the ratio of accruing TDRs to total loans at March 31, 2020 was 0.58%, compared to 0.60% at December 31, 2019 and 0.65% at March 31, 2019.

 

Total noninterest income from continuing operations for the first quarter of 2020 decreased $342 thousand, or 12.7%, when compared to the fourth quarter of 2019 and increased $164 thousand, or 7.5%, when compared to the first quarter of 2019. The decrease from the fourth quarter of 2019 was primarily the result of lower service charges on deposit accounts, decrease in BOLI life insurance proceeds collected in the first quarter of 2020 relative to the fourth quarter of 2019 and less activity for other banking services as a result of the COVID-19 pandemic. The increase from the first 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.

 

Total noninterest expense from continuing operations for the first quarter of 2020 increased $504 thousand, or 5.1%, when compared to the fourth quarter of 2019 and increased $1.0 million, or 10.8%, when compared to the first quarter of 2019. The increase in noninterest expense compared to the fourth quarter of 2019 was the result of higher salaries and wages due to pay increases and additional payroll days, as well as, higher FDIC insurance premiums due to receiving an assessment credit in the fourth quarter for banks under $10 billion. The increase in noninterest expenses from the first quarter of 2019 was primarily due to increases in employee benefits from higher medical insurance costs, the addition of supplemental executive retirement plans (“SERPs”) during 2019 and data processing, partially offset by lower other real estate owned expenses and FDIC insurance premiums.

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

 

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

 

For further information contact: Edward Allen, Executive Vice President and Chief Financial Officer,

410-763-7800

 

 
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Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)

 

   For the Three Months Ended 
   March 31, 
   2020   2019   Change 
PROFITABILITY FOR THE PERIOD               
Net interest income  $12,518   $12,394    1.0%
Provision for credit losses   350    100    250.0 
Noninterest income   2,352    2,188    7.5 
Noninterest expense   10,349    9,343    10.8 
Income from continuing operations before income taxes   4,171    5,139    (18.8)
Income tax expense   1,053    1,311    (19.7)
Income from continuing operations  $3,118   $3,828    (18.5)
                
Loss from discontinued operations before income taxes       (99)   100.0 
Income tax benefit       (25)   100.0 
Loss from discontinued operations       (74)   100.0 
Net income  $3,118   $3,754    (16.9)
                
From Continuing Operations:               
Return on average assets   0.81%   1.06%   (25)bp
Return on average equity   6.45    8.39    (194)
Return on average tangible equity (1)   7.43    9.72    (229)
Net interest margin   3.48    3.61    (13)
Efficiency ratio - GAAP   69.60    64.07    553 
Efficiency ratio - Non-GAAP (1)   68.46    62.81    565 
                
PER SHARE DATA               
Basic net income per common share               
Income from continuing operations  $0.25   $0.30    (16.7)%
Loss from discontinued operations       (0.01)   100.0 
Net income  $0.25   $0.29    (13.8)
Diluted net income per common share               
Income from continuing operations  $0.25   $0.30    (16.7)
Loss from discontinued operations       (0.01)   100.0 
Net income  $0.25   $0.29    (13.8)
                
Dividends paid per common share  $0.12   $0.10    20.0 
Book value per common share at period end   15.62    14.64    6.7 
Tangible book value per common share at period end (1)   14.06    13.06    7.7 
Market value at period end   10.85    14.91    (27.2)
Market range:               
High   17.56    16.11    9.0 
Low   7.63    14.00    (45.5)
                
AVERAGE BALANCE SHEET DATA               
Loans  $1,263,441   $1,201,913    5.1%
Investment securities   129,410    165,009    (21.6)
Earning assets   1,450,508    1,394,728    4.0 
Assets   1,546,991    1,460,291    5.9 
Deposits   1,327,162    1,215,702    9.2 
Stockholders' equity   194,332    184,972    5.1 

 

 

 
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CREDIT QUALITY DATA               
Net charge-offs  $479   $25    1,816.0%
                
Nonaccrual loans  $11,540   $15,360    (24.9)
Loans 90 days past due and still accruing   721    47    1,434.0 
Other real estate owned   38    979    (96.1)
Total nonperforming assets   12,299    16,386    (24.9)
Accruing troubled debt restructurings (TDRs)   7,444    7,828    (4.9)
Total nonperforming assets and accruing TDRs  $19,743   $24,214    (18.5)
                
                
CAPITAL AND CREDIT QUALITY RATIOS               
Period-end equity to assets   12.45%   12.59%   (14)bp
Period-end tangible equity to tangible assets (1)   11.35    11.39    (4)
                
Annualized net charge-offs to average loans   0.15    0.01    14 
                
Allowance for credit losses as a percent of:               
Period-end loans   0.81    0.86    (5)
Nonaccrual loans   89.93    67.83    2,210 
Nonperforming assets   84.38    63.58    2,080 
Accruing TDRs   139.41    133.09    632 
Nonperforming assets and accruing TDRs   52.57    43.02    955 
                
As a percent of total loans:               
Nonaccrual loans   0.90    1.27    (37)
Accruing TDRs   0.58    0.65    (7)
Nonaccrual loans and accruing TDRs   1.49    1.91    (42)
                
As a percent of total loans+other real estate owned:               
Nonperforming assets   0.96    1.35    (39)
Nonperforming assets and accruing TDRs   1.55    2.00    (45)
                
As a percent of total assets:               
Nonaccrual loans   0.73    1.03    (30)
Nonperforming assets   0.78    1.10    (32)
Accruing TDRs   0.47    0.53    (6)
Nonperforming assets and accruing TDRs   1.25    1.63    (38)

 

 

(1)See the reconciliation table on page 17 of 17.

 

 
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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

 

               March 31, 2020 
   March 31,   December 31,   March 31,   compared to 
   2020   2019   2019   December 31, 2019 
ASSETS                    
Cash and due from banks  $16,432   $18,465   $18,915    (11.0)%
Interest-bearing deposits with other banks   79,819    76,506    39,904    4.3 
Cash and cash equivalents   96,251    94,971    58,819    1.3 
                     
Investment securities available for sale (at fair value)   104,375    122,791    150,814    (15.0)
Investment securities held to maturity   8,687    8,786    5,899    (1.1)
Equity securities, at fair value   1,350    1,342    1,299    0.6 
Restricted securities   4,263    4,190    5,292    1.7 
                     
Loans   1,276,993    1,248,654    1,211,716    2.3 
Less: allowance for credit losses   (10,378)   (10,507)   (10,418)   (1.2)
Loans, net   1,266,615    1,238,147    1,201,298    2.3 
                     
Premises and equipment, net   24,930    23,821    22,632    4.7 
Goodwill   17,518    17,518    17,518     
Other intangible assets, net   2,108    2,252    2,696    (6.4)
Other real estate owned, net   38    74    979    (48.6)
Right of use assets, net   5,019    4,771    3,767    5.2 
Other assets   40,267    40,572    14,772    (0.8)
Assets of discontinued operations           14     
                     
Total assets  $1,571,421   $1,559,235   $1,485,799    0.8 
                     
LIABILITIES                    
Noninterest-bearing deposits  $355,054   $356,618   $345,151    (0.4)
Interest-bearing deposits   993,740    984,716    892,118    0.9 
Total deposits   1,348,794    1,341,334    1,237,269    0.6 
                     
Short-term borrowings   2,162    1,226    30,724    76.3 
Long-term borrowings   15,000    15,000    15,000     
Lease liabilities   5,072    4,792    3,767    5.8 
Accrued expenses and other liabilities   4,699    4,081    9,146    15.1 
Liabilities of discontinued operations           2,811     
Total liabilities   1,375,727    1,366,433    1,298,717    0.7 
                     
COMMITMENTS AND CONTINGENCIES                    
                     
STOCKHOLDERS' EQUITY                    
Common stock, par value $0.01; authorized 35,000,000 shares   125    125    128     
Additional paid in capital   61,067    61,045    65,408    0.0 
Retained earnings   133,044    131,425    123,050    1.2 
Accumulated other comprehensive income (loss)   1,458    207    (1,504)   604.3 
Total stockholders' equity   195,694    192,802    187,082    1.5 
                     
Total liabilities and stockholders' equity  $1,571,421   $1,559,235   $1,485,799    0.8 
                     
Period-end common shares outstanding   12,525    12,500    12,780    0.2 
Book value per common share  $15.62   $15.42   $14.64    1.3 

 

 

 
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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

   For the Three Months Ended 
   March 31, 
   2020   2019   % Change 
INTEREST INCOME               
Interest and fees on loans  $13,795   $13,499    2.2%
Interest on investment securities:               
Taxable   719    998    (28.0)
Interest on deposits with other banks   172    163    5.5 
Total interest income   14,686    14,660    0.2 
                
INTEREST EXPENSE               
Interest on deposits   2,059    1,947    5.8 
Interest on short-term borrowings   2    213    (99.1)
Interest on long-term borrowings   107    106    0.9 
Total interest expense   2,168    2,266    (4.3)
                
NET INTEREST INCOME   12,518    12,394    1.0 
Provision for credit losses   350    100    250.0 
                
NET INTEREST INCOME AFTER PROVISION               
FOR CREDIT LOSSES   12,168    12,294    (1.0)
                
NONINTEREST INCOME               
Service charges on deposit accounts   866    934    (7.3)
Trust and investment fee income   375    372    0.8 
Other noninterest income   1,111    882    26.0 
Total noninterest income   2,352    2,188    7.5 

 

 
 Page 9 of 17

 

 

NONINTEREST EXPENSE               
Salaries and wages   4,296    3,766    14.1 
Employee benefits   1,722    1,254    37.3 
Occupancy expense   698    691    1.0 
Furniture and equipment expense   317    263    20.5 
Data processing   1,044    910    14.7 
Directors' fees   141    86    64.0 
Amortization of intangible assets   144    162    (11.1)
FDIC insurance premium expense   91    205    (55.6)
Other real estate owned expenses, net   18    233    (92.3)
Legal and professional fees   634    601    5.5 
Other noninterest expenses   1,244    1,172    6.1 
Total noninterest expense   10,349    9,343    10.8 
                
Income from continuing operations before income taxes   4,171    5,139    (18.8)
Income tax expense   1,053    1,311    (19.7)
                
Income from continuing operations   3,118    3,828    (18.5)
                
Loss from discontinued operations before income taxes       (99)   100.0 
Income tax benefit       (25)   100.0 
                
Loss from discontinued operations       (74)   100.0 
                
NET INCOME  $3,118   $3,754    (16.9)
                
Weighted average shares outstanding - basic   12,513    12,769    (2.0)
Weighted average shares outstanding - diluted   12,518    12,773    (2.0)
                
Basic net income per common share               
Income from continuing operations  $0.25   $0.30    (16.7)
Loss from discontinued operations       (0.01)   100.0 
Net income  $0.25   $0.29    (13.8)
                
Diluted net income per common share               
Income from continuing operations  $0.25   $0.30    (16.7)
Loss from discontinued operations       (0.01)   100.0 
Net income  $0.25   $0.29    (13.8)
                
Dividends paid per common share   0.12    0.10    20.0 

  

 
 Page 10 of 17

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

 

   For the Three Months Ended 
   March 31, 
   2020   2019 
   Average   Yield/   Average   Yield/ 
   balance   rate   balance   rate 
Earning assets                    
Loans (1), (2), (3)  $1,263,441    4.40%  $1,201,913    4.57%
Investment securities                    
Taxable   129,410    2.22    165,009    2.45 
Interest-bearing deposits   57,657    1.20    27,806    2.38 
Total earning assets   1,450,508    4.08%   1,394,728    4.27%
Cash and due from banks   17,874         17,196      
Other assets   89,154         58,756      
Allowance for credit losses   (10,545)        (10,389)     
Total assets  $1,546,991        $1,460,291      
                     
                     
Interest-bearing liabilities                    
Demand deposits  $284,176    0.56%  $239,794    0.61%
Money market and savings deposits   410,252    0.46    383,738    0.85 
Brokered deposits           22,080    2.37 
Certificates of deposit $100,000 or more   129,408    1.85    98,535    1.24 
Other time deposits   150,645    1.60    140,523    1.02 
Interest-bearing deposits   974,481    0.85    884,670    0.89 
Short-term borrowings   1,235    0.65    32,984    2.62 
Long-term borrowings   15,000    2.87    15,000    2.87 
Total interest-bearing liabilities   990,716    0.88%   932,654    0.99%
Noninterest-bearing deposits   352,681         331,032      
Accrued expenses and other liabilities   9,262         11,633      
Stockholders' equity   194,332         184,972      
Total liabilities and stockholders' equity  $1,546,991        $1,460,291      
                     
Net interest spread        3.20%        3.28%
Net interest margin        3.48%        3.61%

 

 

(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.

 

 
 Page 11 of 17

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

 

   1st Quarter   4th Quarter   3rd Quarter   2nd Quarter   1st Quarter   Q1 2020   Q1 2020 
   2020   2019   2019   2019   2019   compared to   compared to 
   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019   Q4 2019   Q1 2019 
PROFITABILITY FOR THE PERIOD                                   
Taxable-equivalent net interest income  $12,554   $12,808   $12,724   $12,334   $12,428    (2.0)%   1.0 
Less: Taxable-equivalent adjustment   36    44    44    41    34    (18.2)   5.9 
Net interest income   12,518    12,764    12,680    12,293    12,394    (1.9)   1.0 
Provision for credit losses   350    200    200    200    100    75.0    250.0 
Noninterest income   2,352    2,694    2,529    2,609    2,188    (12.7)   7.5 
Noninterest expense   10,349    9,845    9,384    8,985    9,343    5.1    10.8 
Income from continuing operations before income taxes   4,171    5,413    5,625    5,717    5,139    (22.9)   (18.8)
Income tax expense   1,053    1,399    1,411    1,489    1,311    (24.7)   (19.7)
Income from continuing operations   3,118    4,014    4,214    4,228    3,828    (22.3)   (18.5)
                                    
Loss from discontinued operations before income taxes           (10)   (4)   (99)       100.0 
Income tax benefit           (2)       (25)       100.0 
Loss from discontinued operations           (8)   (4)   (74)       100.0 
                                    
Net income  $3,118   $4,014   $4,206   $4,224   $3,754    (22.3)   (16.9)
                                    
From Continuing Operations:                                   
Return on average assets   0.81%   1.03%   1.10%   1.16%   1.06%   (22)bp   (25)
Return on average equity   6.45    8.24    8.66    8.97    8.39    (179)   (194)
Return on average tangible equity (1)   7.43    9.43    9.90    10.31    9.72    (200)   (229)
Net interest margin   3.48    3.47    3.52    3.54    3.61    1    (13)
Efficiency ratio - GAAP   69.60    63.69    61.70    60.29    64.07    591    553 
Efficiency ratio - Non-GAAP (1)   68.46    62.58    60.58    59.09    62.81    588    565 
                                    
PER SHARE DATA                                   
Basic net income per common share                                   
Income from continuing operations  $0.25   $0.32   $0.33   $0.33   $0.30    (21.9)%   (16.7)
Loss from discontinued operations                   (0.01)       100.0 
Net income  $0.25   $0.32   $0.33   $0.33   $0.29    (21.9)   (13.8)
Diluted net income per common share                                   
Income from continuing operations  $0.25   $0.32   $0.33   $0.33   $0.30    (21.9)   (16.7)
Loss from discontinued operations                   (0.01)       100.0 
Net income  $0.25   $0.32   $0.33   $0.33   $0.29    (21.9)   (13.8)
                                    
Dividends paid per common share   0.12    0.12    0.10    0.10    0.10        20.0 
Book value per common share at period end   15.62    15.42    15.22    14.97    14.64    1.3    6.7 
Tangible book value per common share at period end (1)   14.06    13.84    13.66    13.40    13.06    1.6    7.7 
Market value at period end   10.85    17.36    15.41    16.34    14.91    (37.5)   (27.2)
Market range:                                   
High   17.56    17.90    17.00    16.48    16.11    (1.9)   9.0 
Low   7.63    15.01    14.90    14.84    14.00    (49.2)   (45.5)

 

 
 Page 12 of 17

                             
AVERAGE BALANCE SHEET DATA                                   
Loans  $1,263,441   $1,246,355   $1,235,374   $1,221,215   $1,201,913    1.4%   5.1 
Investment securities   129,410    145,544    155,324    159,878    165,009    (11.1)   (21.6)
Earning assets   1,450,508    1,463,490    1,432,252    1,399,418    1,394,728    (0.9)   4.0 
Assets   1,546,991    1,553,017    1,513,790    1,468,093    1,460,291    (0.4)   5.9 
Deposits   1,327,162    1,334,047    1,280,057    1,233,951    1,215,702    (0.5)   9.2 
Stockholders' equity   194,332    193,239    193,120    189,101    184,972    0.6    5.1 
                                    
CREDIT QUALITY DATA                                   
Net charge-offs  $479   $131   $67   $313   $25    265.6%   1,816.0 
                                    
Nonaccrual loans  $11,540   $10,590   $12,530   $14,592   $15,360    9.0    (24.9)
Loans 90 days past due and still accruing   721    1,326    712    439    47    (45.6)   1,434.0 
Other real estate owned   38    74    74    524    979    (48.6)   (96.1)
Total nonperforming assets  $12,299   $11,990   $13,316   $15,555   $16,386    2.6    (24.9)
                                    
Accruing troubled debt restructurings (TDRs)  $7,444   $7,501   $7,588   $7,768   $7,828    (0.8)   (4.9)
                                    
Total nonperforming assets and accruing TDRs  $19,743   $19,491   $20,904   $23,323   $24,214    1.3    (18.5)
                                    
CAPITAL AND CREDIT QUALITY RATIOS                                   
Period-end equity to assets   12.45%   12.37%   12.42%   12.85%   12.59%   8bp    (14)
Period-end tangible equity to tangible assets (1)   11.35    11.24    11.29    11.66    11.39    11    (4)
                                    
Annualized net charge-offs to average loans   0.15    0.04    0.02    0.10    0.01    11    14 
                                    
Allowance for credit losses as a percent of:                                   
Period-end loans   0.81    0.84    0.85    0.83    0.86    (3)   (5)
Nonaccrual loans   89.93    99.22    83.30    70.62    67.83    (929)   2,210 
Nonperforming assets   84.38    87.63    78.39    66.25    63.58    (325)   2,080 
Accruing TDRs   139.41    140.07    137.56    132.66    133.09    (66)   632 
Nonperforming assets and accruing TDRs   52.57    53.91    49.93    44.18    43.02    (134)   955 
                                    
As a percent of total loans:                                   
Nonaccrual loans   0.90    0.85    1.01    1.18    1.27    5    (37)
Accruing TDRs   0.58    0.60    0.61    0.63    0.65    (2)   (7)
Nonaccrual loans and accruing TDRs   1.49    1.45    1.63    1.80    1.91    4    (42)
                                    
As a percent of total loans+other real estate owned:                                   
Nonperforming assets   0.96    0.96    1.08    1.25    1.35        (39)
Nonperforming assets and accruing TDRs   1.55    1.56    1.69    1.88    2.00    (1)   (45)
                                    
As a percent of total assets:                                   
Nonaccrual loans   0.73    0.68    0.80    0.98    1.03    5    (30)
Nonperforming assets   0.78    0.77    0.85    1.04    1.10    1    (32)
Accruing TDRs   0.47    0.48    0.49    0.52    0.53    (1)   (6)
Nonperforming assets and accruing TDRs   1.25    1.25    1.34    1.56    1.63        (38)

 

 

 (1)

See the reconciliation table on page 17 of 17.

 

 
 Page 13 of 17

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)

 

                       Q1 2020   Q1 2020 
                       compared to   compared to 
   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019   Q4 2019   Q1 2019 
INTEREST INCOME                                   
Interest and fees on loans  $13,795   $14,043   $14,100   $13,749   $13,499    (1.8)%   2.2%
Interest on investment securities:                                   
Taxable   719    827    870    887    998    (13.1)   (28.0)
Interest on deposits with other banks   172    295    223    113    163    (41.7)   5.5 
Total interest income   14,686    15,165    15,193    14,749    14,660    (3.2)   0.2 
                                    
INTEREST EXPENSE                                   
Interest on deposits   2,059    2,287    2,288    2,204    1,947    (10.0)   5.8 
Interest on short-term borrowings   2    6    117    145    213    (66.7)   (99.1)
Interest on long-term borrowings   107    108    108    107    106    (0.9)   0.9 
Total interest expense   2,168    2,401    2,513    2,456    2,266    (9.7)   (4.3)
                                    
NET INTEREST INCOME   12,518    12,764    12,680    12,293    12,394    (1.9)   1.0 
Provision for credit losses   350    200    200    200    100    75.0    250.0 
                                    
NET INTEREST INCOME AFTER PROVISION                                   
FOR CREDIT LOSSES   12,168    12,564    12,480    12,093    12,294    (3.2)   (1.0)
                                    
NONINTEREST INCOME                                   
Service charges on deposit accounts   866    958    990    1,028    934    (9.6)   (7.3)
Trust and investment fee income   375    382    383    385    372    (1.8)   0.8 
Other noninterest income   1,111    1,354    1,156    1,196    882    (17.9)   26.0 
Total noninterest income   2,352    2,694    2,529    2,609    2,188    (12.7)   7.5 

 

 
 Page 14 of 17

                             
NONINTEREST EXPENSE                                   
Salaries and wages   4,296    4,002    3,853    3,792    3,766    7.3    14.1 
Employee benefits   1,722    1,662    1,299    1,068    1,254    3.6    37.3 
Occupancy expense   698    702    697    668    691    (0.6)   1.0 
Furniture and equipment expense   317    286    263    295    263    10.8    20.5 
Data processing   1,044    989    972    919    910    5.6    14.7 
Directors' fees   141    137    140    116    86    2.9    64.0 
Amortization of intangible assets   144    144    144    155    162        (11.1)
FDIC insurance premium expense   91    (42)       181    205    316.7    (55.6)
Other real estate owned expenses, net   18    (1)   133    60    233    1,900.0    (92.3)
Legal and professional fees   634    568    495    559    601    11.6    5.5 
Other noninterest expenses   1,244    1,398    1,388    1,172    1,172    (11.0)   6.1 
Total noninterest expense   10,349    9,845    9,384    8,985    9,343    5.1    10.8 
                                    
Income from continuing operations before income taxes   4,171    5,413    5,625    5,717    5,139    (22.9)   (18.8)
Income tax expense   1,053    1,399    1,411    1,489    1,311    (24.7)   (19.7)
                                    
Income from continuing operations   3,118    4,014    4,214    4,228    3,828    (22.3)   (18.5)
                                    
Loss from discontinued operations before income taxes           (10)   (4)   (99)       100.0 
Income tax benefit           (2)       (25)       100.0 
                                    
Loss from discontinued operations           (8)   (4)   (74)       100.0 
                                    
                                    
NET INCOME  $3,118   $4,014   $4,206   $4,224   $3,754    (22.3)   (16.9)
                                    
Weighted average shares outstanding - basic   12,513    12,588    12,764    12,779    12,769    (0.6)   (2.0)
Weighted average shares outstanding - diluted   12,518    12,593    12,769    12,784    12,773    (0.6)   (2.0)
                                    
Basic net income per common share                                   
Income from continuing operations  $0.25   $0.32   $0.33   $0.33   $0.30    (21.9)   (16.7)
Loss from discontinued operations                   (0.01)       100.0 
Net income  $0.25   $0.32   $0.33   $0.33   $0.29    (21.9)   (13.8)
Diluted net income per common share                                   
Income from continuing operations  $0.25   $0.32   $0.33   $0.33   $0.30    (21.9)   (16.7)
Loss from discontinued operations                   (0.01)       100.0 
Net income  $0.25   $0.32   $0.33   $0.33   $0.29    (21.9)   (13.8)
                                    
Dividends paid per common share   0.12    0.12    0.10    0.10    0.10        20.0 

  

 
 Page 15 of 17

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)

 

                                           Average balance 
                                           Q1 2020   Q1 2020 
                                           compared to   compared to 
   Q1 2020   Q4 2019   Q3 2019   Q2 2019   Q1 2019   Q4 2019   Q1 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)   1,263,441    4.40%  $1,246,355    4.48%  $1,235,374    4.54%  $1,221,215    4.53%  $1,201,913    4.57%   1.4%   5.1%
Investment securities                                                            
Taxable   129,410    2.22    145,544    2.27    155,324    2.24    159,878    2.22    165,009    2.45    (11.1)   (21.6)
Interest-bearing deposits   57,657    1.20    71,591    1.63    41,554    2.13    18,325    2.47    27,806    2.38    (19.5)   107.4 
Total earning assets   1,450,508    4.08%   1,463,490    4.12%   1,432,252    4.22%   1,399,418    4.24%   1,394,728    4.27%   (0.9)   4.0 
Cash and due from banks   17,874         20,382         18,127         17,225         17,196         (12.3)   3.9 
Other assets   89,154         79,586         73,823         61,906         58,756         12.0    51.7 
Allowance for credit losses   (10,545)        (10,441)        (10,412)        (10,456)        (10,389)        1.0    1.5 
Total assets  $1,546,991        $1,553,017        $1,513,790        $1,468,093        $1,460,291         (0.4)   5.9 
                                                             
Interest-bearing liabilities                                                            
Demand deposits  $284,176    0.56%  $284,193    0.76%  $252,386    0.70%  $234,775    0.65%  $239,794    0.61%       18.5 
Money market and savings deposits   410,252    0.46    397,662    0.51    389,268    0.67    385,272    0.84    383,738    0.85    3.2    6.9 
Brokered deposits           8,135    2.15    14,568    2.29    20,866    2.52    22,080    2.37    (100.0)   (100.0)
Certificates of deposit $100,000 or more   129,408    1.85    126,411    1.85    119,200    1.78    107,549    1.54    98,535    1.24    2.4    31.3 
Other time deposits   150,645    1.60    149,197    1.58    149,708    1.49    145,900    1.31    140,523    1.02    1.0    7.2 
Interest-bearing deposits   974,481    0.85    965,598    0.94    925,130    0.98    894,362    0.99    884,670    0.89    0.9    10.2 
Short-term borrowings   1,235    0.65    1,889    1.26    17,729    2.64    21,557    2.70    32,984    2.62    (34.6)   (96.3)
Long-term borrowings   15,000    2.87    15,000    2.86    15,000    2.86    15,000    2.86    15,000    2.87         
Total interest-bearing liabilities   990,716    0.88%   982,487    0.97%   957,859    1.04%   930,919    1.06%   932,654    0.99%   0.8    6.2 
Noninterest-bearing deposits   352,681         368,449         354,927         339,589         331,032         (4.3)   6.5 
Accrued expenses and other liabilities   9,262         8,842         7,884         8,484         11,633         4.8    (20.4)
Stockholders' equity   194,332         193,239         193,120         189,101         184,972         0.6    5.1 
Total liabilities and stockholders' equity  $1,546,991        $1,553,017        $1,513,790        $1,468,093        $1,460,291         (0.4)  5.9 
                                                             
Net interest spread        3.20%        3.15%        3.18%        3.18%