Shore Bancshares Inc. SHBI

NAS: SHBI | ISIN: US8251071051   28/03/2024
11,50 USD (+0,88%)
(+0,88%)   28/03/2024

Shore Bancshares Reports Third Quarter and Nine-Month Financial Results

EASTON, Md., Oct. 27, 2022 /PRNewswire/ --Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company") reported net income of $9.658 million or $0.49 per diluted common share for the third quarter of 2022, compared to net income of $7.499 million or $0.38 per diluted common share for the second quarter of 2022, and net income of $4.616 million or $0.39 per diluted common share for the third quarter of 2021. Net income for the first nine months of 2022 was $22.769 million or $1.15 per diluted common share, compared to net income for the first nine months of 2021 of $12.645 million or $1.08 per diluted common share. Net income, excluding merger related expenses, for the third quarter of 2022 was $9.774 million or $0.49 per diluted common share, compared to net income, excluding merger related expenses, of $7.674 million or $0.39 per diluted common share for the second quarter of 2022 and net income, excluding merger related expenses, of $5.013 million or $0.43 per diluted common share for the third quarter 2021. Net income, excluding merger related expenses, for the first nine months of 2022 was $23.617 million or $1.19 per diluted common share compared to net income for the first nine months of 2021 of $13.322 million or $1.13 per diluted common share.

When comparing net income, excluding merger related expenses, for the third quarter of 2022 to the second quarter of 2022, net income increased $2.1 million due to an increase in net interest income of $2.7 million and a decrease in noninterest expense of $1.1 million partially offset by a decrease in noninterest income of $489 thousand. When comparing net income, excluding merger related expenses, for the third quarter of 2022 to the third quarter of 2021, net income increased $4.8 million primarily due to increases in net interest income of $11.7 million and noninterest income of $2.4 million offset by increases in noninterest expense of $7.3 million primarily as a result of the acquisition of Severn Bank ("Severn") in November of 2021. 

"We are excited to announce our third quarter financial results." said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer.  "We continue to see strong loan demand and opportunities for growth within our various markets.  During the third quarter we experienced significant loan growth of 6.0%.   We are beginning to see a more normalized expense base since the merger in the fourth quarter of 2021. Our outlook for the remainder of 2022 is a very positive one, as we continue to maintain our commitment and focus on core earnings and enhanced returns for our shareholders.

Balance Sheet Review

Total assets were $3.447 billion at September 30, 2022, a $13.3 million, or less than 1.0%, decrease when compared to $3.460 billion at the end of 2021.  During this time period, the Company also shifted its asset mix by redeploying cash and cash equivalents into higher yielding assets which consisted of loans and investment securities.  As of September 30, 2022, the Company had 9 Paycheck Protection Program ("PPP') loans totaling $291 thousand that were outstanding.

Total deposits decreased $10.9 million, or less than 1%, when compared to December 31, 2021. The decrease in total deposits was due to decreases in money market and savings accounts of $72.4 million, noninterest-bearing deposits of $33.7 million and time deposits of $30.6 million, partially offset by an increase in interest bearing checking accounts of $125.8 million

Total stockholders' equity increased $6.5 million, or 1.9%, when compared to December 31, 2021, primarily due to current year earnings, partially offset by an increase in unrealized losses on available for sale securities of $9.8 million. At September 30, 2022, the ratio of total equity to total assets was 10.36% and the ratio of total tangible equity to total tangible assets was 8.52% compared to 10.14% and 8.25% at the end of 2021.

Review of Quarterly Financial Results

Net interest income was $27.3 million for the third quarter of 2022, compared to $24.6 million for the second quarter of 2022 and $15.6 million for the third quarter of 2021. The increase in net interest income when compared to the second quarter of 2022 was primarily due to increases in interest and fees on loans of $2.5 million, interest on investment securities of $794 thousand and interest with other banks of $640 thousand, partially offset by an increase in expense on interest-bearing deposits of $1.1 million. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $110.1 million, or 5.0%, coupled with an increase in yields of 18bps. The increase in interest on deposits with other banks was primarily due to the recent increases to the fed funds rate in July and August.  The increase in interest on taxable investment securities was driven by an increase in the rates of 31bps and an increase in the average balance within these securities of $72.1 million, or 13.2%.   

The increase in net interest income when compared to the third quarter of 2021 was primarily due to increases in interest and fees on loans of $10.4 million, interest on taxable investment securities of $1.9 million and interest on deposits with other banks of $1.4 million, partially offset by expense increases in interest-bearing deposits of $1.6 million and long-term borrowings of $341 thousand, all of which were significantly impacted by the acquisition of Severn in the fourth quarter of 2021.

The Company's net interest margin increased to 3.38% for the third quarter of 2022 from 3.10% for the second quarter of 2022 and 2.99% for the third quarter of 2021. The increase in net interest margin when compared to the second quarter of 2022 was primarily due to a shift from interest-bearing deposits with other banks to higher yielding loans and investment securities, partially offset by higher rates paid on interest-bearing deposits. The increase in net interest margin compared to the third quarter of 2021 was due to significantly higher volume as well as improved yields on all earning assets.

The provision for credit losses was $675 thousand for the three months ended September 30, 2022.  The comparable amounts were $200 thousand and $290 thousand for the three months ended June 30, 2022 and September 30, 2021, respectively. The increase in the provision for credit losses during the third quarter of 2022 as compared to the prior quarters was primarily a result of significant loan growth in the third quarter of 2022. Net recoveries for the third quarter of 2022 were $119 thousand, compared to net recoveries of $573 thousand for the second quarter of 2022 and net recoveries of $147 thousand for the third quarter of 2021.  The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.84% at September 30, 2022, compared to 0.89% at June 30, 2022 and 1.10% at September 30, 2021. The decline in the percentage of the allowance from the second quarter of 2022 was primarily due to lower pandemic related qualitative reserves.  The decline in the percentage of the allowance from the third quarter of 2021 was primarily the result of lower historical loss experience as well as lower pandemic related qualitative reserves.

At September 30, 2022 and June 30, 2022, nonperforming assets were $4.4 million and $4.0 million respectively. The balance of nonperforming assets increased primarily due to an increase in nonaccrual loans of $266 thousand, or 9.9%, and loans 90 days past due still accruing of $87 thousand, or 7.7%.  Accruing troubled debt restructuring ("TDRs") decreased $436 thousand, or 8.9%, at September 30, 2022 compared to June 30, 2022.  When comparing the third quarter of 2022 to the third quarter of 2021, nonperforming assets decreased $35 thousand, or less than 1%, primarily due to decreases in nonaccrual loans of $498 thousand, or 14.4%, partially offset by an increase in loans 90 days past due still accruing of $469 thousand, or 62.7%. Accruing TDRs decreased $1.3 million, or 22.5%, compared to the third quarter of 2021. The ratio of nonperforming assets and accruing TDRs to total assets at both September 30, 2022, and June 30, 2022 was 0.26% and was 0.44% at September 30, 2021.  In addition, the ratio of accruing TDRs to total loans at September 30, 2022 was 0.19% compared to 0.22% at June 30, 2022 and 0.38% at September 30, 2021.

Total noninterest income for the third quarter of 2022 decreased $489 thousand, or 8.4%, when compared to the second quarter of 2022 and increased $2.4 million, or 83.7%, when compared to the third quarter of 2021. The decrease compared to the second quarter of 2022 was primarily due to decreases in revenue associated with the mortgage division of $416 thousand, or 38.0%, and other bank fee income of $133 thousand, or 7.7%, partially offset by an increase in service charges on deposit accounts of $71 thousand, or 4.9%.  The increase in noninterest income when compared to the third quarter of 2021 was largely impacted by the addition of Severn in the fourth quarter of 2021 which contributed in part to increases in service charges on deposit accounts of $704 thousand. The Severn acquisition also added mortgage-banking revenue of $680 thousand and title revenue from Mid-MD Title of $397 thousand in the third quarter of 2022.

Total noninterest expense, excluding merger related expenses, for the third quarter of 2022 decreased $1.1 million or 5.5%, when compared to the second quarter of 2022 and increased $7.3 million, or 61.5%, when compared to the third quarter of 2021. The decrease in noninterest expense when compared to the second quarter of 2022 was primarily due to the increased deferrals of direct loan origination costs for salaries and employee benefits associated with the elevated level of loan originations during the quarter, as well as various cost saves related to the merger with Severn.  The increase from the third quarter of 2021 was primarily due to increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and legal and professional fees, which were all significantly impacted by adding Severn and its operations. 

Review of Nine-Month Financial Results

Net interest income for the first nine months of 2022 was $74.4 million, an increase of $30.9 million, or 71.0%, when compared to the first nine months of 2021.  The increase in net interest income was primarily due to an increase in total interest income of $33.8 million, or 70.7%, specifically interest and fees on loans of $27.2 million, or 61.6%. The improvement of interest and fees on loans was primarily due to the increase in the average balance of $774.0 million, or 53.0%, coupled with accretion income from acquired loans of $2.1 million for the first nine months of 2022.  Taxable investment securities and interest on deposits with other banks increased $4.2 million and $2.3 million, respectively, partially offset by an increase in total interest expense of $2.9 million, or 68.3%. The increase in interest expense was primarily the result of an increase in the average balance of interest-bearing deposits of $819.8 million, or 62.8%.  Interest on long term borrowings increased by $688 thousand due to long-term advances with FHLB and junior subordinated debt acquired as part of the Severn acquisition.  The long-term advances with FHLB will mature in October of 2022.

The provision for credit losses for the nine months ended September 30, 2022 and 2021 was $1.5 million and $1.4 million, respectively. The increase in provision for credit losses was the result of an increase in loans held for investment in the first nine months of 2022 of $283 million compared to $41 million for the first nine months of 2021. The ratio of the allowance to total loans decreased from 1.04% at September 30, 2021, to 0.68% at September 30, 2022. Excluding PPP loans and acquired loans, the ratio of the allowance for credit losses to period-end loans was 0.84% at September 30, 2022, lower than the 1.10% at September 30, 2021, primarily due to lower historical loss experience and reduced pandemic related qualitative factors.

Total noninterest income for the nine months ended September 30, 2022 increased $8.9 million, or 105.8%, when compared to the same period in 2021. The increase in noninterest income primarily consisted of revenue associated with the acquired mortgage division of $3.6 million, service charges on deposit accounts of $2.1 million, revenue from Mid-Maryland Title of $1.1 million and other noninterest income of $1.3 million. The increase in other noninterest income was primarily due to increases in rental fee income of $1.0 million and other loan fee income of $265 thousand.

Total noninterest expense, excluding merger related expenses, for the nine months ended September 30, 2022 increased $25.8 million, or 79.6%, when compared to the same period in 2021. The increase was primarily the result of higher salaries, employee benefits, occupancy expense, other intangibles, data processing costs, other noninterest expenses, and FDIC insurance premiums due to significant increases in new and existing customers and the acquisition of Severn. In addition, as previously mentioned, during the first nine months of 2022, the Company recorded merger-related expenses of $1.1 million due to the acquisition of Severn.  

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. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; the potential resurgence of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

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

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)






















For the Three Months Ended


For the Nine Months Ended




September 30, 


September 30, 




2022


2021


 Change


2022


2021


 Change


PROFITABILITY FOR THE PERIOD


















Net interest income


$

27,315


$

15,589


75.2

%

$

74,359


$

43,491


71.0

%

Provision for credit losses



675



290


132.8



1,475



1,365


8.1


Noninterest income



5,344



2,909


83.7



17,224



8,369


105.8


Noninterest expense



18,899



11,935


58.3



59,323



33,309


78.1


Income before income taxes



13,085



6,273


108.6



30,785



17,186


79.1


Income tax expense



3,427



1,657


106.8



8,016



4,541


76.5


Net income


$

9,658


$

4,616


109.2


$

22,769


$

12,645


80.1






































Return on average assets



1.11

%


0.84

%

27

bp


0.88

%


0.81

%

7

bp

Return on average assets excluding
amortization of intangibles and merger
related expenses - Non-GAAP (2)



1.17



0.94


23



0.96



0.87


9


Return on average equity



10.72



9.12


160



8.59



8.53


6


Return on average tangible equity - Non-
GAAP (1), (2)



13.98



11.12


286



11.63



10.15


148


Net interest margin



3.38



2.99


39



3.09



2.97


12


Efficiency ratio - GAAP



57.87



64.52


(665)



64.78



64.23


55


Efficiency ratio - Non-GAAP (1), (2)



55.79



60.93


(514)



61.80



61.66


14




















PER SHARE DATA


















Basic and diluted net income per common
share


$

0.49


$

0.39


25.6

%

$

1.15


$

1.08


6.5

%



















Dividends paid per common share


$

0.12


$

0.12



$

0.36


$

0.36



Book value per common share at period
end



17.99



17.15


4.9










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



14.50



15.55


(6.8)










Market value at period end



17.32



17.73


(2.3)










Market range:


















High



20.50



18.00


13.9



21.41



18.10


18.3


Low



17.29



16.35


5.7



17.29



12.99


33.1




















AVERAGE BALANCE SHEET DATA


















Loans


$

2,327,279


$

1,487,281


56.5

%

$

2,235,092


$

1,461,083


53.0

%

Investment securities



618,378



334,205


85.0



565,535



283,104


99.8


Earning assets



3,210,233



2,071,505


55.0



3,225,417



1,963,727


64.2


Assets



3,444,365



2,184,448


57.7



3,446,941



2,074,635


66.1


Deposits



3,012,658



1,943,225


55.0



3,016,594



1,836,748


64.2


Stockholders' equity



357,383



200,881


77.9



354,549



198,087


79.0




















CREDIT QUALITY DATA


















Net (recoveries)


$

(119)


$

(147)


19.0

%

$

(858)


$

(272)


(215.4)

%



















Nonaccrual loans


$

2,959


$

3,457


(14.4)










Loans 90 days past due and still accruing



1,217



748


62.7










Other real estate owned



197



203


(3.0)










Total nonperforming assets



4,373



4,408


(0.8)










Accruing troubled debt restructurings (TDRs)



4,458



5,750


(22.5)










Total nonperforming assets and accruing TDRs


$

8,831


$

10,158


(13.1)














































CAPITAL AND CREDIT QUALITY RATIOS


















Period-end equity to assets



10.36

%


8.92

%

144

bp









Period-end tangible equity to tangible assets - Non-GAAP (1)



8.52



8.15


37




























Annualized net (recoveries) to average loans



(0.02)



(0.04)


2



(0.05)

%


(0.02)

%

(3)

bp



















Allowance for credit losses as a percent of:


















Period-end loans (3)



0.68



1.04


(36)










Period-end loans (4)



0.84



1.10


(26)










Nonaccrual loans



550.08



449.09


10,099










Nonperforming assets



372.22



352.20


2,002










Accruing TDRs



365.12



270.00


9,512










Nonperforming assets and accruing TDRs



184.32



152.84


3,148




























As a percent of total loans:


















Nonaccrual loans



0.12



0.23


(11)










Accruing TDRs



0.19



0.38


(19)










Nonaccrual loans and accruing TDRs



0.31



0.62


(31)




























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


















Nonperforming assets



0.18



0.29


(11)










Nonperforming assets and accruing TDRs



0.37



0.68


(31)




























As a percent of total assets:


















Nonaccrual loans



0.09



0.15


(6)










Nonperforming assets



0.13



0.19


(6)










Accruing TDRs



0.13



0.25


(12)










Nonperforming assets and accruing TDRs



0.26



0.44


(18)










____________________

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

(2)   This ratio excludes merger related expenses (Non-GAAP).

(3)   As of September 30, 2022 and September 30, 2021, these ratios include all loans held for investment, including PPP loans of $291 thousand and $41.5 million, respectively.

(4)   As of September 30, 2022 and September 30, 2021, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)



























September 30, 2022


September 30, 2022





September 30, 



December 31, 


September 30, 


compared to


compared to




2022


2021


2021


December 31, 2021


September 30, 2021


ASSETS















Cash and due from banks


$

33,814


$

16,919


$

18,440


99.9

%

83.4

%

Interest-bearing deposits with other banks



129,492



566,694



292,412


(77.1)


(55.7)


Cash and cash equivalents



163,306



583,613



310,852


(72.0)


(47.5)

















Investment securities available for sale (at fair value)



86,347



116,982



105,125


(26.2)


(17.9)


Investment securities held to maturity (at amortized cost)



570,719



404,594



250,501


41.1


127.8


Equity securities, at fair value



1,222



1,372



1,384


(10.9)


(11.7)


Restricted securities



9,894



4,159



3,189


137.9


210.3

















Loans held for sale, at fair value



8,342



37,749



-


(77.9)


-

















Loans held for investment



2,401,883



2,119,175



1,494,897


13.3


60.7


Less: allowance for credit losses



(16,277)



(13,944)



(15,525)


16.7


(4.8)


Loans, net



2,385,606



2,105,231



1,479,372


13.3


61.3

















Premises and equipment, net



52,252



51,624



27,011


1.2


93.4


Goodwill



63,281



63,421



17,518


(0.2)


261.2


Other intangible assets, net



6,007



7,535



1,365


(20.3)


340.1


Other real estate owned, net



197



532



203


(63.0)


(3.0)


Mortgage servicing rights, at fair value



5,321



4,087




30.2



Right of use assets, net



9,764



11,370



5,512


(14.1)


77.1


Cash surrender value on life insurance



58,768



47,935



41,949


22.6


40.1


Other assets



25,778



19,932



16,793


29.3


53.5


Total assets


$

3,446,804


$

3,460,136


$

2,260,774


(0.4)


52.5

















LIABILITIES















Noninterest-bearing deposits


$

893,808


$

927,497


$

554,902


(3.6)


61.1


Interest-bearing deposits



2,121,504



2,098,739



1,463,163


1.1


45.0


Total deposits



3,015,312



3,026,236



2,018,065


(0.4)


49.4

















Securities sold under retail repurchase agreements





4,143



3,501


(100.0)


(100.0)


Advances from FHLB - long-term



10,013



10,135




(1.2)



Subordinated debt



42,995



42,762



24,521


0.5


75.3


Total borrowings



53,008



57,040



28,022





















Lease liabilities



10,023



11,567



5,686


(13.3)


76.3


Accrued expenses and other liabilities



11,240



14,600



7,394


(23.0)


52.0


Total liabilities



3,089,583



3,109,443



2,059,167


(0.6)


50.0

















COMMITMENTS AND CONTINGENCIES






























STOCKHOLDERS' EQUITY















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



199



198



118


0.5


68.6


Additional paid in capital



201,213



200,473



51,641


0.4


289.6


Retained earnings



165,590



149,966



149,620


10.4


10.7


Accumulated other comprehensive (loss) income



(9,781)



56



228


(17,566.1)


(4,389.9)


Total stockholders' equity



357,221



350,693



201,607


1.9


77.2


Total liabilities and stockholders' equity


$

3,446,804


$

3,460,136


$

2,260,774


(0.4)


52.5

















Period-end common shares outstanding



19,858



19,808



11,752


0.3


69.0


Book value per common share


$

17.99


$

17.71


$

17.15


1.6


4.9


 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)





















For the Three Months Ended



For the Nine Months Ended




September 30, 


September 30, 




2022


2021


% Change


2022


2021


% Change


INTEREST INCOME


















Interest and fees on loans


$

25,924


$

15,484


67.4

%

$

71,458


$

44,231


61.6

%

Interest on investment securities:


















Taxable



3,186



1,318


141.7



7,562



3,343


126.2


Interest on deposits with other banks



1,466



97


1,411.3



2,546



199


1,179.4


Total interest income



30,576



16,899


80.9



81,566



47,773


70.7




















INTEREST EXPENSE


















Interest on deposits



2,561



949


169.9



5,429



3,189


70.2


Interest on short-term borrowings





2


(100.0)



2



5


(60.0)


Interest on long-term borrowings



700



359


95.0



1,776



1,088



Total interest expense



3,261



1,310


148.9



7,207



4,282


68.3




















NET INTEREST INCOME



27,315



15,589


75.2



74,359



43,491


71.0


Provision for credit losses



675



290


132.8



1,475



1,365


8.1




















NET INTEREST INCOME AFTER PROVISION


















FOR CREDIT LOSSES



26,640



15,299


74.1



72,884



42,126


73.0




















NONINTEREST INCOME


















Service charges on deposit accounts



1,509



805


87.5



4,306



2,162


99.2


Trust and investment fee income



421



477


(11.7)



1,383



1,359


1.8


Gains on sales and calls of investment securities





2


(100.0)





2



Interchange credits



1,241



1,016


22.1



3,532



2,922


20.9


Mortgage-banking revenue



680






3,643





Title Company revenue



397






1,146





Other noninterest income



1,096



609


80.0



3,214



1,924


67.0


Total noninterest income



5,344



2,909


83.7



17,224



8,369


105.8




















NONINTEREST EXPENSE


















Salaries and wages



8,562



5,091


68.2



27,022



13,495


100.2


Employee benefits



2,191



1,654


32.5



7,122



4,991


42.7


Occupancy expense



1,496



843


77.5



4,548



2,427


87.4


Furniture and equipment expense



533



449


18.7



1,370



1,168


17.3


Data processing



1,759



1,170


50.3



5,034



3,514


43.3


Directors' fees



217



147


47.6



617



450


37.1


Amortization of intangible assets



499



107


366.4



1,528



353


332.9


FDIC insurance premium expense



339



245


38.4



1,111



653


70.1


Other real estate owned, net



1



4


(75.0)



52



6


766.7


Legal and professional fees



756



428


76.6



2,204



1,592


38.4


Merger related expenses



159



538


(70.4)



1,130



915


23.5


Other noninterest expenses



2,387



1,259


89.6



7,585



3,745


102.5


Total noninterest expense



18,899



11,935


58.3



59,323



33,309


78.1




















Income before income taxes



13,085



6,273


108.6



30,785



17,186


79.1


Income tax expense



3,427



1,657


106.8



8,016



4,541


76.5






































NET INCOME


$

9,658


$

4,616


109.2


$

22,769


$

12,645


80.1




















Weighted average shares outstanding - basic



19,852



11,752


68.9



19,842



11,750


68.9


Weighted average shares outstanding - diluted



19,852



11,752


68.9



19,842



11,750


68.9




















Basic and diluted net income per common share


$

0.49


$

0.39


25.6


$

1.15


$

1.08


6.5




















Dividends paid per common share



0.12



0.12




0.36



0.36



 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

























For the Three Months Ended


For the Nine Months Ended




September 30, 


September 30, 




2022


2021


2022


2021




Average


Yield/


Average


Yield/


Average


Yield/


Average


Yield/




balance


rate


balance


rate


balance


rate


balance


rate


Earning assets






















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


$

2,327,279


4.43

%

$

1,487,281


4.14

%

$

2,235,092


4.28

%

$

1,461,083


4.06

%

Investment securities






















Taxable



618,378


2.06



334,205


1.58



565,535


1.79



283,104


1.58


Interest-bearing deposits



264,576


2.20



250,019


0.15



424,790


0.80



219,540


0.12


Total earning assets



3,210,233


3.78

%


2,071,505


3.24

%


3,225,417


3.39

%


1,963,727


3.26

%

Cash and due from banks



31,724





19,453





14,383





18,536




Other assets



218,163





108,989





222,236





107,174




Allowance for credit losses



(15,755)





(15,499)





(15,095)





(14,802)




Total assets


$

3,444,365




$

2,184,448




$

3,446,941




$

2,074,635
















































Interest-bearing liabilities






















Demand deposits


$

646,399


0.66

%

$

462,950


0.14

%

$

627,213


0.35

%

$

435,678


0.14

%

Money market and savings deposits



1,034,580


0.35



644,330


0.18



1,046,230


0.26



591,959


0.18


Certificates of deposit $100,000 or more



222,697


0.55



136,059


0.71



247,635


0.50



134,080


1.00


Other time deposits



215,014


0.51



142,777


0.68



204,283


0.54



143,832


0.89


Interest-bearing deposits



2,118,690


0.48



1,386,116


0.27



2,125,361


0.34



1,305,549


0.33


Securities sold under retail repurchase






















   agreements and federal funds purchased






2,718


0.29



913


0.29



2,695


0.25


Advances from FHLB - long-term



10,035


0.63






10,075


0.60





Subordinated debt



42,953


6.33



24,504


5.81



42,878


5.40



24,474


5.94


Total interest-bearing liabilities



2,171,678


0.60

%


1,413,338


0.37

%


2,179,227


0.44

%


1,332,718


0.43

%

Noninterest-bearing deposits



893,968





557,109





891,233





531,199




Accrued expenses and other liabilities



21,336





13,120





21,932





12,631




Stockholders' equity



357,383





200,881





354,549





198,087




Total liabilities and stockholders' equity


$

3,444,365




$

2,184,448




$

3,446,941




$

2,074,635


























Net interest spread





3.18

%




2.87

%




2.95

%




2.83

%

Net interest margin





3.38

%




2.99

%




3.09

%




2.97

%

____________________

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

(2) Average loan balances include nonaccrual loans.

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

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)
























3rd Quarter


2nd Quarter


1st Quarter


4th Quarter



3rd Quarter


Q3 2022


Q3 2022




2022


2022


2022


2021



2021


compared to


compared to




Q3 2022


Q2 2022


Q1 2022


Q4 2021



Q3 2021


Q2 2022


Q3 2021


PROFITABILITY FOR THE PERIOD





















Taxable-equivalent net interest income


$

27,350


$

24,656


$

22,469


$

20,652


$

15,623


10.9

%

75.1

%

Less: Taxable-equivalent adjustment



35



38



39



13



34


(7.9)


2.9


Net interest income



27,315



24,618



22,430



20,639



15,589


11.0


75.2


Provision for credit losses



675



200



600



(1,723)



290


237.5


132.8


Noninterest income



5,344



5,833



6,046



5,129



2,909


(8.4)


83.7


Noninterest expense



18,899



20,094



20,332



23,497



11,935


(5.9)


58.3


Income before income taxes



13,085



10,157



7,544



3,994



6,273


28.8


108.6


Income tax expense



3,427



2,658



1,931



1,271



1,657


28.9


106.8


Net income


$

9,658


$

7,499


$

5,613


$

2,723


$

4,616


28.8


109.2























Return on average assets



1.11

%


0.88

%


0.65

%


0.36

%


0.84

%

23

bp

27

bp

Return on average assets excluding
amortization of intangibles and
merger related expenses - Non-
GAAP (2)



1.17



0.94



0.76



1.07



0.94


23


23


Return on average equity



10.72



8.52



6.45



3.59



9.12


220


160


Return on average tangible equity - Non-
GAAP (1)



13.98



11.41



9.40



13.06



11.12


257


286


Net interest margin



3.38



3.10



2.78



2.87



2.99


28


39


Efficiency ratio - GAAP



57.87



65.99



71.40



91.19



64.52


(812)


(665)


Efficiency ratio - Non-GAAP (1), (2)



55.79



63.44



66.93



60.13



60.92


(765)


(513)























PER SHARE DATA





















Basic and diluted net income per
common share


$

0.49


$

0.38


$

0.28


$

0.16


$

0.39


28.9

%

25.6

%






















Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




Book value per common share at period
end



17.99



17.77



17.73



17.71



17.15


1.2


4.9


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



14.50



14.26



14.19



14.12



15.55


1.7


(6.8)


Market value at period end



17.32



18.50



20.48



20.85



17.73


(6.4)


(2.3)


Market range:





















High



20.50



21.21



21.41



23.19



18.00


(3.3)


13.9


Low



17.29



17.91



19.34



17.50



16.35


(3.5)


5.7























AVERAGE BALANCE SHEET DATA





















Loans


$

2,327,279


$

2,217,139


$

2,135,734


$

1,887,126


$

1,487,281


5.0

%

56.5

%

Investment securities



618,378



546,252



531,017



468,724



334,205


13.2


85.0


Earning assets



3,210,233



3,189,926



3,253,549



2,842,097



2,071,505


0.6


55.0


Assets



3,444,365



3,419,168



3,477,481



3,037,262



2,184,448


0.7


57.7


Deposits



3,012,658



2,993,098



3,044,213



2,547,151



1,943,225


0.7


55.0


Stockholders' equity



357,383



353,192



353,011



301,095



200,881


1.2


77.9























CREDIT QUALITY DATA





















Net (recoveries)


$

(119)


$

(573)


$

(166)


$

(142)


$

(147)


79.2

%

19.0

%






















Nonaccrual loans


$

2,959


$

2,693


$

2,848


$

2,004


$

3,457


9.9


(14.4)


Loans 90 days past due and still accruing



1,217



1,130



459



508



748


7.7


62.7


Other real estate owned



197



197



561



532



203



(3.0)


Total nonperforming assets


$

4,373


$

4,020


$

3,868


$

3,044


$

4,408


8.8


(0.8)























Accruing troubled debt restructurings
(TDRs)


$

4,458


$

4,894


$

5,004


$

5,667


$

5,750


(8.9)


(22.5)























Total nonperforming assets and accruing
TDRs


$

8,831


$

8,914


$

8,872


$

8,711


$

10,158


(0.9)


(13.1)























CAPITAL AND CREDIT QUALITY RATIOS





















Period-end equity to assets



10.36

%


10.25

%


10.07

%


10.14

%


8.92

%

11

bp

144

bp

Period-end tangible equity to tangible assets
- Non-GAAP (1)



8.52



8.39



8.22



8.25



8.15


13


37























Annualized net (recoveries)  to average loans



(0.02)



(0.10)



(0.03)



(0.03)



(0.04)


8


2























Allowance for credit losses as a percent of:





















Period-end loans (3)



0.68



0.68



0.67



0.66



1.04



(36)


Period-end loans (4)



0.84



0.89



0.92



0.93



1.10


(5)


(26)


Nonaccrual loans



550.08



574.94



516.50



695.81



449.09


(2,486)


10,099


Nonperforming assets



372.22



385.15



380.30



458.08



352.20


(1,293)


2,002


Accruing TDRs



365.12



316.37



293.96



246.06



270.00


4,875


9,512


Nonperforming assets and accruing TDRs



184.32



173.69



165.80



160.07



152.84


1,063


3,148























As a percent of total loans:





















Nonaccrual loans



0.12



0.12



0.13



0.09



0.23



(11)


Accruing TDRs



0.19



0.22



0.23



0.27



0.38


(3)


(19)


Nonaccrual loans and accruing TDRs



0.31



0.34



0.36



0.36



0.62


(3)


(31)























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





















Nonperforming assets



0.18



0.18



0.18



0.14



0.29



(11)


Nonperforming assets and accruing TDRs



0.37



0.39



0.41



0.41



0.68


(2)


(31)























As a percent of total assets:





















Nonaccrual loans



0.09



0.08



0.08



0.06



0.15


1


(6)


Nonperforming assets



0.13



0.12



0.11



0.09



0.19


1


(6)


Accruing TDRs



0.13



0.14



0.14



0.16



0.25


(1)


(12)


Nonperforming assets and accruing TDRs



0.26



0.26



0.25



0.25



0.44



(18)


____________________

(1)     See the reconciliation table that begins on page 14.

(2)     This ratio excludes merger related expenses (Non-GAAP).

(3)     Includes all loans held for investment, including PPP loan balances for all periods shown.

(4)     For all periods shown, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)







































Q3 2022


Q3 2022



















compared to


compared to




Q3 2022


Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2022


Q3 2021


INTEREST INCOME





















Interest and fees on loans


$

25,924


$

23,452


$

22,085


$

20,564


$

15,484


10.5

%

67.4

%

Interest on investment securities:





















Taxable



3,186



2,392



1,985



1,663



1,318


33.2


141.7


Interest on deposits with other banks



1,466



826



254



169



97


77.5


1,411.3


Total interest income



30,576



26,670



24,324



22,396



16,899


14.6


80.9























INTEREST EXPENSE





















Interest on deposits



2,561



1,511



1,358



1,272



949


69.5


169.9


Interest on short-term borrowings







2



3



2



(100.0)


Interest on long-term borrowings



700



541



534



482



359


29.4


95.0


Total interest expense



3,261



2,052



1,894



1,757



1,310


58.9


148.9























NET INTEREST INCOME



27,315



24,618



22,430



20,639



15,589


11.0


75.2


Provision for credit losses



675



200



600



(1,723)



290


237.5


132.8























NET INTEREST INCOME AFTER PROVISION





















FOR CREDIT LOSSES



26,640



24,418



21,830



22,362



15,299


9.1


74.1























NONINTEREST INCOME





















Service charges on deposit accounts



1,509



1,438



1,359



1,234



805


4.9


87.5


Trust and investment fee income



421



447



514



522



477


(5.8)


(11.7)


Gains on sales and calls of investment securities











2



(100.0)


Interchange credits



1,241



1,253



1,038



1,043



1,016


(1.0)


22.1


Mortgage-banking revenue



680



1,096



1,867



948




(38.0)



Title Company revenue



397



426



323



247




(6.8)



Other noninterest income



1,096



1,173



945



1,135



609


(6.6)


80.0


Total noninterest income



5,344



5,833



6,046



5,129



2,909


(8.4)


83.7























NONINTEREST EXPENSE





















Salaries and wages



8,562



8,898



9,562



7,727



5,091


(3.8)


68.2


Employee benefits



2,191



2,269



2,662



2,271



1,654


(3.4)


32.5


Occupancy expense



1,496



1,485



1,567



1,263



843


0.7


77.5


Furniture and equipment expense



533



411



429



385



449


29.7


18.7


Data processing



1,759



1,668



1,607



1,487



1,170


5.5


50.3


Directors' fees



217



210



190



170



147


3.3


47.6


Amortization of intangible assets



499



511



517



381



107


(2.3)


366.4


FDIC insurance premium expense



339



429



343



362



245


(21.0)


38.4


Other real estate owned expenses, net



1



57



(6)



(2)



4


(98.2)


(75.0)


Legal and professional fees



756



811



637



150



428


(6.8)


76.6


Merger related expenses



159



241



730



7,615



538


(34.0)


(70.4)


Other noninterest expenses



2,387



3,104



2,094



1,688



1,259


(23.1)


89.6


Total noninterest expense



18,899



20,094



20,332



23,497



11,935


(5.9)


58.3























Income before income taxes



13,085



10,157



7,544



3,994



6,273


28.8


108.6


Income tax expense



3,427



2,658



1,931



1,271



1,657


28.9


106.8























NET INCOME


$

9,658


$

7,499


$

5,613


$

2,723


$

4,616


28.8


109.2























Weighted average shares outstanding - basic



19,852



19,847



19,828



17,180



11,752


0.0


68.9


Weighted average shares outstanding - diluted



19,852



19,847



19,828



17,180



11,752


0.0


68.9























Basic and diluted net income per common share


$

0.49


$

0.38


$

0.28


$

0.16


$

0.39


28.9


25.6























Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)



























































Average balance





























Q3 2022


Q3 2022





























compared to


compared to




Q3 2022


Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2022


Q3 2021




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)


$

2,327,279


4.43

%

$

2,217,139


4.25

%

$

2,135,734


4.20

%

$

1,887,126


4.33

%

$

1,487,281


4.14

%

5.0

%

56.5

%

Investment securities































Taxable



618,378


2.06



546,252


1.75



531,017


1.49



468,724


1.42



334,205


1.58


13.2


85.0


Interest-bearing deposits



264,576


2.20



426,535


0.78



586,798


0.18



486,247


0.14



250,019


0.15


(38.0)


5.8


Total earning assets



3,210,233


3.78

%


3,189,926


3.36

%


3,253,549


3.01

%


2,842,097


3.11

%


2,071,505


3.24

%

0.6


55.0


Cash and due from banks



31,724





26,162





(15,253)





22,625





19,453




21.3


63.1


Other assets



218,163





218,353





253,424





188,399





108,989




(0.1)


100.2


Allowance for credit losses



(15,755)





(15,273)





(14,239)





(15,859)





(15,499)




3.2


1.7


Total assets


$

3,444,365




$

3,419,168




$

3,477,481




$

3,037,262




$

2,184,448




0.7


57.7

































Interest-bearing liabilities































Demand deposits


$

646,399


0.66

%

$

644,881


0.22

%

$

589,737


0.16

%

$

494,081


0.14

%

$

462,950


0.14

%

0.2


39.6


Money market and savings deposits



1,034,580


0.35



1,019,295


0.21



1,075,791


0.23



1,001,115


0.26



644,330


0.18


1.5


60.6


Certificates of deposit $100,000 or more



222,697


0.55



234,325


0.58



286,587


0.40



174,268


0.49



136,059


0.71


(5.0)


63.7


Other time deposits



215,014


0.51



221,714


0.54



175,683


0.57



173,975


0.50



142,777


0.68


(3.0)


50.6


Interest-bearing deposits



2,118,690


0.48



2,120,215


0.29



2,127,798


0.26



1,843,439


0.27



1,386,116


0.27


(0.1)


52.9


Securities sold under retail repurchase agreements































    and federal funds purchased









2,770


0.29



3,972


0.30



2,718


0.29



(100.0)


Advances from FHLB - short-term



















Advances from FHLB - long-term



10,035


0.63



10,075


0.60



10,116


0.57



6,630


2.21





(0.4)


100.0


Subordinated debt



42,953


6.33



42,876


4.93



42,804


4.93



36,589


5.12



24,504


5.81


0.2


75.3


Total interest-bearing liabilities



2,171,678


0.60

%


2,173,166


0.38

%


2,183,488


0.35

%


1,890,630


0.37

%


1,413,338


0.37

%

(0.1)


53.7


Noninterest-bearing deposits



893,968





872,883





916,415





703,712





557,109




2.4


60.5


Accrued expenses and other liabilities



21,336





19,927





24,567





141,825





13,120




7.1


62.6


Stockholders' equity



357,383





353,192





353,011





301,095





200,881




1.2


77.9


Total liabilities and stockholders' equity


$

3,444,365




$

3,419,168




$

3,477,481




$

3,037,262




$

2,184,448




0.7


57.7

































Net interest spread





3.18

%




2.98

%




2.66

%




2.74

%




2.87

%





Net interest margin





3.38

%




3.10

%




2.78

%




2.87

%




2.99

%





____________________

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

(2) Average loan balances include nonaccrual loans.

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

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)










































YTD


YTD




Q3 2022


Q2 2022


Q1 2022


Q4 2021


Q3 2021


9/30/2022


9/30/2021

























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














































Net Income


$

9,658


$

7,499


$

5,613


$

2,723


$

4,616


$

22,769


$

12,645


Net Income - annualized (A)


$

38,317


$

30,078


$

22,764


$

10,803


$

18,313


$

30,442


$

16,906

























Net income, excluding net amortization of intangible assets























    and merger related expenses


$

10,144


$

8,054


$

6,541


$

8,176


$

5,097


$

24,736


$

13,591


Net income, excluding net amortization of intangible assets
and merger related expenses - annualized (B)


$

40,245


$

32,305


$

26,527


$

32,437


$

20,222


$

33,072


$

18,171

























Return on average assets excluding net amortization of
intangible assets and merger related expenses - Non-GAAP



1.17

%


0.94

%


0.76

%


1.07

%


0.94

%


0.96

%


0.87

%
























Average stockholders' equity (C)


$

357,383


$

353,192


$

353,011


$

301,095


$

200,881


$

354,549


$

198,087


Less:  Average goodwill and other intangible assets



(69,558)



(70,057)



(70,711)



(52,692)



(18,942)



(70,104)



(19,057)


Average tangible equity (D)


$

287,825


$

283,135


$

282,300


$

248,403


$

181,939


$

284,445


$

179,030

























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



10.72

%


8.52

%


6.45

%


3.59

%


9.12

%


8.59

%


8.53

%

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



13.98

%


11.41

%


9.40

%


13.06

%


11.12

%


11.63

%


10.15

%
























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














































Noninterest expense (E)


$

18,899


$

20,094


$

20,332


$

23,497


$

11,935


$

59,323


$

33,309


Less:  Amortization of intangible assets



(499)



(511)



(517)



(381)



(107)



(1,528)



(353)


           Merger Expenses



(159)



(241)



(730)



(7,615)



(538)



(1,130)



(915)


Adjusted noninterest expense (F)


$

18,241


$

19,342


$

19,085


$

15,501


$

11,290


$

56,665


$

32,041

























Net interest income (G)



27,315



24,618



22,430



20,639



15,589



74,359



43,491


Add:  Taxable-equivalent adjustment



35



38



39



13



34



112



108


Taxable-equivalent net interest income (H)


$

27,350


$

24,656


$

22,469


$

20,652


$

15,623


$

74,471


$

43,599

























Noninterest income (I)


$

5,344


$

5,833


$

6,046


$

5,129


$

2,909


$

17,224



8,369


Less:  Investment securities (gains)











(2)





(2)


Adjusted noninterest income (J)


$

5,344


$

5,833


$

6,046


$

5,129


$

2,907


$

17,224


$

8,367

























Efficiency ratio (GAAP)  (E)/(G)+(I)



57.87

%


65.99

%


71.40

%


91.19

%


64.52

%


64.78

%


64.23

%

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



55.79

%


63.44

%


66.93

%


60.13

%


60.93

%


61.80

%


61.66

%
























The following reconciles book value per common share and
tangible book value per common share (Note 1):














































Stockholders' equity (L)


$

357,221


$

352,777


$

351,864


$

350,693


$

201,607








Less:  Goodwill and other intangible assets



(69,288)



(69,787)



(70,299)



(70,956)



(18,883)








Tangible equity (M)


$

287,933


$

282,990


$

281,565


$

279,737


$

182,724































Shares outstanding (N)



19,858



19,850



19,843



19,808



11,752































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


$

17.99


$

17.77


$

17.73


$

17.71


$

17.15








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


$

14.50


$

14.26


$

14.19


$

14.12


$

15.55






















































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














































Stockholders' equity (O)


$

357,221


$

352,777


$

351,864


$

350,693


$

201,607








Less:  Goodwill and other intangible assets



(69,288)



(69,787)



(70,299)



(70,956)



(18,883)








Tangible equity (P)


$

287,933


$

282,990


$

281,565


$

279,737


$

182,724































Assets (Q)


$

3,446,804


$

3,442,550


$

3,494,497


$

3,460,136


$

2,260,774








Less:  Goodwill and other intangible assets



(69,288)



(69,787)



(70,299)



(70,956)



(18,883)








Tangible assets (R)


$

3,377,516


$

3,372,763


$

3,424,198


$

3,389,180


$

2,241,891































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



10.36

%


10.25

%


10.07

%


10.14

%


8.92

%







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



8.52

%


8.39

%


8.22

%


8.25

%


8.15

%







____________________

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.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/shore-bancshares-reports-third-quarter-and-nine-month-financial-results-301661809.html

SOURCE Shore Bancshares, Inc.

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