SHORE BANCSHARES, INC. EASTON, Md., July 20, 2017 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $2.352 million or $0.19 per diluted common share for the second quarter of 2017, compared to net income of $2.800 million or $0.22 per diluted common share for the first quarter of 2017, and net income of $2.272 million or $0.18 per diluted common share for the second quarter of 2016. The Company reported net income of $5.152 million or $0.41 per diluted common share for the first half of 2017, compared to net income of $4.732 million or $0.37 per diluted common share for the first half of 2016.
The Company's core earnings for the second quarter of 2017 when excluding the acquisition costs of the Northwest Bank branches of $367 thousand, net of tax, resulted in net income of $2.719 million or $0.21 per diluted common share for the second quarter of 2017. On a comparative basis, the Company's core earnings for the first quarter of 2017 when excluding the acquisition costs of the Northwest Bank branches of $136 thousand, net of tax, resulted in net income of $2.936 million or $0.23 per diluted common share.
When comparing the second quarter of 2017 to the first quarter of 2017, the lower result was primarily attributable to lower noninterest income due to insurance agency contingent commissions which are typically received in the first quarter of the year, additional merger expenses due to the acquisition of three branches from Northwest Bank, and an increase in provision for credit losses due to a partial charge-off associated with a negotiated restructured commercial loan. When comparing the second quarter of 2017 to the second quarter of 2016, improved results were due to increases in net interest income and noninterest income of $1.5 million and $138 thousand, respectively, offset by increases in both provision for credit losses of $599 thousand and noninterest expenses of $834 thousand. When comparing the first half of 2017 to the first half of 2016, improved earnings were due to increases in net interest income and noninterest income of $2.2 million and $404 thousand, respectively, offset by increases in both the provision for credit losses of $576 thousand and noninterest expenses of $1.1 million.
"We are pleased to report another strong quarter of earnings despite the additional expenses related to the branch acquisition. While we absorbed the impact of these expenses primarily in the second quarter, we are well positioned to capitalize on the accretive earnings from both the newly acquired and legacy loan portfolios," said Lloyd L. "Scott" Beatty, Jr., president and chief executive officer. "We continue to be strategically focused on expanding our market footprint while maintaining our core values of healthy and stable loan and deposit growth."
Balance Sheet Review
Total assets were $1.363 billion at June 30, 2017, a $202.5 million, or 17.5%, increase when compared to $1.160 billion at the end of 2016. The primary reason for the increase was the acquisition of three branches from Northwest Bank which contributed $212.5 million in total assets, offset by decreases in interest-bearing deposits with other banks. The increase in gross loans, less the loans acquired from Northwest Bank of $122.5 million, was $40.5 million, or a 9.4% annualized loan growth rate for the period.
Total deposits increased $198.8 million, or 19.9%, when compared to December 31, 2016. The increase was the direct result of the acquisition of three branches from Northwest Bank which contributed $212.5 million in total deposits, offset by declines in time deposits and checking plus interest accounts. The deposits acquired from Northwest Bank were primarily core deposits consisting of the following: $34.6 million in noninterest bearing deposits, money market and savings deposits of $99.3 million and checking plus interest of $17.2 million. Noncore deposits acquired from Northwest Bank included $19.8 million in time deposits over $100 thousand and $41.7 million in other time deposits. Total stockholders' equity increased $5.6 million, or 3.7%, when compared to the end of 2016. At June 30, 2017, the ratio of total equity to total assets was 11.74% and the ratio of total tangible equity to total tangible assets was 9.60%, lower than the 13.30% and 12.32%, respectively, at December 31, 2016 primarily due to the acquisition of the Northwest Bank branches which significantly increased both tangible and intangible assets.
Total assets at June 30, 2017 increased $237.1 million, or 21.1%, when compared to total assets at June 30, 2016. The primary reason for the increase was the acquisition of three branches from Northwest Bank which contributed $212.5 million in total assets. Gross loans increased $213.5 million, or 26.0% when compared to June 30, 2016, of which $122.5 million was acquired from Northwest Bank and $90.6 million, or 11.0% was originated organically. Total deposits increased $235.2 million, or 24.5%, when compared to June 30, 2016, of which $212.5 million was acquired from Northwest Bank and $22.7 million, or 2.4% was originated. Total stockholders' equity increased $7.6 million, or 5.0%, when compared to June 30, 2016.
Review of Quarterly Financial Results
Net interest income was $10.9 million for the second quarter of 2017, compared to $9.9 million for the first quarter of 2017 and $9.4 million for the second quarter of 2016. The increase in net interest income when compared to the first quarter of 2017 was primarily due to an increase in average loans of $78.9 million resulting in $891 thousand in additional interest and fees on loans, coupled with an increase in average investment securities of $20.3 million resulting in $110 thousand in additional income. These increases were partially offset by an increase in volume and rates paid on average interest-bearing deposits and short-term liabilities. The increase in net interest income for the second quarter of 2017 when compared to the second quarter of 2016 was primarily due to an increase in average loans of $152.4 million resulting in $1.3 million in additional interest and fees on loans. In addition, the Company was able to utilize the additional core deposits received in the Northwest Bank acquisition to fund loan growth which had a positive impact on net interest income despite the continual decrease in the overall yield on loans. The Company's net interest margin has remained flat at 3.71% for both the second and first quarter of 2017, and has increased over the second quarter of 2016 of 3.57%.
The provision for credit losses was $974 thousand for the three months ended June 30, 2017. The comparable amounts were $427 thousand and $375 thousand for the three months ended March 31, 2017 and June 30, 2016, respectively. The increase in the amount of provision for credit losses from the first quarter of 2017 of $547 thousand was associated with a partial charge-off of a negotiated restructured commercial loan. Net charge-offs were $769 thousand for the second quarter of 2017, $226 thousand for the first quarter of 2017 and $326 thousand for the second quarter of 2016. The ratio of annualized net charge-offs to average loans was 0.32% for the second quarter of 2017, 0.10% for the first quarter of 2017 and 0.16% for the second quarter of 2016. The ratio of the allowance for credit losses to period-end loans was 0.88% at June 30, 2017, lower than the 1.00% at March 31, 2017 and 1.02% at June 30, 2016. The decrease in such ratio at June 30, 2017 was primarily due to the performing loans acquired in the Northwest Bank transaction with no associated allowance since they were purchased at fair value. Under the terms of the Northwest Bank asset purchase and assumptions agreement, Northwest Bank is required to repurchase any loan(s) that experience early payment default within 75 days after the May 19, 2017 closing.
At June 30, 2017, nonperforming assets were $9.8 million, a decrease of $1.4 million, or 12.7%, when compared to March 31, 2017 and accruing troubled debt restructurings ("TDRs") decreased $658 thousand, or 5.1% over the same time period. When comparing June 30, 2017 to June 30, 2016, nonperforming assets decreased $5.7 million, or 36.7%, and accruing TDRs decreased $1.2 million, or 9.1%. The positive trend in nonperforming assets and TDRs when comparing June 30, 2017 to June 30, 2016 resulted mostly from the Company's continued workout efforts. The ratio of nonperforming assets to total assets was 0.72%, 0.96% and 1.37% at June 30, 2017, March 31, 2017 and June 30, 2016, respectively. In addition, the ratio of accruing TDRs to total assets at June 30, 2017 was 0.89%, compared to 1.10% at March 31, 2017 and 1.18% at June 30, 2016.
Total noninterest income for the second quarter of 2017 decreased $628 thousand, or 13.1%, when compared to the first quarter of 2017 and increased $138 thousand, or 3.4%, when compared to the second quarter of 2016. The decrease from the first quarter of 2017 was primarily due to a decline in insurance agency commissions of $787 thousand which was partially offset by an increase in other noninterest income of $104 thousand. Insurance agency commissions for the second quarter of 2017 were lower when compared to the first quarter of 2017 due to the fact that contingency commission payments are typically received in the first quarter of the year. The increase from the second quarter of 2016 was mainly due to higher insurance agency commissions of $91 thousand.
Total noninterest expense for the second quarter of 2017 increased $548 thousand, or 5.7%, when compared to the first quarter of 2017 and increased $834 thousand, or 8.9%, when compared to the second quarter of 2016. The increase when compared to the first quarter of 2017 was primarily due to acquisition costs of the three Northwest Bank branches of an additional $325 thousand and the cost of operating those branches for one month. The increases in noninterest expenses from the second quarter of 2016 were due to the acquisition and operating costs of the Northwest Bank branches, employee benefits due to the higher insurance premiums paid for group insurance and higher salaries and wages due to pay increases implemented in the first quarter of 2017, offset by a decrease in FDIC insurance premium expenses due the consolidation of the two former bank subsidiaries, The Talbot Bank and CNB.
Review of Six-Month Financial Results
Net interest income for the first six months of 2017 was $20.8 million, an increase of $2.2 million, or 11.8% when compared to the first six months of 2016. The increase was primarily due an increase in average loans of approximately $121.4 million and a decline in rates paid on interest-bearing deposits of 7bps. The increase in volume on loans was the direct result of loans acquired from Northwest Bank and the organic growth of loans which were funded by lower yielding assets and core deposits acquired from the acquisition, allowing the overall yield on total earning assets to increase. This, coupled with higher yields earned on investment securities and two rate increases by the Federal Reserve which impacted interest-bearing deposits with other banks, resulted in a net interest margin of 3.71% for the first six months of 2017 compared to 3.53% for the first six months of 2016.
The provision for credit losses for the six months ended June 30, 2017 and 2016 was $1.4 million and $825 thousand, respectively, while net charge-offs were $995 thousand and $783 thousand, respectively. The increase in provision for credit losses primarily occurred in the second quarter of 2017 due to a single problem credit discussed above. The ratio of annualized net charge-offs to average loans was 0.22% for the first half of 2017 and 0.20% for the first half of 2016.
Total noninterest income for the six months ended June 30, 2017 increased $404 thousand, or 4.7%, when compared to the same period in 2016. The increase in noninterest income primarily consists of increases in insurance agency commissions of $151 thousand and other noninterest income of $206 thousand. The increase in other noninterest income primarily consisted of an increase in an insurance investment of $174 thousand.
Total noninterest expense for the six months ended June 30, 2017 increased $1.1 million, or 6.1%, when compared to the same period in 2016. The increase was primarily due to acquisition costs of the three Northwest Bank branches which approximated $825 thousand and the cost of operating those branches for one month. In addition, higher salaries/wages and employee benefits resulted in increased non-interest expenses which were partially offset by a decrease in FDIC insurance premiums.
Shore Bancshares Information
Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank; one retail insurance producer firm, The Avon-Dixon Agency, LLC ("Avon-Dixon"), with two specialty lines, Elliott Wilson Insurance (Trucking) and Jack Martin Associates (Marine); and an insurance premium finance company, Mubell Finance, LLC ("Mubell"). Shore Bancshares Inc. engages in trust and wealth management services through Wye Financial & Trust, 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".
The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
Shore Bancshares, Inc. Page 5 of 12
Financial Highlights
(Dollars in thousands, except per share data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Net interest income $10,900 $9,383 16.2% $20,833 $18,626 11.8%
Provision for credit losses 974 375 159.7 1,401 825 69.8
Noninterest income 4,179 4,041 3.4 8,986 8,582 4.7
Noninterest expense 10,199 9,365 8.9 19,850 18,704 6.1
------ ----- ------ ------
Income before income taxes 3,906 3,684 6.0 8,568 7,679 11.6
Income tax expense 1,554 1,412 10.1 3,416 2,947 15.9
Net income $2,352 $2,272 3.5 $5,152 $4,732 8.9
====== ====== ====== ======
Return on average assets 0.75% 0.81% (6) bp 0.87% 0.84% 3 bp
Return on average equity 5.47 6.04 (57) 6.32 6.34 (2)
Return on average tangible equity (1) 6.01 6.67 (66) 6.94 7.00 (6)
Net interest margin 3.71 3.57 14 3.71 3.53 18
Efficiency ratio - GAAP 67.37 69.60 (223) 66.30 68.59 (229)
Efficiency ratio - Non-GAAP (1) 67.01 69.35 (234) 66.01 68.35 (234)
PER SHARE DATA
Basic net income per common share $0.19 $0.18 5.6% $0.41 $0.37 10.8%
Diluted net income per common share 0.19 0.18 5.6 0.41 0.37 10.8
Dividends paid per common share 0.05 0.03 66.7 0.10 0.06 66.7
Book value per common share at period end 12.61 12.04 4.7
Tangible book value per common share at period end (1) 10.07 11.00 (8.5)
Market value at period end 16.45 11.75 40.0
Market range:
High 17.53 12.50 40.2 17.92 12.59 42.3
Low 15.17 10.23 48.3 14.64 10.23 43.1
AVERAGE BALANCE SHEET DATA
Loans $959,642 $807,231 18.9% $920,434 $799,004 15.2%
Investment securities 198,301 204,357 (3.0) 188,243 209,672 (10.2)
Earning assets 1,185,099 1,061,645 11.6 1,139,270 1,063,579 7.1
Assets 1,249,526 1,122,568 11.3 1,199,419 1,126,403 6.5
Deposits 1,066,165 959,397 11.1 1,024,791 964,194 6.3
Stockholders' equity 172,351 151,270 13.9 164,357 150,151 9.5
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs $769 $326 135.9% $995 $783 27.1%
Nonaccrual loans $7,157 $13,531 (47.1)
Loans 90 days past due and still accruing 314 6 5,133.3
Other real estate owned 2,302 1,897 21.3
----- -----
Total nonperforming assets 9,773 15,434 (36.7)
Accruing troubled debt restructurings (TDRs) 12,124 13,338 (9.1)
Total nonperforming assets and accruing TDRs $21,897 $28,772 (23.9)
======= =======
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets 11.74% 13.53% (179) bp
Period-end tangible equity to tangible assets (1) 9.60 12.52 (292)
Annualized net charge-offs to average loans 0.32 0.16 16 0.22% 0.20% 2 bp
Allowance for credit losses as a percent of:
Period-end loans 0.88 1.02 (14)
Nonaccrual loans 127.60 61.77 6,583
Nonperforming assets 93.44 54.15 3,929
Accruing TDRs 75.32 62.66 1,266
Nonperforming assets and accruing TDRs 41.70 29.05 1,265
As a percent of total loans:
Nonaccrual loans 0.69 1.65 (96)
Accruing TDRs 1.17 1.62 (45)
Nonaccrual loans and accruing TDRs 1.86 3.27 (141)
As a percent of total loans+other real estate owned:
Nonperforming assets 0.94 1.88 (94)
Nonperforming assets and accruing TDRs 2.11 3.50 (139)
As a percent of total assets:
Nonaccrual loans 0.53 1.20 (67)
Nonperforming assets 0.72 1.37 (65)
Accruing TDRs 0.89 1.18 (29)
Nonperforming assets and accruing TDRs 1.61 2.55 (94)
(1) See the reconciliation table on page 12 of 12.
Shore Bancshares, Inc. Page 6 of 12
Consolidated Balance Sheets
(In thousands, except per share data)
June 30, 2017 June 30, 2017
June 30, December 31, June 30, compared to compared to
2017 2016 2016 December 31, 2016 June 30, 2016
---- ---- ---- ----------------- -------------
ASSETS
Cash and due from banks $15,748 $14,596 $15,753 7.9% (0.0)%
Interest-bearing deposits with other banks 38,331 61,342 45,455 (37.5) (15.7)
Federal funds sold - - 9 - (100.0)
--- --- ---
Cash and cash equivalents 54,079 75,938 61,217 (28.8) (11.7)
Investment securities available for sale (at fair value) 201,587 163,798 195,681 23.1 3.0
Investment securities held to maturity 6,411 6,808 3,995 (5.8) 60.5
Loans 1,034,605 871,525 821,079 18.7 26.0
Less: allowance for credit losses (9,132) (8,726) (8,358) 4.7 9.3
------ ------
Loans, net 1,025,473 862,799 812,721 18.9 26.2
--------- ------- -------
Premises and equipment, net 23,297 16,558 16,708 40.7 39.4
Goodwill 27,207 11,931 11,931 128.0 128.0
Other intangible assets, net 4,946 1,079 1,145 358.4 332.0
Other real estate owned, net 2,302 2,477 1,897 (7.1) 21.3
Other assets 17,496 18,883 20,395 (7.3) (14.2)
------ ------ ------
Total assets $1,362,798 $1,160,271 $1,125,690 17.5 21.1
========== ========== ==========
LIABILITIES
Noninterest-bearing deposits $311,438 $261,575 $231,614 19.1 34.5
Interest-bearing deposits 884,820 735,914 729,480 20.2 21.3
------- ------- -------
Total deposits 1,196,258 997,489 961,094 19.9 24.5
Short-term borrowings 3,325 3,203 6,868 3.8 (51.6)
Accrued expenses and other liabilities 3,275 5,280 5,407 (38.0) (39.4)
----- ----- -----
Total liabilities 1,202,858 1,005,972 973,369 19.6 23.6
--------- --------- -------
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares 127 127 127 - -
Additional paid in capital 64,791 64,201 63,995 0.9 1.2
Retained earnings 94,848 90,964 87,071 4.3 8.9
Accumulated other comprehensive income (loss) 174 (993) 1,128 117.5 (84.6)
--- ---- -----
Total stockholders' equity 159,940 154,299 152,321 3.7 5.0
------- ------- -------
Total liabilities and stockholders' equity $1,362,798 $1,160,271 $1,125,690 17.5 21.1
========== ========== ==========
Period-end common shares outstanding 12,685 12,665 12,655 0.2 0.2
Book value per common share $12.61 $12.18 $12.04 3.5 4.7
Shore Bancshares, Inc. Page 7 of 12
Consolidated Statements of Operations
(In thousands, except per share data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------- --------
2017 2016 % Change 2017 2016 % Change
---- ---- -------- ---- ---- --------
INTEREST INCOME
Interest and fees on loans $10,441 $9,117 14.5% $19,991 $18,078 10.6%
Interest and dividends on investment securities:
Taxable 937 824 13.7 1,764 1,694 4.1
Tax-exempt 1 2 (50.0) 3 4 (25.0)
Interest on federal funds sold - 2 (100.0) - 5 (100.0)
Interest on deposits with other banks 70 58 20.7 138 130 6.2
---
Total interest income 11,449 10,003 14.5 21,896 19,911 10.0
------ ------ ------
INTEREST EXPENSE
Interest on deposits 538 617 (12.8) 1,049 1,278 (17.9)
Interest on short-term borrowings 11 3 266.7 14 7 100.0
--- ---
Total interest expense 549 620 (11.5) 1,063 1,285 (17.3)
--- --- ----- -----
NET INTEREST INCOME 10,900 9,383 16.2 20,833 18,626 11.8
Provision for credit losses 974 375 159.7 1,401 825 69.8
--- --- ----- ---
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 9,926 9,008 10.2 19,432 17,801 9.2
----- ------ ------
NONINTEREST INCOME
Service charges on deposit accounts 878 870 0.9 1,712 1,683 1.7
Trust and investment fee income 372 364 2.2 733 715 2.5
Insurance agency commissions 2,032 1,941 4.7 4,851 4,700 3.2
Other noninterest income 897 866 3.6 1,690 1,484 13.9
Total noninterest income 4,179 4,041 3.4 8,986 8,582 4.7
----- ----- ----- -----
NONINTEREST EXPENSE
Salaries and wages 4,803 4,422 8.6 9,305 8,899 4.6
Employee benefits 1,127 964 16.9 2,367 2,078 13.9
Occupancy expense 629 583 7.9 1,254 1,196 4.8
Furniture and equipment expense 284 248 14.5 517 483 7.0
Data processing 1,015 854 18.9 1,887 1,663 13.5
Directors' fees 102 131 (22.1) 182 235 (22.6)
Amortization of intangible assets 55 33 66.7 88 66 33.3
FDIC insurance premium expense 45 268 (83.2) 209 550 (62.0)
Other real estate owned expenses, net 108 66 63.6 163 73 123.3
Legal and professional fees 702 609 15.3 1,362 994 37.0
Other noninterest expenses 1,329 1,187 12.0 2,516 2,467 2.0
Total noninterest expense 10,199 9,365 8.9 19,850 18,704 6.1
------ ----- ------ ------
Income before income taxes 3,906 3,684 6.0 8,568 7,679 11.6
Income tax expense 1,554 1,412 10.1 3,416 2,947 15.9
----- ----- ----- -----
NET INCOME $2,352 $2,272 3.5 $5,152 $4,732 8.9
====== ====== ====== ======
Weighted average shares outstanding - basic 12,681 12,648 0.3 12,676 12,642 0.3
Weighted average shares outstanding - diluted 12,732 12,665 0.5 12,727 12,657 0.6
Basic net income per common share $0.19 $0.18 5.6 $0.41 $0.37 10.8
Diluted net income per common share 0.19 0.18 5.6 0.41 0.37 10.8
Dividends paid per common share 0.05 0.03 66.7 0.10 0.06 66.7
Shore Bancshares, Inc. Page 8 of 12
Consolidated Average Balance Sheets
(Dollars in thousands)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate
------- ---- ------- ----
Earning assets
Loans $959,642 4.39% $807,231 4.56% $920,434 4.41% $799,004 4.57%
Investment securities
Taxable 198,160 1.89 204,147 1.61 188,068 1.88 209,462 1.62
Tax-exempt 141 5.36 210 5.30 175 5.38 210 5.30
Federal funds sold - - 2,910 0.34 - - 3,275 0.34
Interest-bearing deposits 27,156 1.05 47,147 0.50 30,593 0.91 51,628 0.51
------ ------ ------ ------
Total earning assets 1,185,099 3.90% 1,061,645 3.80% 1,139,270 3.90% 1,063,579 3.78%
Cash and due from banks 14,798 14,776 14,355 15,491
Other assets 58,693 54,699 54,750 55,868
Allowance for credit losses (9,064) (8,552) (8,956) (8,535)
Total assets $1,249,526 $1,122,568 $1,199,419 $1,126,403
========== ========== ========== ==========
Interest-bearing liabilities
Demand deposits $198,593 0.16% $186,137 0.12% $196,809 0.15% $189,612 0.12%
Money market and savings deposits 320,967 0.12 261,495 0.13 298,695 0.13 260,105 0.13
Certificates of deposit $100,000 or more 121,967 0.51 129,544 0.69 120,477 0.52 130,978 0.70
Other time deposits 150,953 0.55 151,577 0.68 144,429 0.56 152,675 0.71
------- ------- ------- -------
Interest-bearing deposits 792,480 0.27 728,753 0.34 760,410 0.28 733,370 0.35
Short-term borrowings 5,589 0.82 5,792 0.24 4,873 0.59 6,017 0.24
----- ----- ----- -----
Total interest-bearing liabilities 798,069 0.28% 734,545 0.34% 765,283 0.28% 739,387 0.35%
Noninterest-bearing deposits 273,685 230,644 264,381 230,824
Accrued expenses and other liabilities 5,421 6,109 5,398 6,041
Stockholders' equity 172,351 151,270 164,357 150,151
Total liabilities and stockholders' equity $1,249,526 $1,122,568 $1,199,419 $1,126,403
========== ========== ========== ==========
Net interest spread 3.62% 3.46% 3.62% 3.43%
Net interest margin 3.71% 3.57% 3.71% 3.53%
Shore Bancshares, Inc. Page 9 of 12
Financial Highlights By Quarter
(Dollars in thousands, except per share data)
2nd quarter 1st quarter 4th quarter 3rd quarter 2nd quarter 2Q 17 2Q 17
2017 2017 2016 2016 2016 compared to compared to
(2Q 17) (1Q 17) (4Q 16) (3Q 16) (2Q 16) 1Q 17 2Q 16
------ ------ ------ ------ ------ ----- -----
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income $10,960 $9,994 $10,029 $9,730 $9,415 9.7% 16.4%
Less: Taxable-equivalent adjustment 60 61 64 72 32 (1.6) 87.5
--- --- --- --- ---
Net interest income 10,900 9,933 9,965 9,658 9,383 9.7 16.2
Provision for credit losses 974 427 418 605 375 128.1 159.7
Noninterest income 4,179 4,807 4,056 4,007 4,041 (13.1) 3.4
Noninterest expense 10,199 9,651 9,226 9,217 9,365 5.7 8.9
------ ----- ----- ----- -----
Income before income taxes 3,906 4,662 4,377 3,843 3,684 (16.2) 6.0
Income tax expense 1,554 1,862 1,882 1,432 1,412 (16.5) 10.1
----- ----- ----- ----- -----
Net income $2,352 $2,800 $2,495 $2,411 $2,272 (16.0) 3.5
====== ====== ====== ====== ======
Return on average assets 0.75% 0.99% 0.86% 0.83% 0.81% (24) bp (6) bp
Return on average equity 5.47 7.27 6.39 6.23 6.04 (180) (57)
Return on average tangible equity (1) 6.01 7.98 7.03 6.86 6.67 (197) (66)
Net interest margin 3.71 3.71 3.63 3.54 3.57 - 14
Efficiency ratio - GAAP 67.37 65.21 65.50 67.10 69.60 216 (223)
Efficiency ratio - Non-GAAP (1) 67.01 64.98 65.28 67.00 69.35 203 (234)
PER SHARE DATA
Basic net income per common share $0.19 $0.22 $0.20 $0.19 $0.18 (13.6)% 5.6%
Diluted net income per common share 0.19 0.22 0.20 0.19 0.18 (13.6) 5.6
Dividends paid per common share 0.05 0.05 0.05 0.03 0.03 - 66.7
Book value per common share at period end 12.61 12.44 12.18 12.23 12.04 1.4 4.7
Tangible book value per common share at period end (1) 10.07 11.41 11.16 11.20 11.00 (11.7) (8.5)
Market value at period end 16.45 16.71 15.25 11.78 11.75 (1.6) 40.0
Market range:
High 17.53 17.92 16.90 11.95 12.50 (2.2) 40.2
Low 15.17 14.64 11.49 11.32 10.23 3.6 48.3
AVERAGE BALANCE SHEET DATA
Loans $959,642 $880,791 $866,360 $836,955 $807,231 9.0% 18.9%
Investment securities 198,301 178,074 175,417 190,475 204,357 11.4 (3.0)
Earning assets 1,185,099 1,092,934 1,100,197 1,092,105 1,061,645 8.4 11.6
Assets 1,249,526 1,148,757 1,159,131 1,152,309 1,122,568 8.8 11.3
Deposits 1,066,165 982,956 993,918 984,940 959,397 8.5 11.1
Stockholders' equity 172,351 156,274 155,367 153,985 151,270 10.3 13.9
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs $769 $226 $306 $349 $326 240.3% 135.9%
Nonaccrual loans $7,157 $8,729 $8,972 $11,490 $13,531 (18.0) (47.1)
Loans 90 days past due and still accruing 314 118 20 64 6 166.1 5,133.3
Other real estate owned 2,302 2,354 2,477 2,197 1,897 (2.2) 21.3
----- ----- ----- ----- -----
Total nonperforming assets $9,773 $11,201 $11,469 $13,751 $15,434 (12.7) (36.7)
====== ======= ======= ======= =======
Accruing troubled debt restructurings (TDRs) $12,124 $12,782 $13,001 $13,273 $13,338 (5.1) (9.1)
======= ======= ======= ======= =======
Total nonperforming assets and accruing TDRs $21,897 $23,983 $24,470 $27,024 $28,772 (8.7) (23.9)
======= ======= ======= ======= =======
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets 11.74% 13.51% 13.30% 13.37% 13.53% (177) bp (179) bp
Period-end tangible equity to tangible assets (1) 9.60 12.54 12.32 12.39 12.52 (294) (292)
Annualized net charge-offs to average loans 0.32 0.10 0.14 0.17 0.16 22 16
Allowance for credit losses as a percent of:
Period-end loans 0.88 1.00 1.00 1.00 1.02 (12) (14)
Nonaccrual loans 127.60 102.27 97.26 74.97 61.77 2,533 6,583
Nonperforming assets 93.44 79.70 76.08 62.64 54.15 1,374 3,929
Accruing TDRs 75.32 69.84 67.12 64.90 62.66 548 1,266
Nonperforming assets and accruing TDRs 41.70 37.22 35.66 31.88 29.05 448 1,265
As a percent of total loans:
Nonaccrual loans 0.69 0.98 1.03 1.34 1.65 (29) (96)
Accruing TDRs 1.17 1.43 1.49 1.54 1.62 (26) (45)
Nonaccrual loans and accruing TDRs 1.86 2.41 2.52 2.88 3.27 (55) (141)
As a percent of total loans+other real estate owned:
Nonperforming assets 0.94 1.25 1.31 1.59 1.88 (31) (94)
Nonperforming assets and accruing TDRs 2.11 2.68 2.80 3.13 3.50 (57) (139)
As a percent of total assets:
Nonaccrual loans 0.53 0.75 0.77 0.99 1.20 (22) (67)
Nonperforming assets 0.72 0.96 0.99 1.19 1.37 (24) (65)
Accruing TDRs 0.89 1.10 1.12 1.15 1.18 (21) (29)
Nonperforming assets and accruing TDRs 1.61 2.06 2.11 2.34 2.55 (45) (94)
(1) See the reconciliation table on page 12 of 12.
Shore Bancshares, Inc. Page 10 of 12
Consolidated Statements of Operations By Quarter
(In thousands, except per share data)
2Q 17 2Q 17
compared to compared to
2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 17 2Q 16
----- ----- ----- ----- ----- ----- -----
INTEREST INCOME
Interest and fees on loans $10,441 $9,550 $9,679 $9,398 $9,117 9.3% 14.5%
Interest and dividends on investment securities:
Taxable 937 827 747 754 824 13.3 13.7
Tax-exempt 1 2 1 2 2 (50.0) (50.0)
Interest on federal funds sold - - - 1 2 - (100.0)
Interest on deposits with other banks 70 68 78 81 58 2.9 20.7
--- --- --- --- ---
Total interest income 11,449 10,447 10,505 10,236 10,003 9.6 14.5
INTEREST EXPENSE
Interest on deposits 538 511 537 574 617 5.3 (12.8)
Interest on short-term borrowings 11 3 3 4 3 266.7 266.7
--- --- --- --- ---
Total interest expense 549 514 540 578 620 6.8 (11.5)
--- --- --- --- ---
NET INTEREST INCOME 10,900 9,933 9,965 9,658 9,383 9.7 16.2
Provision for credit losses 974 427 418 605 375 128.1 159.7
--- --- --- --- ---
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 9,926 9,506 9,547 9,053 9,008 4.4 10.2
NONINTEREST INCOME
Service charges on deposit accounts 878 834 883 899 870 5.3 0.9
Trust and investment fee income 372 361 369 358 364 3.0 2.2
Investment securities gains - - - 30 - - -
Insurance agency commissions 2,032 2,819 1,797 2,054 1,941 (27.9) 4.7
Other noninterest income 897 793 1,007 666 866 13.1 3.6
--- --- ----- --- ---
Total noninterest income 4,179 4,807 4,056 4,007 4,041 (13.1) 3.4
----- ----- ----- ----- -----
NONINTEREST EXPENSE
Salaries and wages 4,803 4,502 4,381 4,346 4,422 6.7 8.6
Employee benefits 1,127 1,240 906 1,009 964 (9.1) 16.9
Occupancy expense 629 625 613 643 583 0.6 7.9
Furniture and equipment expense 284 233 235 245 248 21.9 14.5
Data processing 1,015 872 857 976 854 16.4 18.9
Directors' fees 102 80 156 120 131 27.5 (22.1)
Amortization of intangible assets 55 33 32 33 33 66.7 66.7
FDIC insurance premium expense 45 164 42 104 268 (72.6) (83.2)
Other real estate owned expenses, net 108 55 167 2 66 96.4 63.6
Legal and professional fees 702 660 441 440 609 6.4 15.3
Other noninterest expenses 1,329 1,187 1,396 1,299 1,187 12.0 12.0
----- ----- ----- ----- -----
Total noninterest expense 10,199 9,651 9,226 9,217 9,365 5.7 8.9
------ ----- ----- ----- -----
Income before income taxes 3,906 4,662 4,377 3,843 3,684 (16.2) 6.0
Income tax expense 1,554 1,862 1,882 1,432 1,412 (16.5) 10.1
----- ----- ----- ----- -----
NET INCOME $2,352 $2,800 $2,495 $2,411 $2,272 (16.0) 3.5
====== ====== ====== ====== ======
Weighted average shares outstanding - basic 12,681 12,670 12,665 12,661 12,648 0.1 0.3
Weighted average shares outstanding - diluted 12,732 12,707 12,686 12,676 12,665 0.2 0.5
Basic net income per common share $0.19 $0.22 $0.20 $0.19 $0.18 (13.6) 5.6
Diluted net income per common share 0.19 0.22 0.20 0.19 0.18 (13.6) 5.6
Dividends paid per common share 0.05 0.05 0.05 0.03 0.03 - 66.7
Shore Bancshares, Inc. Page 11 of 12
Consolidated Average Balance Sheets By Quarter
(Dollars in thousands)
Average balance
---------------
2Q 17 2Q 17
compared to compared to
2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 17 2Q 16
----- ----- ----- ----- ----- ----- -----
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate balance rate
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earning assets
Loans $959,642 4.39% $880,791 4.43% $866,360 4.47% $836,955 4.50% $807,231 4.56% 9.0% 18.9%
Investment securities
Taxable 198,160 1.89 177,864 1.86 175,207 1.70 190,265 1.59 204,147 1.61 11.4 (2.9)
Tax-exempt 141 5.36 210 5.38 210 5.30 210 5.30 210 5.30 (32.9) (32.9)
Federal funds sold - - - - 27 0.38 511 0.37 2,910 0.34 - (100.0)
Interest-bearing deposits 27,156 1.05 34,069 0.80 58,393 0.54 64,164 0.50 47,147 0.50 (20.3) (42.4)
------ ------ ------ ------ ------
Total earning assets 1,185,099 3.90% 1,092,934 3.90% 1,100,197 3.82% 1,092,105 3.75% 1,061,645 3.80% 8.4 11.6
Cash and due from banks 14,798 13,907 16,707 15,678 14,776 6.4 0.1
Other assets 58,693 50,763 51,065 52,836 54,699 15.6 7.3
Allowance for credit losses (9,064) (8,847) (8,838) (8,310) (8,552) 2.5 6.0
Total assets $1,249,526 $1,148,757 $1,159,131 $1,152,309 $1,122,568 8.8 11.3
========== ========== ========== ========== ==========
Interest-bearing liabilities
Demand deposits $198,593 0.16% $195,005 0.14% $197,810 0.12% $199,116 0.12% $186,137 0.12% 1.8 6.7
Money market and savings deposits 320,967 0.12 276,175 0.13 272,786 0.13 268,183 0.13 261,495 0.13 16.2 22.7
Certificates of deposit $100,000 or more 121,967 0.51 118,970 0.54 122,725 0.56 125,265 0.61 129,544 0.69 2.5 (5.8)
Other time deposits 150,953 0.55 137,832 0.58 141,641 0.60 147,780 0.64 151,577 0.68 9.5 (0.4)
------- ------- ------- ------- -------
Interest-bearing deposits 792,480 0.27 727,982 0.28 734,962 0.29 740,344 0.31 728,753 0.34 8.9 8.7
Short-term borrowings 5,589 0.82 4,150 0.27 3,908 0.25 7,075 0.25 5,792 0.24 34.7 (3.5)
----- ----- ----- ----- -----
Total interest-bearing liabilities 798,069 0.28% 732,132 0.28% 738,870 0.29% 747,419 0.31% 734,545 0.34% 9.0 8.6
Noninterest-bearing deposits 273,685 254,974 258,956 244,596 230,644 7.3 18.7
Accrued expenses and other liabilities 5,421 5,377 5,938 6,309 6,109 0.8 (11.3)
Stockholders' equity 172,351 156,274 155,367 153,985 151,270 10.3 13.9
Total liabilities and stockholders' equity $1,249,526 $1,148,757 $1,159,131 $1,152,309 $1,122,568 8.8 11.3
========== ========== ========== ========== ==========
Net interest spread 3.62% 3.62% 3.53% 3.44% 3.46%
Net interest margin 3.71% 3.71% 3.63% 3.54% 3.57%
Shore Bancshares, Inc. Page 12 of 12
Reconciliation of Generally Accepted Accounting Principles (GAAP)
and Non-GAAP Measures
(In thousands, except per share data)
YTD YTD
2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 6/30/2017 6/30/2016
----- ----- ----- ----- ----- --------- ---------
The following reconciles return on average equity and return on
average tangible equity (Note 1):
Net income $2,352 $2,800 $2,495 $2,411 $2,272 $5,152 $4,732
====== ====== ====== ====== ====== ====== ======
Net income - annualized (A) $9,434 $11,356 $9,926 $9,592 $9,138 $10,389 $9,516
====== ======= ====== ====== ====== ======= ======
Net income, excluding net amortization of intangible assets $2,385 $2,820 $2,514 $2,431 $2,292 $5,205 $4,772
====== ====== ====== ====== ====== ====== ======
Net income, excluding net amortization of intangible
assets - annualized (B) $9,566 $11,437 $10,001 $9,671 $9,218 $10,496 $9,596
====== ======= ======= ====== ====== ======= ======
Average stockholders' equity (C) $172,351 $156,274 $155,367 $153,985 $151,270 $164,357 $150,151
Less: Average goodwill and other intangible assets (13,173) (12,997) (13,030) (13,063) (13,096) (13,086) (13,112)
------- ------- ------- ------- -------
Average tangible equity (D) $159,178 $143,277 $142,337 $140,922 $138,174 $151,271 $137,039
======== ======== ======== ======== ======== ======== ========
Return on average equity (GAAP) (A)/(C) 5.47% 7.27% 6.39% 6.23% 6.04% 6.32% 6.34%
==== ==== ==== ==== ==== ==== ====
Return on average tangible equity (Non-GAAP) (B)/(D) 6.01% 7.98% 7.03% 6.86% 6.67% 6.94% 7.00%
==== ==== ==== ==== ==== ==== ====
The following reconciles GAAP efficiency ratio and non-GAAP
efficiency ratio (Note 2):
Noninterest expense (E) $10,199 $9,651 $9,226 $9,217 $9,365 $19,850 $18,704
Less: Amortization of intangible assets (55) (33) (32) (33) (33) (88) (66)
Adjusted noninterest expense (F) $10,144 $9,618 $9,194 $9,184 $9,332 $19,762 $18,638
======= ====== ====== ====== ====== ======= =======
Taxable-equivalent net interest income (G) $10,960 $9,994 $10,029 $9,730 $9,415 $20,954 $18,688
------- ------
Taxable-equivalent net interest income excluding nonrecurring adjustment (H) $10,960 $9,994 $10,029 $9,730 $9,415 $20,954 $18,688
======= ====== ======= ====== ====== ======= =======
Noninterest income (I) $4,179 $4,807 $4,056 $4,007 $4,041 $8,986 $8,582
Adjusted noninterest income (J) $4,179 $4,807 $4,056 $4,007 $4,041 $8,986 $8,582
====== ====== ====== ====== ====== ====== ======
Efficiency ratio (GAAP) (E)/(G)+(I) 67.37% 65.21% 65.50% 67.10% 69.60% 66.30% 68.59%
===== ===== ===== ===== ===== ===== =====
Efficiency ratio (Non-GAAP) (F)/(H)+(J) 67.01% 64.98% 65.28% 67.00% 69.35% 66.01% 68.35%
===== ===== ===== ===== ===== ===== =====
Stockholders' equity (K) $159,940 $157,626 $154,299 $154,835 $152,321
Less: Goodwill and other intangible assets (32,153) (12,978) (13,010) (13,043) (13,076)
======= ======= ======= ======= =======
Tangible equity (L) $127,787 $144,648 $141,289 $141,792 $139,245
======== ======== ======== ======== ========
Shares outstanding (M) 12,685 12,673 12,665 12,663 12,655
====== ====== ====== ====== ======
Book value per common share (GAAP) (K)/(M) $12.61 $12.44 $12.18 $12.23 $12.04
====== ====== ====== ====== ======
Tangible book value per common share (Non-GAAP) (L)/(M) $10.07 $11.41 $11.16 $11.20 $11.00
====== ====== ====== ====== ======
The following reconciles equity to assets and
tangible equity to tangible assets (Note 1):
Stockholders' equity (N) $159,940 $157,626 $154,299 $154,835 $152,321
Less: Goodwill and other intangible assets (32,153) (12,978) (13,010) (13,043) (13,076)
Tangible equity (O) $127,787 $144,648 $141,289 $141,792 $139,245
======== ======== ======== ======== ========
Assets (P) $1,362,798 $1,166,896 $1,160,271 $1,157,866 $1,125,690
Less: Goodwill and other intangible assets (32,153) (12,978) (13,010) (13,043) (13,076)
Tangible assets (Q) $1,330,645 $1,153,918 $1,147,261 $1,144,823 $1,112,614
========== ========== ========== ========== ==========
Period-end equity/assets (GAAP) (N)/(P) 11.74% 13.51% 13.30% 13.37% 13.53%
===== ===== ===== ===== =====
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q) 9.60% 12.54% 12.32% 12.39% 12.52%
==== ===== ===== ===== =====
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.
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SOURCE Shore Bancshares, Inc.
