8-K
SHORE BANCSHARES INC (SHBI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 14, 2022
SHORE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 000-22345 | 52-1974638 |
|---|---|---|
| (State or other jurisdiction of | (Commission file number) | (IRS Employer |
| incorporation or organization) | Identification No.) |
18 E. Dover St., Easton, Maryland 21601
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code: (410) 763-7800
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities<br>Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
|---|---|---|
| Common stock, par value $.01 per share | SHBI | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Result of Operation and Financial Condition.
On February 14, 2022, Shore Bancshares, Inc. (the “Company”) issued a press release setting forth the Company’s fourth quarter and year-to-date 2021 financial results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
The information furnished under Item 2.02, 8.01 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.
Item 8.01. Other Events.
On February 14, 2022, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on March 7, 2022, to holders of record of shares of common stock as of February 24, 2022. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.
2
EXHIBIT INDEX
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Press Release, dated February 14, 2022 (filed herewith) |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SHORE BANCSHARES, INC. | ||
|---|---|---|
| Dated: February 14, 2022 | By: | /s/ Lloyd L. Beatty, Jr. |
| Lloyd L. Beatty, Jr.<br><br>President and Chief Executive Officer |
4
Exhibit 99.1
18 E. Dover Street
Easton**,Maryland 21601**
Phone 410-763-7800
PRESS RELEASE
Shore Bancshares Reports 2021 Financial Results and Quarterly Dividend of $0.12 Per share
Easton, Maryland (2/14/2022) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported net income of $2.723 million or $0.16 per diluted common share for the fourth quarter of 2021, compared to net income of $4.617 million or $0.39 per diluted common share for the third quarter of 2021, and net income of $3.886 million or $0.32 per diluted common share for the fourth quarter of 2020. Net income, excluding merger related expenses for the fourth quarter of 2021 was $7.914 million or $0.46 per diluted common share. Net income for the fiscal year of 2021 was $15.368 million or $1.17 per diluted common share, compared to net income for the fiscal year of 2020 of $15.730 million or $1.27 per diluted common share. On October 31, 2021, the Company acquired Severn Bancorp, Inc. (“Severn”). Net income, excluding merger related expenses for 2021 was $21.237 million or $1.62 per diluted common share. For the fourth quarter and the fiscal year of 2021, the Company recorded $7.6 million and $8.5 million, respectively, in merger-related expenses.
When comparing net income for the fourth quarter of 2021 to the third quarter of 2021, net income decreased $1.9 million, the direct result of $7.6 million in merger related expenses in the fourth quarter of 2021. The Company reported increases in net interest income and noninterest income of $5.1 million and $2.2 million, respectively, coupled with a reversal of provision for credit losses for a decrease of $2.0 million. These improvements were partially offset by an increase in noninterest expense of $4.5 million, excluding merger-related expenses. When comparing net income for the fourth quarter of 2021 to the fourth quarter of 2020, net income decreased $1.1 million, due to merger related expenses of $7.6 million. The Company reported increases in net interest income and noninterest income of $6.9 million and $2.1 million, respectively, coupled with a reversal of provision for credit losses for a decrease of $2.8 million, partially offset by an increase in noninterest expense of $5.3 million, excluding merger related expenses.
“We are pleased to announce our fourth quarter earnings and fiscal year 2021 results.” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer. “Our acquisition of Severn Bank continues to be a high priority as the process continues from the legal merger date of November 1, 2021, through the core processing conversion date of February 19, 2022. The integration has been well received and we are thrilled to have their outstanding team join us as we expand our footprint and strive to create value for our shareholders. In 2021, we experienced significant growth in both loans and deposits. Excess liquidity continues to put pressure on our margin, but that liquidity is well positioned to profit from the expected interest rate hikes in 2022.”
Balance Sheet Review
Total assets were $3.460 billion at December 31, 2021, a $1.5 billion, or 79.0%, increase when compared to $1.933 billion at the end of 2020. The merger with Severn, added approximately $1.1 billion to total assets as of October 31, 2021. Excluding these acquired assets, total assets increased $384.7 million, or 19.9% when compared to the end of 2020. Of this growth the Company experienced increases in investment securities held to maturity of $214.6 million, interest-bearing deposits with other banks of $98.6 million, loans of $80.3 million and loans held for sale of $26.8 million, partially offset by a decrease in investment securities available for sale of $43.6 million.
Page 2 of 15
Total deposits increased $1.326 billion, or 77.9%, when compared to December 31, 2020. The merger with Severn, added approximately $955.3 million to total deposits as of October 31, 2021. Excluding these deposits, total deposits increased $370.2 million, or 21.8%, when compared to the end of 2020. The significant movement within deposit accounts, excluding the deposits acquired from Severn, continues to be impacted by new account openings and municipal deposit inflows.
Total stockholders’ equity increased $155.7 million, or 79.8%, when compared to December 31, 2020, primarily due to the acquisition of Severn. At December 31, 2021, the ratio of total equity to total assets was 10.13% and the ratio of total tangible equity to total tangible assets was 8.25%.
Review of Quarterly Financial Results
Net interest income was $20.6 million for the fourth quarter of 2021, compared to $15.6 million for the third quarter of 2021 and $13.8 million for the fourth quarter of 2020. 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 $5.1 million, interest on taxable investment securities of $345 thousand and interest on deposits with other banks of $72 thousand, partially offset by increases in expense on interest-bearing deposits of $323 thousand and borrowings of $123 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $399.8 million, or 26.9%, combined with accretion income of approximately $628 thousand from the acquired Severn loans, which increased the average yield on loans for the quarter. The acquisition of loans from Severn had the most significant impact on the higher interest and fees on loans, but it was also complemented by significant organic loan growth of $39.7 million and forgiveness on PPP loans during the fourth quarter of 2021. The increase in interest on taxable investment securities was also primarily impacted by the acquisition of Severn with the addition of continued purchases of held to maturity securities during the fourth quarter of 2021, due to an excess liquidity position. The increase in interest expense on interest-bearing deposits was primarily due to higher rates paid on money market and savings deposits acquired from Severn, resulting in an increase of 10bps in the average rate paid on these deposits. The addition of a long-term advance from the Federal Home Loan Bank (“FHLB”) and subordinated debt, acquired from Severn, resulted in $150 thousand of additional borrowing expense. The long-term advances from the FHLB, will mature in October of 2022 and management will keep the subordinated debt on the balance sheet due to its addition to capital. The increase in net interest income when comparing the fourth quarter of 2021 to the fourth quarter of 2020, was primarily due to increases in interest and fees on loans of $6.0 million, interest on taxable investment securities of $754 thousand and interest on deposits with other banks of $125 thousand, coupled with a decrease in interest expense on interest-bearing deposits of $81 thousand. These improvements to net interest income were partially offset by the addition of long-term advances from the FHLB and subordinated debt acquired from Severn, which were the primary cause of additional borrowing expense of $108 thousand.
The Company’s net interest margin decreased to 2.87% for the fourth quarter of 2021 from 2.99% for the third quarter of 2021 and decreased from 3.08% for the fourth quarter of 2020. The decrease in net interest margin in the fourth quarter of 2021 when compared to the third quarter of 2021 and the fourth quarter of 2020, was primarily due to excess liquidity, which has been partially invested in lower yielding taxable investment securities. In addition, the acquired borrowings from Severn attributed to the decline in margin when compared to the third quarter of 2021 and the fourth quarter of 2020. Rates paid on interest-bearing deposits in the fourth quarter of 2021 compared to the third quarter of 2021, increased by 2bps, whereas the rates paid compared to the fourth quarter of 2020, declined 18bps. Absent excess liquidity of $400 million, we estimate our margin for the fourth quarter of 2021 would have been 3.34%.
The provision for credit losses was $(1.7) million for the three months ended December 31, 2021. The comparable amounts were $290 thousand and $1.1 million for the three months ended September 30, 2021 and December 31, 2020, respectively. The reversal of provision expense in the fourth quarter of 2021 was related to reduced pandemic related qualitative factors associated with anticipated losses that failed to materialize in 2021. The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.96% at December 31, 2021, compared to 1.10% at September 30, 2021 and 1.09% at December 31, 2020. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to September 30, 2021, was due to reduced pandemic qualitative factors previously mentioned. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to December 31, 2020, was primarily due to improved credit quality and pandemic related allocations prior to the end of 2020, which as mentioned, were significantly reduced during the fourth quarter of 2021. The Company reported net recoveries of $142 thousand in the fourth quarter of 2021, compared to net recoveries of $147 thousand in the third quarter of 2021 and net recoveries of $61 thousand for the fourth quarter of 2020.
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At December 31, 2021 and September 30, 2021, nonperforming assets were $3.8 million and $4.4 million, respectively. The balance of nonperforming assets decreased primarily due to a decrease in nonaccrual loans of $671 thousand, or 19.4%. Accruing troubled debt restructurings (“TDRs”) decreased $83 thousand, or 1.4%. Other real estate owned properties increased to $532 thousand for December 31, 2021, from $203 thousand at September 30, 2021, also attributable to the acquisition of Severn. When comparing December 31, 2021, to December 31, 2020, nonperforming assets decreased $2.4 million, or 38.9%, primarily due to decreases in nonaccrual loans of $2.7 million, or 48.9% and loans 90 days past due and still accruing of $296 thousand, or 36.8%. Accruing TDRs decreased $1.3 million, or 19.0%, and other real estate owned increased $532 thousand, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.27%, 0.44% and 0.68% at December 31, 2021, September 30, 2021 and December 31, 2020, respectively. In addition, the ratio of accruing TDRs to total loans at December 31, 2021 was 0.27%, compared to 0.38% at September 30, 2021 and 0.48% at December 31, 2020.
Total noninterest income for the fourth quarter of 2021 increased $2.2 million, or 76.3%, when compared to the third quarter of 2021 and increased $2.1 million, or 68.3%, when compared to the fourth quarter of 2020. The increase compared to the third quarter of 2021 and the fourth quarter of 2020 was primarily due to the addition of revenue from the recently acquired mortgage division and Mid-Maryland Title, Co. (“Mid-MD”) of Severn. The mortgage division added $948 thousand and Mid-MD attributed $247 thousand in the fourth quarter of 2021. Service charges on deposit accounts increased $429 thousand when compared to the third quarter of 2021 and $452 thousand when compared to the fourth quarter of 2020. In addition, rental income on premises acquired from Severn, added an additional $237 thousand when compared to the third quarter of 2021 and $242 thousand when compared to the fourth quarter of 2020.
Total noninterest expense, excluding merger related expenses, for the fourth quarter of 2021 increased $4.5 million, or 39.4%, when compared to the third quarter of 2021 and increased $5.3 million, or 50.5%, when compared to the fourth quarter of 2020. The increase in noninterest expense when compared to the third quarter of 2021 and the fourth quarter of 2020, was primarily due to increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and FDIC insurance premium expense, which were all significantly impacted by adding Severn and its operations in the fourth quarter of 2021.
Review of 2021 Financial Results
Net interest income for 2021 was $64.1 million, an increase of $11.5 million, or 21.9% when compared to 2020. The increase was primarily due to higher interest income and fees on loans of $8.4 million and taxable investment securities of $2.0 million. Total interest expense decreased $1.0 million, due to the average rates paid on interest-bearing deposits which declined by 30bps, partially offset by the addition of subordinated debt in the third quarter of 2020 and the acquisition of subordinated debt from Severn. The Company’s net interest margin decreased to 2.94% for 2021, compared to 3.27% for 2020. The primary factor impacting the net interest margin was the average yield on earnings assets which declined 50bps. Although the average yield on loans only increased 1bp, the average yield on investment in taxable securities declined 64bps, while the average yield on interest-bearing deposits with other banks declined 12bps. The Company had excess liquidity before adding $955.3 million in deposits in connection with the acquisition of Severn on October 31, 2021. Management believes that the excess liquidity is a temporary issue but will benefit from anticipated interest rate increases from the Federal Reserve in the near-term while continuing to seek alternative investments with favorable yields.
The provision for credit losses for 2021 and 2020 was $(358) thousand and $3.9 million, respectively, while net recoveries were $414 thousand and net charge offs were $519 thousand, respectively. The reversal in provision for credit losses was the result of recoveries in 2021 compared to charge-offs in 2020 and the alleviation of qualitative factors established in 2020 related to the pandemic. The ratio of allowance to total loans, excluding PPP loans and acquired loans, decreased from 1.09% at December 31, 2020, to 0.96% at December 31, 2021. The primary drivers for the decrease in the percentage of allowance for credit losses to total loans were improved credit quality and the reduced impact of qualitative factors related to the pandemic. Management will continue to evaluate the adequacy of the allowance for credit losses as changes within the Company’s portfolio are known.
Total noninterest income for 2021 increased $2.7 million, or 25.6%, when compared to the same period in 2020. The increase in noninterest income primarily consisted of the addition of the mortgage division and Mid-MD title from Severn. As previously stated, the mortgage division added $948 thousand and Mid-MD attributed $247 thousand in 2021. In addition, the increase in noninterest income in 2021 included increases in debit card interchange fees of $958 thousand, service charges on deposit accounts of $557 thousand and trust and investment fee income of $323 thousand, partially offset by a decrease in the gains on sale of investment securities of $345 thousand.
Page 4 of 15
Total noninterest expense for 2021, excluding merger related expenses, increased $9.9 million, or 25.7%, when compared to the same period in 2020. The increase was mainly the result of increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and FDIC insurance premium expense, which were all significantly impacted by adding Severn and its operations in the fourth quarter of 2021. In addition, as previously mentioned, during 2021, the Company recorded merger-related expenses of $8.5 million due to the acquisition of Severn.
Small Business Administration’s Paycheck Protection Program (“PPP”) and COVID related deferrals
As of December 31, 2021, the Company had 227 PPP loans totaling $27.6 million that were outstanding, inclusive of loans issued pre-merger and those acquired from Severn. The Company had no COVID related loan deferrals.
Shore Bancshares, Inc. Reports Quarterly Dividend of $0.12 Per Share
The Company announced that the Board of Directors has declared a quarterly common stock dividend in the amount of $0.12 per share, payable March 7, 2022, to stockholders of record on February 24, 2022.
Shore Bancshares Information
Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.
Additional information is available at www.shorebancshares.com.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.
The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
For further information contact: Edward Allen, Executive Vice Presidentand Chief Financial Officer, 410-763-7800
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Shore Bancshares, Inc.
Financial Highlights (Unaudited)
(Dollars in thousands, except per share data)
| For the Three Months Ended | For the Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||
| PROFITABILITY FOR THE PERIOD | ||||||||||||||||||
| Net interest income | $ | 20,639 | $ | 13,765 | 49.9 | % | $ | 64,130 | $ | 52,597 | 21.9 | % | ||||||
| Provision for credit losses | (1,723 | ) | 1,050 | (264.1 | ) | (358 | ) | 3,900 | (109.2 | ) | ||||||||
| Noninterest income | 5,129 | 3,047 | 68.3 | 13,498 | 10,749 | 25.6 | ||||||||||||
| Noninterest expense | 23,497 | 10,556 | 122.6 | 56,806 | 38,399 | 47.9 | ||||||||||||
| Income before income taxes | 3,994 | 5,206 | (23.3 | ) | 21,180 | 21,047 | 0.6 | |||||||||||
| Income tax expense | 1,271 | 1,320 | (3.7 | ) | 5,812 | 5,317 | 9.3 | |||||||||||
| Net income | $ | 2,723 | $ | 3,886 | (29.9 | ) | $ | 15,368 | $ | 15,730 | (2.3 | ) | ||||||
| Return on average assets | 0.36 | % | 0.82 | % | (46 | )bp | 0.66 | % | 0.92 | % | (26 | )bp | ||||||
| Return on average assets excluding merger expenses - Non-GAAP (2) | 1.35 | 0.82 | 53 | 1.03 | 0.92 | 11 | ||||||||||||
| Return on average equity | 3.59 | 7.82 | (423 | ) | 6.86 | 7.95 | (109 | ) | ||||||||||
| Return on average tangible equity - Non-GAAP (1), (2) | 13.88 | 8.88 | 500 | 11.34 | 9.04 | 230 | ||||||||||||
| Net interest margin | 2.87 | 3.08 | (21 | ) | 2.94 | 3.27 | (33 | ) | ||||||||||
| Efficiency ratio - GAAP | 91.19 | 62.79 | 2,840 | 73.18 | 60.62 | 1,256 | ||||||||||||
| Efficiency ratio - Non-GAAP (1), (2) | 60.13 | 61.91 | (178 | ) | 61.15 | 59.97 | 118 | |||||||||||
| PER SHARE DATA | ||||||||||||||||||
| Basic and diluted net income per common share | $ | 0.16 | $ | 0.32 | (50.0 | )% | $ | 1.17 | $ | 1.27 | (7.9 | )% | ||||||
| Dividends paid per common share | $ | 0.12 | $ | 0.12 | — | $ | 0.48 | $ | 0.48 | — | ||||||||
| Book value per common share at period end | 17.71 | 16.55 | 7.0 | |||||||||||||||
| Tangible book value per common share at period end - Non-GAAP (1) | 14.12 | 14.92 | (5.4 | ) | ||||||||||||||
| Market value at period end | 20.85 | 14.60 | 42.8 | |||||||||||||||
| Market range: | ||||||||||||||||||
| High | 23.19 | 15.12 | 53.4 | 23.19 | 17.56 | 32.1 | ||||||||||||
| Low | 17.50 | 10.25 | 70.7 | 12.99 | 7.63 | 70.2 | ||||||||||||
| AVERAGE BALANCE SHEET DATA | ||||||||||||||||||
| Loans | $ | 1,887,126 | $ | 1,430,013 | 32.0 | % | $ | 1,568,468 | $ | 1,368,887 | 14.6 | % | ||||||
| Investment securities | 468,724 | 179,801 | 160.7 | 329,890 | 138,391 | 138.4 | ||||||||||||
| Earning assets | 2,842,097 | 1,780,854 | 59.6 | 2,185,123 | 1,611,004 | 35.6 | ||||||||||||
| Assets | 3,037,262 | 1,880,449 | 61.5 | 2,317,597 | 1,709,997 | 35.5 | ||||||||||||
| Deposits | 2,547,151 | 1,646,980 | 54.7 | 2,015,624 | 1,487,921 | 35.5 | ||||||||||||
| Stockholders' equity | 301,095 | 197,591 | 52.4 | 224,055 | 197,969 | 13.2 |
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| CREDIT QUALITY DATA | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net (recoveries) charge-offs | $ | (142 | ) | $ | (61 | ) | (132.8 | )% | $ | (414 | ) | $ | 519 | (179.8 | )% | |
| Nonaccrual loans | $ | 2,786 | $ | 5,455 | (48.9 | ) | ||||||||||
| Loans 90 days past due and still accruing | 508 | 804 | (36.8 | ) | ||||||||||||
| Other real estate owned | 532 | — | — | |||||||||||||
| Total nonperforming assets | 3,826 | 6,259 | (38.9 | ) | ||||||||||||
| Accruing troubled debt restructurings (TDRs) excluding acquired | 5,667 | 6,997 | (19.0 | ) | ||||||||||||
| Total nonperforming assets and accruing TDRs excluding acquired | $ | 9,493 | $ | 13,256 | (28.4 | ) | ||||||||||
| CAPITAL AND CREDIT QUALITY RATIOS | ||||||||||||||||
| Period-end equity to assets | 10.13 | % | 10.09 | % | 4 | bp | ||||||||||
| Period-end tangible equity to tangible assets - Non-GAAP (1) | 8.25 | 9.18 | (93 | ) | ||||||||||||
| Annualized net (recoveries) charge-offs to average loans | (0.03 | ) | (0.02 | ) | (1 | ) | (0.03 | )% | 0.04 | % | (7 | )bp | ||||
| Allowance for credit losses as a percent of: | ||||||||||||||||
| Period-end loans (3) | 0.66 | 0.95 | (29 | ) | ||||||||||||
| Period-end loans (4) | 0.96 | 1.09 | (13 | ) | ||||||||||||
| Nonaccrual loans | 500.50 | 254.59 | 246 | |||||||||||||
| Nonperforming assets | 364.45 | 221.89 | 143 | |||||||||||||
| Accruing TDRs excluding acquired | 246.06 | 198.49 | 48 | |||||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 146.89 | 104.77 | 42 | |||||||||||||
| As a percent of total loans: | ||||||||||||||||
| Nonaccrual loans | 0.13 | 0.38 | (25 | ) | ||||||||||||
| Accruing TDRs excluding acquired | 0.27 | 0.48 | (21 | ) | ||||||||||||
| Nonaccrual loans and accruing TDRs excluding acquired | 0.40 | 0.86 | (46 | ) | ||||||||||||
| As a percent of total loans+other real estate owned: | ||||||||||||||||
| Nonperforming assets | 0.18 | 0.43 | (25 | ) | ||||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 0.45 | 0.91 | (46 | ) | ||||||||||||
| As a percent of total assets: | ||||||||||||||||
| Nonaccrual loans | 0.08 | 0.28 | (20 | ) | ||||||||||||
| Nonperforming assets | 0.11 | 0.32 | (21 | ) | ||||||||||||
| Accruing TDRs excluding acquired | 0.16 | 0.36 | (20 | ) | ||||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 0.27 | 0.68 | (41 | ) | ||||||||||||
| (1) | See the reconciliation table that begins on page 14 of 15. | |||||||||||||||
| --- | --- | |||||||||||||||
| (2) | This ratio excludes merger related expenses (Non-GAAP). | |||||||||||||||
| --- | --- | |||||||||||||||
| (3) | As of December 31, 2021 and December 31, 2020, these ratios included all loans held for investment, including PPP loans of $27.6 million<br>and $122.8 million, respectively. | |||||||||||||||
| --- | --- | |||||||||||||||
| (4) | As of December 31, 2021 and December 31, 2020, these ratios exclude PPP loans, acquired loans and the associated purchase discount<br>mark on the acquired loans from both Severn and Northwest. | |||||||||||||||
| --- | --- |
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Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share data)
| December 31, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | compared to | |||||||
| 2020 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Cash and due from banks | 16,919 | $ | 16,666 | 1.5 | % | |||
| Interest-bearing deposits with other banks | 566,694 | 170,251 | 232.9 | |||||
| Cash and cash equivalents | 583,613 | 186,917 | 212.2 | |||||
| Investment securities available for sale (at fair value) | 116,982 | 139,568 | (16.2 | ) | ||||
| Investment securities held to maturity (at amortized cost) | 404,594 | 65,706 | 515.8 | |||||
| Equity securities, at fair value | 1,372 | 1,395 | (1.6 | ) | ||||
| Restricted securities | 4,159 | 3,626 | 14.7 | |||||
| Loans held for sale, at fair value | 36,427 | - | — | |||||
| Loans | 2,119,175 | 1,454,256 | 45.7 | |||||
| Less: allowance for credit losses | (13,944 | ) | (13,888 | ) | 0.4 | |||
| Loans, net | 2,105,231 | 1,440,368 | 46.2 | |||||
| Premises and equipment, net | 51,624 | 24,924 | 107.1 | |||||
| Goodwill | 63,421 | 17,518 | 262.0 | |||||
| Other intangible assets, net | 7,535 | 1,719 | 338.3 | |||||
| Other real estate owned, net | 532 | — | — | |||||
| Mortgage servicing rights | 4,087 | — | — | |||||
| Right of use assets, net | 11,370 | 4,795 | 137.1 | |||||
| Other assets | 69,469 | 46,779 | 48.5 | |||||
| Total assets | 3,460,416 | $ | 1,933,315 | 79.0 | ||||
| LIABILITIES | ||||||||
| Noninterest-bearing deposits | 1,059,963 | $ | 509,091 | 108.2 | ||||
| Interest-bearing deposits | 1,966,273 | 1,191,614 | 65.0 | |||||
| Total deposits | 3,026,236 | 1,700,705 | 77.9 | |||||
| Securities sold under retail repurchase agreements | 4,143 | 1,050 | 294.6 | |||||
| Advances from FHLB - short-term | — | — | — | |||||
| Advances from FHLB - long-term | 10,135 | — | — | |||||
| Subordinated debt | 42,762 | 24,429 | 75.0 | |||||
| Total borrowings | 57,040 | 25,479 | ||||||
| Lease liabilities | 11,567 | 4,874 | 137.3 | |||||
| Accrued expenses and other liabilities | 14,880 | 7,238 | 105.6 | |||||
| Total liabilities | 3,109,723 | 1,738,296 | 78.9 | |||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Common stock, par value 0.01; authorized 35,000,000 shares | 198 | 118 | 67.8 | |||||
| Additional paid in capital | 200,473 | 52,167 | 284.3 | |||||
| Retained earnings | 149,966 | 141,205 | 6.2 | |||||
| Accumulated other comprehensive income | 56 | 1,529 | (96.3 | ) | ||||
| Total stockholders' equity | 350,693 | 195,019 | 79.8 | |||||
| Total liabilities and stockholders' equity | 3,460,416 | $ | 1,933,315 | 79.0 | ||||
| Period-end common shares outstanding | 19,808 | 11,783 | 68.1 | |||||
| Book value per common share | 17.71 | $ | 16.55 | 7.0 |
All values are in US Dollars.
Page 8 of 15
Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
| For the Three Months Ended | For the Year Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||||||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||
| INTEREST INCOME | ||||||||||||||||
| Interest and fees on loans | $ | 20,564 | $ | 14,541 | 41.4 | % | $ | 64,795 | $ | 56,420 | 14.8 | % | ||||
| Interest on investment securities: | ||||||||||||||||
| Taxable | 1,663 | 910 | 82.7 | 5,006 | 2,997 | 67.0 | ||||||||||
| Interest on deposits with other banks | 169 | 44 | 284.1 | 368 | 260 | 41.5 | ||||||||||
| Total interest income | 22,396 | 15,495 | 44.5 | 70,169 | 59,677 | 17.6 | ||||||||||
| INTEREST EXPENSE | ||||||||||||||||
| Interest on deposits | 1,272 | 1,355 | (6.1 | ) | 4,461 | 6,440 | (30.7 | ) | ||||||||
| Interest on short-term borrowings | 3 | 1 | 200.0 | 8 | 5 | 60.0 | ||||||||||
| Interest on long-term borrowings | 482 | 374 | 28.9 | 1,570 | 635 | — | ||||||||||
| Total interest expense | 1,757 | 1,730 | 1.6 | 6,039 | 7,080 | (14.7 | ) | |||||||||
| NET INTEREST INCOME | 20,639 | 13,765 | 49.9 | 64,130 | 52,597 | 21.9 | ||||||||||
| Provision for credit losses | (1,723 | ) | 1,050 | (264.1 | ) | (358 | ) | 3,900 | (109.2 | ) | ||||||
| NET INTEREST INCOME AFTER PROVISION | ||||||||||||||||
| FOR CREDIT LOSSES | 22,362 | 12,715 | 75.9 | 64,488 | 48,697 | 32.4 | ||||||||||
| NONINTEREST INCOME | ||||||||||||||||
| Service charges on deposit accounts | 1,234 | 782 | 57.8 | 3,396 | 2,839 | 19.6 | ||||||||||
| Trust and investment fee income | 522 | 439 | 18.9 | 1,881 | 1,558 | 20.7 | ||||||||||
| Gains on sales and calls of investment securities | — | — | — | 2 | 347 | — | ||||||||||
| Interchange credits | 1,043 | 837 | 24.6 | 3,964 | 3,006 | — | ||||||||||
| Mortgage-banking revenue | 948 | — | — | 948 | — | — | ||||||||||
| Title Company revenue | 247 | — | — | 247 | — | — | ||||||||||
| Other noninterest income | 1,135 | 989 | 14.8 | 3,060 | 2,999 | 2.0 | ||||||||||
| Total noninterest income | 5,129 | 3,047 | 68.3 | 13,498 | 10,749 | 25.6 | ||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||
| Salaries and wages | 7,727 | 4,366 | 77.0 | 21,222 | 14,935 | 42.1 | ||||||||||
| Employee benefits | 2,271 | 1,715 | 32.4 | 7,262 | 6,461 | 12.4 | ||||||||||
| Occupancy expense | 1,263 | 745 | 69.5 | 3,690 | 2,919 | 26.4 | ||||||||||
| Furniture and equipment expense | 385 | 366 | 5.2 | 1,553 | 1,224 | 26.9 | ||||||||||
| Data processing | 1,487 | 1,093 | 36.0 | 5,001 | 4,288 | 16.6 | ||||||||||
| Directors' fees | 170 | 118 | 44.1 | 620 | 504 | 23.0 | ||||||||||
| Amortization of intangible assets | 381 | 126 | 202.4 | 734 | 533 | 37.7 | ||||||||||
| FDIC insurance premium expense | 362 | 138 | 162.3 | 1,015 | 485 | 109.3 | ||||||||||
| Other real estate owned expenses, net | (2 | ) | 38 | (105.3 | ) | 4 | 56 | (92.9 | ) | |||||||
| Legal and professional fees | 150 | 662 | (77.3 | ) | 1,742 | 2,296 | (24.1 | ) | ||||||||
| Merger related expenses | 7,615 | — | — | 8,530 | — | — | ||||||||||
| Other noninterest expenses | 1,688 | 1,189 | 42.0 | 5,433 | 4,698 | 15.6 | ||||||||||
| Total noninterest expense | 23,497 | 10,556 | 122.6 | 56,806 | 38,399 | 47.9 | ||||||||||
| Income before income taxes | 3,994 | 5,206 | (23.3 | ) | 21,180 | 21,047 | 0.6 | |||||||||
| Income tax expense | 1,271 | 1,320 | (3.7 | ) | 5,812 | 5,317 | 9.3 | |||||||||
| NET INCOME | $ | 2,723 | $ | 3,886 | (29.9 | ) | $ | 15,368 | $ | 15,730 | (2.3 | ) | ||||
| Weighted average shares outstanding - basic | 17,180 | 12,004 | 43.1 | 13,119 | 12,380 | 6.0 | ||||||||||
| Weighted average shares outstanding - diluted | 17,180 | 12,005 | 43.1 | 13,119 | 12,381 | 6.0 | ||||||||||
| Basic and diluted net income per common share | $ | 0.16 | $ | 0.32 | (50.0 | ) | $ | 1.17 | $ | 1.27 | (7.9 | ) | ||||
| Dividends paid per common share | 0.12 | 0.12 | — | 0.48 | 0.48 | — |
Page 9 of 15
Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
(Dollars in thousands)
| For the Year Ended | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | |||||||||||||||||||||||
| 2020 | 2021 | 2020 | |||||||||||||||||||||
| Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||
| rate | balance | rate | balance | rate | balance | rate | |||||||||||||||||
| Earning assets | |||||||||||||||||||||||
| Loans<br> (1), (2), (3) | 1,887,126 | 4.33 | % | $ | 1,430,013 | 4.05 | % | $ | 1,568,468 | 4.14 | % | $ | 1,368,887 | 4.13 | % | ||||||||
| Investment<br> securities | |||||||||||||||||||||||
| Taxable | 468,724 | 1.42 | 179,801 | 2.02 | 329,890 | 1.52 | 138,391 | 2.16 | |||||||||||||||
| Interest-bearing<br> deposits | 486,247 | 0.14 | 171,040 | 0.10 | 286,765 | 0.13 | 103,726 | 0.25 | |||||||||||||||
| Total earning<br> assets | 2,842,097 | 3.11 | % | 1,780,854 | 3.47 | % | 2,185,123 | 3.21 | % | 1,611,004 | 3.71 | % | |||||||||||
| Cash and due from banks | 22,625 | 17,268 | 19,838 | 18,042 | |||||||||||||||||||
| Other assets | 188,399 | 95,684 | 127,704 | 92,575 | |||||||||||||||||||
| Allowance<br> for credit losses | (15,859 | ) | (13,357 | ) | (15,068 | ) | (11,624 | ) | |||||||||||||||
| Total<br> assets | 3,037,262 | $ | 1,880,449 | $ | 2,317,597 | $ | 1,709,997 | ||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||
| Demand deposits | 494,081 | 0.14 | % | $ | 420,582 | 0.18 | % | $ | 450,399 | 0.14 | % | $ | 343,848 | 0.26 | % | ||||||||
| Money market<br> and savings deposits | 925,301 | 0.28 | 459,237 | 0.20 | 675,979 | 0.21 | 434,781 | 0.27 | |||||||||||||||
| Certificates<br> of deposit 100,000 or more | 174,268 | 0.49 | 128,642 | 1.45 | 144,209 | 0.84 | 129,150 | 1.70 | |||||||||||||||
| Other<br> time deposits | 173,975 | 0.50 | 145,795 | 1.27 | 151,429 | 0.78 | 148,823 | 1.46 | |||||||||||||||
| Interest-bearing<br> deposits | 1,767,625 | 0.29 | 1,154,256 | 0.47 | 1,422,016 | 0.31 | 1,056,602 | 0.61 | |||||||||||||||
| Securities<br> sold under retail repurchase | |||||||||||||||||||||||
| agreements<br> and federal funds purchased | 3,972 | 0.30 | 1,101 | 0.36 | 3,017 | 0.27 | 1,484 | 0.34 | |||||||||||||||
| Advances from<br> FHLB - long-term | 6,630 | 2.21 | — | — | 1,671 | 0.48 | 3,934 | 2.87 | |||||||||||||||
| Subordinated<br> debt | 36,589 | 5.12 | 24,420 | 6.09 | 27,528 | 5.70 | 8,617 | 6.06 | |||||||||||||||
| Total interest-bearing<br> liabilities | 1,814,816 | 0.38 | % | 1,179,777 | 0.58 | % | 1,454,232 | 0.42 | % | 1,070,637 | 0.66 | % | |||||||||||
| Noninterest-bearing deposits | 779,526 | 492,724 | 593,608 | 431,319 | |||||||||||||||||||
| Accrued expenses and other liabilities | 141,825 | 10,357 | 45,702 | 10,072 | |||||||||||||||||||
| Stockholders'<br> equity | 301,095 | 197,591 | 224,055 | 197,969 | |||||||||||||||||||
| Total<br> liabilities and stockholders' equity | 3,037,262 | $ | 1,880,449 | $ | 2,317,597 | $ | 1,709,997 | ||||||||||||||||
| Net interest spread | 2.73 | % | 2.89 | % | 2.79 | % | 3.05 | % | |||||||||||||||
| Net interest margin | 2.87 | % | 3.08 | % | 2.94 | % | 3.27 | % |
All values are in US Dollars.
| (1) | All<br> amounts are reported on a tax-equivalent basis computed using the statutory federal income<br> tax rate of 21.0%, exclusive of nondeductible interest expense. |
|---|---|
| (2) | Average<br> loan balances include nonaccrual loans. |
| --- | --- |
| (3) | Interest<br> income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired<br> loans, which are included in the yield calculations. |
| --- | --- |
Page 10 of 15
Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited)
(Dollars in thousands, except per share data)
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | Q4 2021 | Q4 2021 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2021 | 2021 | 2021 | 2020 | compared to | compared to | |||||||||||||||
| Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2021 | Q4 2020 | |||||||||||||||
| PROFITABILITY FOR THE PERIOD | |||||||||||||||||||||
| Taxable-equivalent net interest income | $ | 20,652 | $ | 15,623 | $ | 14,141 | $ | 13,836 | $ | 13,799 | 32.2 | % | 49.7 | % | |||||||
| Less: Taxable-equivalent adjustment | 13 | 34 | 38 | 36 | 34 | (61.8 | ) | (61.8 | ) | ||||||||||||
| Net interest income | 20,639 | 15,589 | 14,103 | 13,800 | 13,765 | 32.4 | 49.9 | ||||||||||||||
| Provision for credit losses | (1,723 | ) | 290 | 650 | 425 | 1,050 | (694.1 | ) | (264.1 | ) | |||||||||||
| Noninterest income | 5,129 | 2,909 | 2,903 | 2,557 | 3,047 | 76.3 | 68.3 | ||||||||||||||
| Noninterest expense | 23,497 | 11,934 | 10,876 | 10,499 | 10,556 | 96.9 | 122.6 | ||||||||||||||
| Income before income taxes | 3,994 | 6,274 | 5,480 | 5,433 | 5,206 | (36.3 | ) | (23.3 | ) | ||||||||||||
| Income tax expense | 1,271 | 1,657 | 1,449 | 1,435 | 1,320 | (23.3 | ) | (3.7 | ) | ||||||||||||
| Net income | $ | 2,723 | $ | 4,617 | $ | 4,031 | $ | 3,998 | $ | 3,886 | (41.0 | ) | (29.9 | ) | |||||||
| Return on average assets | 0.36 | % | 0.84 | % | 0.78 | % | 0.82 | % | 0.82 | % | (48 | )bp | (46 | )bp | |||||||
| Return on average assets excluding merger expenses - Non-GAAP (2) | 1.35 | 0.94 | 0.86 | 0.82 | 0.82 | 41 | 53 | ||||||||||||||
| Return on average equity | 3.59 | 9.12 | 8.19 | 8.28 | 7.82 | (553 | ) | (423 | ) | ||||||||||||
| Return on average tangible equity - Non-GAAP(1) | 13.88 | 11.12 | 9.89 | 9.40 | 8.88 | 276 | 500 | ||||||||||||||
| Net interest margin | 2.87 | 2.99 | 2.91 | 3.00 | 3.08 | (12 | ) | (21 | ) | ||||||||||||
| Efficiency ratio - GAAP | 91.19 | 64.52 | 63.95 | 64.19 | 62.79 | 2,667 | 2,840 | ||||||||||||||
| Efficiency ratio - Non-GAAP (1), (2) | 60.13 | 60.92 | 60.90 | 63.28 | 61.91 | (79 | ) | (178 | ) | ||||||||||||
| PER SHARE DATA | |||||||||||||||||||||
| Basic and diluted net income per common share | $ | 0.16 | $ | 0.39 | $ | 0.34 | $ | 0.34 | $ | 0.32 | (59.0 | )% | (50.0 | )% | |||||||
| Dividends paid per common share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | — | — | ||||||||||||||
| Book value per common share at period end | 17.71 | 17.15 | 16.91 | 16.69 | 16.55 | 3.3 | 7.0 | ||||||||||||||
| Tangible book value per common share at period end - Non-GAAP (1) | 14.12 | 15.55 | 15.29 | 15.06 | 14.92 | (9.2 | ) | (5.4 | ) | ||||||||||||
| Market value at period end | 20.85 | 17.73 | 16.75 | 17.02 | 14.60 | 17.6 | 42.8 | ||||||||||||||
| Market range: | |||||||||||||||||||||
| High | 23.19 | 18.00 | 18.01 | 18.10 | 15.12 | 28.8 | 53.4 | ||||||||||||||
| Low | 17.50 | 16.35 | 16.10 | 12.99 | 10.25 | 7.0 | 70.7 |
Page 11 of 15
| AVERAGE BALANCE SHEET DATA | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans | $ | 1,887,126 | $ | 1,487,281 | $ | 1,444,684 | $ | 1,450,883 | $ | 1,430,013 | 26.9 | % | 32.0 | % | |||||
| Investment securities | 468,724 | 334,205 | 286,121 | 227,816 | 179,801 | 40.3 | 160.7 | ||||||||||||
| Earning assets | 2,842,097 | 2,071,505 | 1,949,509 | 1,867,930 | 1,780,854 | 37.2 | 59.6 | ||||||||||||
| Assets | 3,037,262 | 2,184,448 | 2,061,214 | 1,975,951 | 1,880,449 | 39.0 | 61.5 | ||||||||||||
| Deposits | 2,547,151 | 1,943,225 | 1,822,148 | 1,742,666 | 1,646,980 | 31.1 | 54.7 | ||||||||||||
| Stockholders' equity | 301,095 | 200,881 | 197,532 | 195,791 | 197,591 | 49.9 | 52.4 | ||||||||||||
| CREDIT QUALITY DATA | |||||||||||||||||||
| Net (recoveries) charge-offs | $ | (142 | ) | $ | (147 | ) | $ | (125 | ) | $ | — | $ | (61 | ) | 3.4 | % | (132.8 | )% | |
| Nonaccrual loans | $ | 2,786 | $ | 3,457 | $ | 3,947 | $ | 4,880 | $ | 5,455 | (19.4 | ) | (48.9 | ) | |||||
| Loans 90 days past due and still accruing | 508 | 748 | 752 | 1,188 | 804 | (32.1 | ) | (36.8 | ) | ||||||||||
| Other real estate owned | 532 | 203 | 203 | 205 | — | 162.1 | 100.0 | ||||||||||||
| Total nonperforming assets | $ | 3,826 | $ | 4,408 | $ | 4,902 | $ | 6,273 | $ | 6,259 | (13.2 | ) | (38.9 | ) | |||||
| Accruing troubled debt restructurings (TDRs) excluding acquired | $ | 5,667 | $ | 5,750 | $ | 6,338 | $ | 6,456 | $ | 6,997 | (1.4 | ) | (19.0 | ) | |||||
| Total nonperforming assets and accruing TDRs | $ | 9,493 | $ | 10,158 | $ | 11,240 | $ | 12,729 | $ | 13,256 | (6.5 | ) | (28.4 | ) | |||||
| CAPITAL AND CREDIT QUALITY RATIOS | |||||||||||||||||||
| Period-end equity to assets | 10.13 | % | 8.92 | % | 9.37 | % | 9.61 | % | 10.09 | % | 121 | bp | 4 | bp | |||||
| Period-end tangible equity to tangible assets - Non-GAAP (1) | 8.25 | 8.15 | 8.55 | 8.76 | 9.18 | 10 | (93 | ) | |||||||||||
| Annualized net (recoveries) charge-offs to average loans | (0.03 | ) | (0.04 | ) | (0.03 | ) | — | (0.02 | ) | 1 | (1 | ) | |||||||
| Allowance for credit losses as a percent of: | |||||||||||||||||||
| Period-end loans (3) | 0.66 | 1.04 | 1.02 | 0.98 | 0.95 | (38 | ) | (29 | ) | ||||||||||
| Period-end loans (4) | 0.96 | 1.10 | 1.12 | 1.11 | 1.09 | (14 | ) | (13 | ) | ||||||||||
| Nonaccrual loans | 500.50 | 449.09 | 382.27 | 293.30 | 254.59 | 5,141 | 246 | ||||||||||||
| Nonperforming assets | 364.45 | 352.20 | 307.79 | 228.17 | 221.89 | 1,225 | 143 | ||||||||||||
| Accruing TDRs excluding acquired | 246.06 | 270.00 | 238.06 | 221.70 | 198.49 | (2,394 | ) | 48 | |||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 146.89 | 152.84 | 134.23 | 112.44 | 104.77 | (595 | ) | 42 | |||||||||||
| As a percent of total loans: | |||||||||||||||||||
| Nonaccrual loans | 0.13 | 0.23 | 0.27 | 0.33 | 0.38 | (10 | ) | (25 | ) | ||||||||||
| Accruing TDRs excluding acquired | 0.27 | 0.38 | 0.43 | 0.44 | 0.48 | (11 | ) | (21 | ) | ||||||||||
| Nonaccrual loans and accruing TDRs excluding acquired | 0.40 | 0.62 | 0.70 | 0.78 | 0.86 | (22 | ) | (46 | ) | ||||||||||
| As a percent of total loans+other real estate owned: | |||||||||||||||||||
| Nonperforming assets | 0.18 | 0.29 | 0.33 | 0.43 | 0.43 | (11 | ) | (25 | ) | ||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 0.45 | 0.68 | 0.76 | 0.87 | 0.91 | (23 | ) | (46 | ) | ||||||||||
| As a percent of total assets: | |||||||||||||||||||
| Nonaccrual loans | 0.08 | 0.15 | 0.19 | 0.24 | 0.28 | (7 | ) | (20 | ) | ||||||||||
| Nonperforming assets | 0.11 | 0.19 | 0.23 | 0.31 | 0.32 | (8 | ) | (21 | ) | ||||||||||
| Accruing TDRs excluding acquired | 0.16 | 0.25 | 0.30 | 0.32 | 0.36 | (9 | ) | (20 | ) | ||||||||||
| Nonperforming assets and accruing TDRs excluding acquired | 0.27 | 0.44 | 0.53 | 0.63 | 0.68 | (17 | ) | (41 | ) | ||||||||||
| (1) | See the reconciliation table that begins on page 14 of 15. | ||||||||||||||||||
| --- | --- | ||||||||||||||||||
| (2) | This ratio excludes merger related expenses (Non-GAAP). | ||||||||||||||||||
| --- | --- | ||||||||||||||||||
| (3) | Includes all loans held for investment, including PPP loan balances<br>for all periods shown. | ||||||||||||||||||
| --- | --- | ||||||||||||||||||
| (4) | For all periods shown, these ratios exclude PPP loans, acquired<br>loans and the associated purchase discount mark on the acquired loans from both Severn and Northwest. | ||||||||||||||||||
| --- | --- |
Page 12 of 15
Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited)
(In thousands, except per share data)
| Q4 2021 | Q4 2021 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| compared to | compared to | ||||||||||||||||
| Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2021 | Q4 2020 | |||||||||||
| INTEREST INCOME | |||||||||||||||||
| Interest and fees on loans | $ | 20,564 | $ | 15,484 | $ | 14,381 | $ | 14,366 | $ | 14,541 | 32.8 | % | 41.4 | % | |||
| Interest on investment securities: | |||||||||||||||||
| Taxable | 1,663 | 1,318 | 1,095 | 931 | 910 | 26.2 | 82.7 | ||||||||||
| Interest on deposits with other banks | 169 | 97 | 55 | 47 | 44 | 74.2 | 284.1 | ||||||||||
| Total interest income | 22,396 | 16,899 | 15,531 | 15,344 | 15,495 | 32.5 | 44.5 | ||||||||||
| INTEREST EXPENSE | |||||||||||||||||
| Interest on deposits | 1,272 | 949 | 1,056 | 1,184 | 1,355 | 34.0 | (6.1 | ) | |||||||||
| Interest on short-term borrowings | 3 | 2 | 2 | 1 | 1 | 50.0 | 200.0 | ||||||||||
| Interest on long-term borrowings | 482 | 359 | 370 | 359 | 374 | 34.3 | 28.9 | ||||||||||
| Total interest expense | 1,757 | 1,310 | 1,428 | 1,544 | 1,730 | 34.1 | 1.6 | ||||||||||
| NET INTEREST INCOME | 20,639 | 15,589 | 14,103 | 13,800 | 13,765 | 32.4 | 49.9 | ||||||||||
| Provision for credit losses | (1,723 | ) | 290 | 650 | 425 | 1,050 | (694.1 | ) | (264.1 | ) | |||||||
| NET INTEREST INCOME AFTER PROVISION | |||||||||||||||||
| FOR CREDIT LOSSES | 22,362 | 15,299 | 13,453 | 13,375 | 12,715 | 46.2 | 75.9 | ||||||||||
| NONINTEREST INCOME | |||||||||||||||||
| Service charges on deposit accounts | 1,234 | 805 | 683 | 674 | 782 | 53.3 | 57.8 | ||||||||||
| Trust and investment fee income | 522 | 477 | 475 | 407 | 439 | 9.4 | 18.9 | ||||||||||
| Gains on sales and calls of investment securities | — | 2 | — | — | — | (100.0 | ) | — | |||||||||
| Interchange credits | 1,043 | 1,016 | 1,036 | 869 | 837 | 2.7 | 24.6 | ||||||||||
| Mortgage-banking revenue | 948 | — | — | — | — | — | — | ||||||||||
| Title Company revenue | 247 | — | — | — | — | — | — | ||||||||||
| Other noninterest income | 1,135 | 609 | 709 | 607 | 989 | 86.4 | 14.8 | ||||||||||
| Total noninterest income | 5,129 | 2,909 | 2,903 | 2,557 | 3,047 | 76.3 | 68.3 | ||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||
| Salaries and wages | 7,727 | 5,091 | 4,262 | 4,142 | 4,366 | 51.8 | 77.0 | ||||||||||
| Employee benefits | 2,271 | 1,654 | 1,493 | 1,844 | 1,715 | 37.3 | 32.4 | ||||||||||
| Occupancy expense | 1,263 | 843 | 770 | 814 | 745 | 49.8 | 69.5 | ||||||||||
| Furniture and equipment expense | 385 | 449 | 412 | 307 | 366 | (14.3 | ) | 5.2 | |||||||||
| Data processing | 1,487 | 1,170 | 1,217 | 1,127 | 1,093 | 27.1 | 36.0 | ||||||||||
| Directors' fees | 170 | 147 | 154 | 149 | 118 | 15.6 | 44.1 | ||||||||||
| Amortization of intangible assets | 381 | 107 | 120 | 126 | 126 | 256.1 | 202.4 | ||||||||||
| FDIC insurance premium expense | 362 | 245 | 223 | 185 | 138 | 47.8 | 162.3 | ||||||||||
| Other real estate owned expenses, net | (2 | ) | 4 | 1 | 1 | 38 | (150.0 | ) | (105.3 | ) | |||||||
| Legal and professional fees | 150 | 428 | 648 | 516 | 662 | (65.0 | ) | (77.3 | ) | ||||||||
| Merger related expenses | 7,615 | 538 | 377 | — | — | 1,315.4 | — | ||||||||||
| Other noninterest expenses | 1,688 | 1,258 | 1,199 | 1,288 | 1,189 | 34.2 | 42.0 | ||||||||||
| Total noninterest expense | 23,497 | 11,934 | 10,876 | 10,499 | 10,556 | 96.9 | 122.6 | ||||||||||
| Income before income taxes | 3,994 | 6,274 | 5,480 | 5,433 | 5,206 | (36.3 | ) | (23.3 | ) | ||||||||
| Income tax expense | 1,271 | 1,657 | 1,449 | 1,435 | 1,320 | (23.3 | ) | (3.7 | ) | ||||||||
| NET INCOME | $ | 2,723 | $ | 4,617 | $ | 4,031 | $ | 3,998 | $ | 3,886 | (41.0 | ) | (29.9 | ) | |||
| Weighted average shares outstanding - basic | 17,180 | 11,752 | 11,752 | 11,745 | 12,004 | 46.2 | 43.1 | ||||||||||
| Weighted average shares outstanding - diluted | 17,180 | 11,752 | 11,754 | 11,747 | 12,005 | 46.2 | 43.1 | ||||||||||
| Basic and diluted net income per common share | $ | 0.16 | $ | 0.39 | $ | 0.34 | $ | 0.34 | $ | 0.32 | (59.0 | ) | (50.0 | ) | |||
| Dividends paid per common share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | — | — |
Page 13 of 15
Shore Bancshares, Inc.
Consolidated Average Balance Sheets By Quarter (Unaudited)
(Dollars in thousands)
| Average balance | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 2021 | Q4 2021 | ||||||||||||||||||||||||||||||||||
| compared to | compared to | ||||||||||||||||||||||||||||||||||
| Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2021 | Q4 2020 | ||||||||||||||||||||||||||||||
| Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||
| rate | balance | rate | balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||||
| Earning assets | |||||||||||||||||||||||||||||||||||
| Loans (1), (2), (3) | 1,887,126 | 4.33 | % | $ | 1,487,281 | 4.14 | % | $ | 1,444,684 | 4.00 | % | $ | 1,450,883 | 4.03 | % | $ | 1,430,013 | 4.05 | % | 26.9 | % | 32.0 | % | ||||||||||||
| Investment securities | |||||||||||||||||||||||||||||||||||
| Taxable | 468,724 | 1.42 | 334,205 | 1.58 | 286,121 | 1.53 | 227,816 | 1.63 | 179,801 | 2.02 | 40.3 | 160.7 | |||||||||||||||||||||||
| Interest-bearing deposits | 486,247 | 0.14 | 250,019 | 0.15 | 218,704 | 0.10 | 189,231 | 0.10 | 171,040 | 0.10 | 94.5 | 184.3 | |||||||||||||||||||||||
| Total earning assets | 2,842,097 | 3.11 | % | 2,071,505 | 3.24 | % | 1,949,509 | 3.20 | % | 1,867,930 | 3.34 | % | 1,780,854 | 3.47 | % | 37.2 | 59.6 | ||||||||||||||||||
| Cash and due from banks | 22,625 | 19,453 | 16,908 | 19,245 | 17,268 | 16.3 | 31.0 | ||||||||||||||||||||||||||||
| Other assets | 188,399 | 108,989 | 109,457 | 103,010 | 95,684 | 72.9 | 96.9 | ||||||||||||||||||||||||||||
| Allowance for credit losses | (15,859 | ) | (15,499 | ) | (14,660 | ) | (14,234 | ) | (13,357 | ) | 2.3 | 18.7 | |||||||||||||||||||||||
| Total assets | 3,037,262 | $ | 2,184,448 | $ | 2,061,214 | $ | 1,975,951 | $ | 1,880,449 | 39.0 | 61.5 | ||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Demand deposits | 494,081 | 0.14 | % | $ | 462,950 | 0.14 | % | $ | 405,473 | 0.13 | % | $ | 438,340 | 0.14 | % | $ | 420,582 | 0.18 | % | 6.7 | 17.5 | ||||||||||||||
| Money market and savings deposits | 925,301 | 0.28 | 644,330 | 0.18 | 605,202 | 0.17 | 510,881 | 0.18 | 459,237 | 0.20 | 43.6 | 101.5 | |||||||||||||||||||||||
| Certificates of deposit 100,000 or more | 174,268 | 0.49 | 136,059 | 0.71 | 135,376 | 1.04 | 130,745 | 1.26 | 128,642 | 1.45 | 28.1 | 35.5 | |||||||||||||||||||||||
| Other time deposits | 173,975 | 0.50 | 142,777 | 0.68 | 143,821 | 0.90 | 144,919 | 1.10 | 145,795 | 1.27 | 21.9 | 19.3 | |||||||||||||||||||||||
| Interest-bearing deposits | 1,767,625 | 0.29 | 1,386,116 | 0.27 | 1,289,872 | 0.33 | 1,224,885 | 0.39 | 1,154,256 | 0.47 | 27.5 | 53.1 | |||||||||||||||||||||||
| Securities sold under retail repurchase agreements | |||||||||||||||||||||||||||||||||||
| and federal funds purchased | 3,972 | 0.30 | 2,718 | 0.29 | 3,123 | 0.26 | 2,238 | 0.18 | 1,101 | 0.36 | 46.1 | 260.8 | |||||||||||||||||||||||
| Advances from FHLB - long-term | 6,630 | 2.21 | — | — | — | — | — | — | — | — | 100.0 | 100.0 | |||||||||||||||||||||||
| Subordinated debt | 36,589 | 5.12 | 24,504 | 5.81 | 24,474 | 6.06 | 24,443 | 5.96 | 24,420 | 6.09 | 49.3 | 49.8 | |||||||||||||||||||||||
| Total interest-bearing liabilities | 1,814,816 | 0.38 | % | 1,413,338 | 0.37 | % | 1,317,469 | 0.43 | % | 1,251,566 | 0.50 | % | 1,179,777 | 0.58 | % | 28.4 | 53.8 | ||||||||||||||||||
| Noninterest-bearing deposits | 779,526 | 557,109 | 532,276 | 517,781 | 492,724 | 39.9 | 58.2 | ||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 141,825 | 13,120 | 13,937 | 10,813 | 10,357 | 981.0 | 1,269.4 | ||||||||||||||||||||||||||||
| Stockholders' equity | 301,095 | 200,881 | 197,532 | 195,791 | 197,591 | 49.9 | 52.4 | ||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | 3,037,262 | $ | 2,184,448 | $ | 2,061,214 | $ | 1,975,951 | $ | 1,880,449 | 39.0 | 61.5 | ||||||||||||||||||||||||
| Net interest spread | 2.73 | % | 2.87 | % | 2.77 | % | 2.84 | % | 2.89 | % | |||||||||||||||||||||||||
| Net interest margin | 2.87 | % | 2.99 | % | 2.91 | % | 3.00 | % | 3.08 | % |
All values are in US Dollars.
| (1) | All<br> amounts are reported on a tax-equivalent basis computed using the statutory federal income<br> tax rate of 21.0%, exclusive of nondeductible interest expense. |
|---|---|
| (2) | Average<br> loan balances include nonaccrual loans. |
| --- | --- |
| (3) | Interest<br> income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired<br> loans, which are included in the yield calculations. |
| --- | --- |
Page 14 of 15
Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP)
and Non-GAAP Measures (Unaudited)
(In thousands, except per share data)
| YTD | YTD | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | 12/31/2021 | 12/31/2020 | |||||||||||||||
| The following reconciles return on average equity and return on average tangible equity (Note 1): | |||||||||||||||||||||
| Net Income | $ | 2,723 | $ | 4,617 | $ | 4,031 | $ | 3,998 | $ | 3,886 | $ | 15,368 | $ | 15,730 | |||||||
| Net Income - annualized (A) | $ | 10,803 | $ | 18,317 | $ | 16,168 | $ | 16,214 | $ | 15,460 | $ | 15,368 | $ | 15,730 | |||||||
| Net income, excluding net amortization<br> of intangible assets | |||||||||||||||||||||
| and merger related expenses | $ | 8,688 | $ | 5,098 | $ | 4,402 | $ | 4,092 | $ | 3,980 | $ | 22,279 | $ | 16,128 | |||||||
| Net income,<br> excluding net amortization of intangible assets and merger related expenses - annualized (B) | $ | 34,469 | $ | 20,226 | $ | 17,656 | $ | 16,595 | $ | 15,833 | $ | 22,279 | $ | 16,128 | |||||||
| Average stockholders' equity (C) | $ | 301,095 | $ | 200,881 | $ | 197,532 | $ | 195,791 | $ | 197,591 | $ | 224,055 | $ | 197,969 | |||||||
| Less: Average goodwill and other intangible assets | (52,692 | ) | (18,942 | ) | (19,053 | ) | (19,178 | ) | (19,304 | ) | (27,535 | ) | (19,498 | ) | |||||||
| Average tangible equity (D) | $ | 248,403 | $ | 181,939 | $ | 178,479 | $ | 176,613 | $ | 178,287 | $ | 196,520 | $ | 178,471 | |||||||
| Return on average equity (GAAP) (A)/(C) | 3.59 | % | 9.12 | % | 8.19 | % | 8.28 | % | 7.82 | % | 6.86 | % | 7.95 | % | |||||||
| Return on average tangible equity (Non-GAAP) (B)/(D) | 13.88 | % | 11.12 | % | 9.89 | % | 9.40 | % | 8.88 | % | 11.34 | % | 9.04 | % | |||||||
| The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2): | |||||||||||||||||||||
| Noninterest expense (E) | $ | 23,497 | $ | 11,934 | $ | 10,876 | $ | 10,499 | $ | 10,556 | $ | 56,806 | $ | 38,399 | |||||||
| Less: Amortization of intangible assets | (381 | ) | (107 | ) | (120 | ) | (126 | ) | (126 | ) | (734 | ) | (533 | ) | |||||||
| Merger Expenses | (7,615 | ) | (538 | ) | (377 | ) | — | — | (8,530 | ) | — | ||||||||||
| Adjusted noninterest expense (F) | $ | 15,501 | $ | 11,289 | $ | 10,379 | $ | 10,373 | $ | 10,430 | $ | 47,542 | $ | 37,866 | |||||||
| Net interest income (G) | 20,639 | 15,589 | 14,103 | 13,800 | 13,765 | 64,130 | 52,597 | ||||||||||||||
| Add: Taxable-equivalent adjustment | 13 | 34 | 38 | 36 | 34 | 121 | 141 | ||||||||||||||
| Taxable-equivalent net interest income (H) | $ | 20,652 | $ | 15,623 | $ | 14,141 | $ | 13,836 | $ | 13,799 | $ | 64,251 | $ | 52,738 | |||||||
| Noninterest income (I) | $ | 5,129 | $ | 2,909 | $ | 2,903 | $ | 2,557 | $ | 3,047 | $ | 13,498 | 10,749 | ||||||||
| Less: Investment securities (gains) | — | (2 | ) | — | — | — | (2 | ) | (347 | ) | |||||||||||
| Adjusted noninterest income (J) | $ | 5,129 | $ | 2,907 | $ | 2,903 | $ | 2,557 | $ | 3,047 | $ | 13,496 | $ | 10,402 | |||||||
| Efficiency ratio (GAAP) (E)/(G)+(I) | 91.19 | % | 64.52 | % | 63.95 | % | 64.19 | % | 62.79 | % | 73.18 | % | 60.62 | % | |||||||
| Efficiency ratio (Non-GAAP) (F)/(H)+(J) | 60.13 | % | 60.92 | % | 60.90 | % | 63.28 | % | 61.91 | % | 61.15 | % | 59.97 | % |
Page 15 of 15
| The following reconciles book value per common share and tangible book value per common share (Note 1): | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stockholders' equity (L) | $ | 350,693 | $ | 201,607 | $ | 198,682 | $ | 196,104 | $ | 195,019 | |||||
| Less: Goodwill and other intangible assets | (70,956 | ) | (18,883 | ) | (18,991 | ) | (19,111 | ) | (19,237 | ) | |||||
| Tangible equity (M) | $ | 279,737 | $ | 182,724 | $ | 179,691 | $ | 176,993 | $ | 175,782 | |||||
| Shares outstanding (N) | 19,808 | 11,752 | 11,752 | 11,752 | 11,783 | ||||||||||
| Book value per common share (GAAP) (L)/(N) | $ | 17.71 | $ | 17.15 | $ | 16.91 | $ | 16.69 | $ | 16.55 | |||||
| Tangible book value per common share (Non-GAAP) (M)/(N) | $ | 14.12 | $ | 15.55 | $ | 15.29 | $ | 15.06 | $ | 14.92 | |||||
| The following reconciles equity to assets and tangible equity to tangible assets (Note 1): | |||||||||||||||
| Stockholders' equity (O) | $ | 350,693 | $ | 201,607 | $ | 198,682 | $ | 196,104 | $ | 195,019 | |||||
| Less: Goodwill and other intangible assets | (70,956 | ) | (18,883 | ) | (18,991 | ) | (19,111 | ) | (19,237 | ) | |||||
| Tangible equity (P) | $ | 279,737 | $ | 182,724 | $ | 179,691 | $ | 176,993 | $ | 175,782 | |||||
| Assets (Q) | $ | 3,460,416 | $ | 2,260,774 | $ | 2,120,260 | $ | 2,039,631 | $ | 1,933,315 | |||||
| Less: Goodwill and other intangible assets | (70,956 | ) | (18,883 | ) | (18,991 | ) | (19,111 | ) | (19,237 | ) | |||||
| Tangible assets (R) | $ | 3,389,460 | $ | 2,241,891 | $ | 2,101,269 | $ | 2,020,520 | $ | 1,914,078 | |||||
| Period-end equity/assets (GAAP) (O)/(Q) | 10.13 | % | 8.92 | % | 9.37 | % | 9.61 | % | 10.09 | % | |||||
| Period-end tangible equity/tangible assets (Non-GAAP) (P)/(R) | 8.25 | % | 8.15 | % | 8.55 | % | 8.76 | % | 9.18 | % |
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.