8-K
SHORE BANCSHARES INC (SHBI)
UNITED STATES
SECURITIES ANDEXCHANGE COMMISSION
Washington, D.C.20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION13 OR 15(d) OF THE
SECURITIES EXCHANGEACT OF 1934
Date of Report (Date of
earliest event reported): April 27, 2023
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 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 April 27, 2023, Shore Bancshares, Inc. (the “Company”) issued a press release setting forth the Company’s first quarter 2023 financial results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.
2
EXHIBIT INDEX
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Press Release, dated April 27, 2023 (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: April 27, 2023 | By: | /s/ Lloyd L. Beatty, Jr. |
| Lloyd L. Beatty, Jr. | ||
| 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 First Quarter 2023 Financial Results
Easton, Maryland (04/27/2023) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company” or “Shore Bancshares”) reported net income of $6.457 million or $0.32 per diluted common share for the first quarter of 2023, compared to net income of $8.407 million or $0.42 per diluted common share for the fourth quarter of 2022, and net income of $5.613 million or $0.28 per diluted common share for the first quarter of 2022. Net income, excluding merger-related expenses, for the first quarter of 2023 was $6.959 million or $0.35 per diluted common share, compared to net income, excluding merger-related expenses, of $9.123 million or $0.46 per diluted common share for the fourth quarter of 2022 and net income, excluding merger-related expenses, of $6.156 million or $0.31 per diluted common share for the first quarter 2022. On December 14, 2022, the Company and The Community Financial Corporation (“TCFC”) announced that they had entered into a merger agreement pursuant to which TCFC will be merged with and into the Company. The Company anticipates additional merger-related expenses due to the pending TCFC acquisition.
When comparing net income, excluding merger-related expenses, for the first quarter of 2023 to the fourth quarter of 2022, net income decreased $2.2 million due to decreases in net interest income of $1.3 million and noninterest income of $528 thousand, coupled with increases in noninterest expense of $169 thousand and provision for credit losses of $763 thousand. When comparing net income, excluding merger-related expenses, for the first quarter of 2023 to the first quarter of 2022, net income increased $803 thousand primarily due to an increase in net interest income of $3.2 million partially offset by a decrease in noninterest income of $712 thousand, coupled with increases in both noninterest expense of $600 thousand and provision for credit losses of $613 thousand.
“We are pleased to report our first quarter 2023 earnings and financial results” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer. “This quarter brought intense scrutiny of all banks and their liquidity position due to the recent failures of Silicon Valley Bank and Signature Bank in March. Considering these events, monitoring liquidity and deposit outflow was the primary focus of our cash management teams while we continued to fund loan growth. We are pleased to report that total deposits decreased less than 1.0% since the end of 2022. We experienced normal seasonality in our deposit outflows, specifically from our municipal deposit customers, which typically trend down during the first quarter of each year. We transitioned existing deposits to our insured cash sweep (“ICS”) program during the first quarter, which not only helped alleviate deposit outflows but generated inflows from new and existing customers. We continue to monitor our liquidity position closely by evaluating our percentage of uninsured deposits and our access to additional liquidity through Federal Home Loan Bank (“FHLB”) borrowings and other traditional sources of liquidity. We continue to make progress with the pending merger with TCFC. We have now received all bank regulatory approvals and expect to complete the merger on or about July 1^st^.”
Balance Sheet Review
Total assets were $3.554 billion at March 31, 2023, an increase of $76.4 million, or 2.2%, when compared to $3.477 billion at December 31, 2022. This increase was primarily due to an increase in loans held for investment of $112.6 million, or 4.4%, partially offset by a decrease in cash and cash equivalents of $17.8 million and an increase in allowance for credit losses of $11.8 million primarily due to a Day 1 CECL adjustment in connection with the Company’s adoption of CECL.
Page 2 of 11
Total borrowings were $174.7 million at March 31, 2023, an increase of $91.6 million, or 110.2%, when compared to $83.1 million at December 31, 2022. Total borrowings at March 31, 2023 were comprised of $131.5 million of FHLB short-term advances and $43.2 million of subordinated debt. There were no long-term FHLB borrowings at March 31, 2022. This increase in total borrowings at March 31, 2023 when compared to December 31,2022 was primarily due to an increase of $91.5 million in FHLB short-term borrowings to manage liquidity and fund loan growth.
Total deposits decreased $15.2 million, or less than 1.0%, when compared to December 31, 2022. The primary reason for this decrease was a decrease in noninterest-bearing deposits of $53.3 million due to the seasonal outflow of municipal deposits. Total interest-bearing deposits increased $38.1 million, primarily due to the transitioning of deposits into the Company's ICS program, which is an insured cash sweep program that provides customers with the ability to insure deposits over $250 thousand among other banks that participate in the ICS network and provides interest rates that track the federal funds rate.
Total stockholders’ equity decreased $2.6 million, or less than 1.0%, when compared to December 31, 2022, primarily due to a Day 1 CECL adjustment of $8.3 million, partially offset by current year earnings and a decrease in unrealized losses on available for sale securities of $860 thousand. At March 31, 2023, the ratio of total equity to total assets was 10.18% and the ratio of total tangible equity to total tangible assets was 8.41% compared to 10.48% and 8.67% at the end of 2022, respectively.
Review of Quarterly Financial Results
Net interest income was $25.7 million for the first quarter of 2023, compared to $26.9 million for the fourth quarter of 2022 and $22.4 million for the first quarter of 2022. The decrease in net interest income when compared to the fourth quarter of 2022 was primarily due to increases in rates paid on interest-bearing liabilities. These interest-bearing liabilities included increases in interest-bearing deposits of 52bps and FHLB short-term borrowings of 98bps, partially offset by increases in yields on loans of 34bps. The increase in the rate paid on interest-bearing deposits was primarily the result of the transitioning of $17 million of existing lower rate deposits into the Company’s ICS program which has interest rates that track the federal funds rate. The average balances of interest-bearing deposits and FHLB short-term borrowings increased $12.4 million, or less than 1.0% and $106.6 million, or 1,442% respectively. The increase in FHLB short-term borrowings was primarily utilized to manage the Company’s liquidity needs and fund loan growth. Net interest income increased when compared to the first quarter of 2022 due to an increase in the average balance of loans of $475.9 million, or 22.3%, and an increase in the average balance of investment securities of $123.2 million, or 23.1%, coupled with an increase in yields of 59bps and 100bps, respectively, resulting in $10.8 million of additional income. When comparing the first quarter of 2023 and 2022 on the liability side of the balance sheet, average interest bearing liabilities increased $122.0 million, or 5.6%. This increase was attributed to an increase in the average balance of interest-bearing deposits of $20.5 million and FHLB short-term borrowings of $114.0 million at higher rates.
The Company’s net interest margin decreased to 3.18% for the first quarter of 2023 from 3.35% for the fourth quarter of 2022 and increased compared to 2.76% for the first quarter of 2022. The decrease in the net interest margin when compared to the fourth quarter of 2022 was primarily due to the increase in the average balance of FHLB short -term borrowings of $106.6 million and an increased rate of 98bps, resulting in an additional $1.3 million in interest expense. The increase in net interest margin when compared to the first quarter of 2022 was primarily due to significantly higher volume of interest earning assets as well as improved yields on such interest earning assets.
The provision for credit losses was $1.2 million for the three months ended March 31, 2023. The comparable amounts were $450 thousand and $600 thousand for the three months ended December 31, 2022, and March 31, 2022, respectively. The increase in the provision for credit losses during the first quarter of 2023 as compared to the prior quarters was primarily a result of new loan growth of $112.6 million. Net charge offs for the first quarter of 2023 were $20 thousand, compared to net charge offs of $84 thousand for the fourth quarter of 2022 and net recoveries of $166 thousand for the first quarter of 2022.
At March 31, 2023 and December 31, 2022, nonperforming assets were $2.7 million and $3.9 million, respectively. The balance of nonperforming assets decreased primarily due to a decrease in loans 90 days past due still accruing of $1.2 million, or 66.8%. When comparing the first quarter of 2023 to the first quarter of 2022, nonperforming assets decreased $1.2 million, or 30.6%, primarily due to decreases in nonaccrual loans of 954 thousand, or 33.5%, and other real estate owned of $382 thousand, or 68.1%.
Page 3 of 11
Total noninterest income for the first quarter of 2023 decreased $528 thousand, or 9.0%, when compared to the fourth quarter of 2022 and decreased $712 thousand, or 11.8%, when compared to the first quarter of 2022. The decrease compared to the fourth quarter of 2022 was primarily due to decreases in revenue associated with the mortgage division of $590 thousand, and in-service charges on deposit accounts of $133 thousand. The decrease in noninterest income when compared to the first quarter of 2022 was primarily due to decreases in revenue associated with the mortgage division of $890 thousand, revenue from Mid-Maryland Title Company, Inc. of $186 thousand and service charges on deposit accounts of $146 thousand partially offset by increases in interchange credits of $174 thousand, and other fees on bank services of $336 thousand. Declines in noninterest income from the mortgage division are primarily attributable to the general rise in interest rates that continue to put pressure on the mortgage market, resulting in declines in home loan sales and home loan refinances.
Total noninterest expense, excluding merger related expenses, for the first quarter of 2023 increased $169 thousand, or less than 1.0%, when compared to the fourth quarter of 2022 and increased $600 thousand, or 3.1%, when compared to the first quarter of 2022. The increase in noninterest expense when compared to the fourth quarter of 2022 was primarily due to increases in employee benefits and legal and professional fees primarily offset by decreases in salaries due increase in deferred salaries based on loan originations in the fourth quarter of 2022. The increase from the first quarter of 2022 was primarily due to increases in other noninterest expenses, employee related benefits, data processing, legal and professional fees and furniture and equipment expense partially offset by decreases in salary expense.
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, N.A. Shore Bancshares engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. Additional information is available at www.shorebancshares.com.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors.”
The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
For further information contact: Vance Adkins, Executive Vice President,and Chief Financial Officer, 410-763-7800
Page 4 of 11
Shore Bancshares, Inc.
Financial Highlights (Unaudited)
(Dollars in thousands, except per share data)
| For the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, | |||||||||
| 2023 | 2022 | Change | |||||||
| PROFITABILITY FOR THE PERIOD | |||||||||
| Net interest income | $ | 25,664 | $ | 22,430 | 14.4 | ||||
| Provision for credit losses | 1,213 | 600 | 102.2 | ||||||
| Noninterest income | 5,334 | 6,046 | (11.8 | ) | |||||
| Noninterest expense | 20,893 | 20,332 | 2.8 | ||||||
| Income before income taxes | 8,892 | 7,544 | 17.9 | ||||||
| Income tax expense | 2,435 | 1,931 | 26.1 | ||||||
| Net income | $ | 6,457 | $ | 5,613 | 15.0 | ||||
| Return on average assets | 0.75 | % | 0.65 | % | 10 | ||||
| Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2) | 0.84 | 0.76 | 8 | ||||||
| Return on average equity | 7.25 | 6.45 | 80 | ||||||
| Return on average tangible equity - Non-GAAP (1), (2) | 10.09 | 9.40 | 69 | ||||||
| Net interest margin | 3.18 | 2.76 | 42 | ||||||
| Efficiency ratio - GAAP | 67.40 | 71.40 | (400 | ) | |||||
| Efficiency ratio - Non-GAAP (1), (2) | 63.67 | 66.93 | (326 | ) | |||||
| PER SHARE DATA | |||||||||
| Basic and diluted net income per common share | $ | 0.32 | $ | 0.28 | 14.3 | ||||
| Dividends paid per common share | $ | 0.12 | $ | 0.12 | — | ||||
| Book value per common share at period end | 18.17 | 17.73 | 2.5 | ||||||
| Tangible book value per common share at period end - Non-GAAP (1) | 14.74 | 14.19 | 3.9 | ||||||
| Market value at period end | 14.28 | 20.48 | (30.3 | ) | |||||
| Market range: | |||||||||
| High | 18.15 | 21.41 | (15.2 | ) | |||||
| Low | 14.00 | 19.34 | (27.6 | ) | |||||
| AVERAGE BALANCE SHEET DATA | |||||||||
| Loans | $ | 2,611,644 | $ | 2,135,734 | 22.3 | ||||
| Investment securities | 654,193 | 531,017 | 23.2 | ||||||
| Earning assets | 3,279,686 | 3,253,549 | 0.8 | ||||||
| Assets | 3,506,336 | 3,477,481 | 0.8 | ||||||
| Deposits | 2,968,448 | 3,044,213 | (2.5 | ) | |||||
| Stockholders' equity | 361,174 | 353,011 | 2.3 | ||||||
| CREDIT QUALITY DATA | |||||||||
| Net chargeoffs/(recoveries) | $ | 20 | $ | (166 | ) | 112.0 | |||
| Nonaccrual loans | $ | 1,894 | $ | 2,848 | (33.5 | ) | |||
| Loans 90 days past due and still accruing | 611 | 459 | 33.1 | ||||||
| Other real estate owned | 179 | 561 | (68.1 | ) | |||||
| Total nonperforming assets | 2,684 | 3,868 | (30.6 | ) | |||||
| CAPITAL AND CREDIT QUALITY RATIOS | |||||||||
| Period-end equity to assets | 10.18 | % | 10.07 | % | 11 | ||||
| Period-end tangible equity to tangible assets - Non-GAAP (1) | 8.41 | 8.22 | 19 | ||||||
| Annualized net (recoveries) to average loans | — | (0.03 | ) | 3 | |||||
| Allowance for credit losses as a percent of: | |||||||||
| Period-end loans (3) | 1.07 | 0.67 | 40 | ||||||
| Period-end loans (4) | 1.07 | 0.92 | 15 | ||||||
| Nonaccrual loans | 1,502.85 | 516.50 | 98,635 | ||||||
| Nonperforming assets | 1,060.51 | 380.30 | 68,021 | ||||||
| As a percent of total loans: | |||||||||
| Nonaccrual loans | 0.07 | 0.13 | (6 | ) | |||||
| As a percent of total loans+other real estate owned: | |||||||||
| Nonperforming assets | 0.10 | 0.18 | (8 | ) | |||||
| As a percent of total assets: | |||||||||
| Nonaccrual loans | 0.05 | 0.08 | (3 | ) | |||||
| Nonperforming assets | 0.08 | 0.11 | (3 | ) | |||||
| (1) | See the reconciliation table that begins on page 13. | ||||||||
| --- | --- | ||||||||
| (2) | This ratio excludes merger related expenses (Non-GAAP) on page 4. | ||||||||
| --- | --- | ||||||||
| (3) | As of March 31, 2023 and March 31, 2022, these ratios include all loans held for investment, including PPP loans of $167 thousand<br>and $14.9 million, respectively. | ||||||||
| --- | --- | ||||||||
| (4) | For 2023, this ratio excludes only PPP loans given the Company’s adoption of the CECL standard.<br>For periods in 2022, this ratio excludes PPP loans and loans acquired in the Severn and Northwest acquisitions. | ||||||||
| --- | --- |
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Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share data)
| March 31, 2023 | March 31, 2023 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | March 31, | compared to | compared to | |||||||||||
| 2022 | 2022 | December 31, 2022 | March 31, 2022 | |||||||||||
| ASSETS | ||||||||||||||
| Cash<br> and due from banks | 23,863 | $ | 37,661 | $ | 16,206 | (36.6 | )% | 47.2 | % | |||||
| Interest-bearing<br> deposits with other banks | 13,846 | 17,838 | 554,770 | (22.4 | ) | (97.5 | ) | |||||||
| Cash and cash equivalents | 37,709 | 55,499 | 570,976 | (32.1 | ) | (93.4 | ) | |||||||
| Investment<br> securities available for sale (at fair value) | 81,525 | 83,587 | 106,695 | (2.5 | ) | (23.6 | ) | |||||||
| Investment<br> securities held to maturity (at amortized cost) | 549,096 | 559,455 | 407,138 | (1.9 | ) | 34.9 | ||||||||
| Equity securities,<br> at fair value | 1,258 | 1,233 | 1,305 | 2.0 | (3.6 | ) | ||||||||
| Restricted<br> securities | 15,067 | 11,169 | 9,894 | 34.9 | 52.3 | |||||||||
| Loans held<br> for sale, at fair value | 3,514 | 4,248 | 12,906 | (17.3 | ) | (72.8 | ) | |||||||
| Loans held for investment | 2,668,681 | 2,556,107 | 2,181,106 | 4.4 | 22.4 | |||||||||
| Less: allowance for credit losses | (28,464 | ) | (16,643 | ) | (14,710 | ) | 71.0 | (93.5 | ) | |||||
| Loans, net | 2,640,217 | 2,539,464 | 2,166,396 | 4.0 | 21.9 | |||||||||
| Premises and equipment, net | 50,516 | 51,488 | 52,049 | (1.9 | ) | (2.9 | ) | |||||||
| Goodwill | 63,266 | 63,266 | 63,281 | — | (0.0 | ) | ||||||||
| Other intangible assets, net | 5,106 | 5,547 | 7,018 | (8.0 | ) | (27.2 | ) | |||||||
| Other real estate owned, net | 179 | 197 | 561 | (9.1 | ) | (68.1 | ) | |||||||
| Mortgage servicing rights, at<br> fair value | 5,310 | 5,275 | 5,113 | 0.7 | 3.9 | |||||||||
| Right of use assets, net | 9,344 | 9,629 | 10,180 | (3.0 | ) | (8.2 | ) | |||||||
| Cash surrender value on life insurance | 59,711 | 59,218 | 58,186 | 0.8 | 2.6 | |||||||||
| Other assets | 31,876 | 28,001 | 22,799 | 13.8 | 39.8 | |||||||||
| Total assets | 3,553,694 | $ | 3,477,276 | $ | 3,494,497 | 2.2 | 1.7 | |||||||
| LIABILITIES | ||||||||||||||
| Noninterest-bearing deposits | 808,679 | $ | 862,015 | $ | 876,415 | (6.2 | ) | (7.7 | ) | |||||
| Interest-bearing deposits | 2,185,883 | 2,147,769 | 2,192,080 | 1.8 | (0.3 | ) | ||||||||
| Total deposits | 2,994,562 | 3,009,784 | 3,068,495 | (0.5 | ) | (2.4 | ) | |||||||
| Advances from FHLB - short-term | 131,500 | 40,000 | — | 228.8 | — | |||||||||
| Advances from FHLB - long-term | — | — | 10,094 | — | (100.0 | ) | ||||||||
| Subordinated debt | 43,150 | 43,072 | 42,840 | 0.2 | 0.7 | |||||||||
| Total borrowings | 174,650 | 83,072 | 52,934 | 110.2 | 229.9 | |||||||||
| Lease liabilities | 9,642 | 9,908 | 10,397 | (2.7 | ) | (7.3 | ) | |||||||
| Accrued expenses and other liabilities | 13,202 | 10,227 | 10,807 | 29.1 | 22.2 | |||||||||
| Total liabilities | 3,192,056 | 3,112,991 | 3,142,633 | 5.5 | 5.4 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
| Common stock, par value 0.01; authorized 35,000,000<br> shares | 199 | 199 | 198 | — | 0.5 | |||||||||
| Additional paid in capital | 201,736 | 201,494 | 200,640 | 0.1 | 0.5 | |||||||||
| Retained earnings | 167,864 | 171,613 | 153,198 | (2.2 | ) | 9.6 | ||||||||
| Accumulated other comprehensive<br> loss | (8,161 | ) | (9,021 | ) | (2,172 | ) | 9.5 | (275.7 | ) | |||||
| Total stockholders' equity | 361,638 | 364,285 | 351,864 | (0.7 | ) | 2.8 | ||||||||
| Total liabilities and stockholders'<br> equity | 3,553,694 | $ | 3,477,276 | $ | 3,494,497 | 4.8 | 5.2 | |||||||
| Period-end common shares outstanding | 19,898 | 19,865 | 19,843 | 0.2 | 0.3 | |||||||||
| Book value per common share | 18.17 | $ | 18.34 | $ | 17.73 | (0.9 | ) | 2.5 |
All values are in US Dollars.
Page 6 of 11
Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
| For the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, | |||||||||
| 2023 | 2022 | % Change | |||||||
| INTEREST INCOME | |||||||||
| Interest and fees on loans | $ | 30,828 | $ | 22,085 | 39.6 | % | |||
| Interest on investment securities: | |||||||||
| Taxable | 4,064 | 1,985 | 104.7 | ||||||
| Tax-exempt | 7 | — | 100.0 | ||||||
| Interest on deposits with other banks | 163 | 254 | (35.8 | ) | |||||
| Total interest income | 35,062 | 24,324 | 44.1 | ||||||
| INTEREST EXPENSE | |||||||||
| Interest on deposits | 7,281 | 1,358 | 436.2 | ||||||
| Interest on short-term borrowings | 1,361 | 2 | 67,950.0 | ||||||
| Interest on long-term borrowings | 756 | 534 | 41.6 | ||||||
| Total interest expense | 9,398 | 1,894 | 396.2 | ||||||
| NET INTEREST INCOME | 25,664 | 22,430 | 14.4 | ||||||
| Provision for credit losses | 1,213 | 600 | 102.2 | ||||||
| NET INTEREST INCOME AFTER PROVISION | |||||||||
| FOR CREDIT LOSSES | 24,451 | 21,830 | 12.0 | ||||||
| NONINTEREST INCOME | |||||||||
| Service charges on deposit accounts | 1,213 | 1,359 | (10.7 | ) | |||||
| Trust and investment fee income | 432 | 514 | (16.0 | ) | |||||
| Gains on sales and calls of investment securities | — | — | — | ||||||
| Interchange credits | 1,212 | 1,038 | 16.8 | ||||||
| Mortgage-banking revenue | 977 | 1,867 | (47.7 | ) | |||||
| Title Company revenue | 137 | 323 | (57.6 | ) | |||||
| Other noninterest income | 1,363 | 945 | 44.2 | ||||||
| Total noninterest income | 5,334 | 6,046 | (11.8 | ) | |||||
| NONINTEREST EXPENSE | |||||||||
| Salaries and wages | 8,684 | 9,562 | (9.2 | ) | |||||
| Employee benefits | 2,921 | 2,662 | 9.7 | ||||||
| Occupancy expense | 1,619 | 1,567 | 3.3 | ||||||
| Furniture and equipment expense | 534 | 429 | 24.5 | ||||||
| Data processing | 1,798 | 1,607 | 11.9 | ||||||
| Directors' fees | 250 | 190 | 31.6 | ||||||
| Amortization of intangible assets | 441 | 517 | (14.7 | ) | |||||
| FDIC insurance premium expense | 371 | 343 | 8.2 | ||||||
| Other real estate owned, net | (1 | ) | (6 | ) | 83.3 | ||||
| Legal and professional fees | 750 | 637 | 17.7 | ||||||
| Merger related expenses | 691 | 730 | (5.3 | ) | |||||
| Other noninterest expenses | 2,835 | 2,094 | 35.4 | ||||||
| Total noninterest expense | 20,893 | 20,332 | 2.8 | ||||||
| Income before income taxes | 8,892 | 7,544 | 17.9 | ||||||
| Income tax expense | 2,435 | 1,931 | 26.1 | ||||||
| NET INCOME | $ | 6,457 | $ | 5,613 | 15.0 | ||||
| Weighted average shares outstanding - basic and diluted | 19,886 | 19,828 | 0.3 | ||||||
| Basic and diluted net income per common share | $ | 0.32 | $ | 0.28 | 14.3 | ||||
| Dividends paid per common share | 0.12 | 0.12 | — |
Page 7 of 11
Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
(Dollars in thousands)
| 2022 | |||||||||||
| Yield/ | Average | Yield/ | |||||||||
| rate | balance | rate | |||||||||
| Earning assets | |||||||||||
| Loans (1), (2), (3) | 2,611,644 | 4.79 | % | $ | 2,135,734 | 4.20 | % | ||||
| Investment securities | |||||||||||
| Taxable | 653,527 | 2.49 | 531,017 | 1.49 | |||||||
| Tax-exempt (1) | 666 | 5.41 | — | — | |||||||
| Interest-bearing deposits | 13,849 | 4.77 | 586,798 | 0.18 | |||||||
| Total earning assets | 3,279,686 | 4.34 | % | 3,253,549 | 3.01 | % | |||||
| Cash and due from banks | 28,602 | (15,253 | ) | ||||||||
| Other assets | 228,054 | 253,424 | |||||||||
| Allowance for credit losses | (30,006 | ) | (14,239 | ) | |||||||
| Total assets | 3,506,336 | $ | 3,477,481 | ||||||||
| Interest-bearing liabilities | |||||||||||
| Demand deposits | 694,894 | 1.89 | % | $ | 589,737 | 0.16 | % | ||||
| Money market and savings deposits | 1,004,553 | 0.96 | 1,075,791 | 0.23 | |||||||
| Certificates of deposit 100,000 or more | 241,436 | 1.81 | 286,587 | 0.40 | |||||||
| Other time deposits | 207,403 | 1.16 | 175,683 | 0.57 | |||||||
| Interest-bearing deposits | 2,148,286 | 1.37 | 2,127,798 | 0.26 | |||||||
| Securities sold under retail<br> repurchase agreements and federal funds purchased | — | — | 2,770 | 0.29 | |||||||
| Advances from FHLB - short-term | 113,972 | 4.84 | — | — | |||||||
| Advances from FHLB - long-term | — | — | 10,116 | 0.57 | |||||||
| Subordinated debt | 43,108 | 7.11 | 42,804 | 4.93 | |||||||
| Total interest-bearing liabilities | 2,305,366 | 1.65 | % | 2,183,488 | 0.35 | % | |||||
| Noninterest-bearing deposits | 820,162 | 916,415 | |||||||||
| Accrued expenses and other liabilities | 19,634 | 24,567 | |||||||||
| Stockholders' equity | 361,174 | 353,011 | |||||||||
| Total liabilities and stockholders' equity | 3,506,336 | $ | 3,477,481 | ||||||||
| Net interest spread | 2.69 | % | 2.66 | % | |||||||
| Net interest margin | 3.18 | % | 2.76 | % |
All values are in US Dollars.
| (1) | All amounts are reported on a tax-equivalent basis computed<br>using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense. |
|---|---|
| (2) | Average loan balances include nonaccrual loans. |
| --- | --- |
| (3) | Interest income on loans includes accreted loan fees, net of<br>costs and accretion of discounts on acquired loans, which are included in the yield calculations. |
| --- | --- |
Page 8 of 11
Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited)
(Dollars in thousands, except per share data)
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | Q1 2023 | Q1 2023 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2022 | 2022 | 2022 | compared to | compared to | |||||||||||||||
| Q1<br> 2023 | Q4<br> 2022 | Q3<br> 2022 | Q2<br> 2022 | Q1<br> 2022 | Q4<br> 2022 | Q1<br> 2022 | |||||||||||||||
| PROFITABILITY FOR THE PERIOD | |||||||||||||||||||||
| Taxable-equivalent<br> net interest income | $ | 25,705 | $ | 26,981 | $ | 27,350 | $ | 24,656 | $ | 22,469 | (4.7 | )% | 14.4 | % | |||||||
| Less: Taxable-equivalent<br> adjustment | 40 | 38 | 35 | 38 | 39 | 5.3 | 2.6 | ||||||||||||||
| Net interest<br> income | 25,664 | 26,943 | 27,315 | 24,618 | 22,430 | (4.7 | ) | 14.4 | |||||||||||||
| Provision<br> for credit losses | 1,213 | 450 | 675 | 200 | 600 | 169.6 | 102.2 | ||||||||||||||
| Noninterest<br> income | 5,334 | 5,862 | 5,344 | 5,833 | 6,046 | (9.0 | ) | (11.8 | ) | ||||||||||||
| Noninterest<br> expense | 20,893 | 21,000 | 18,899 | 20,094 | 20,332 | (0.5 | ) | 2.8 | |||||||||||||
| Income<br> before income taxes | 8,892 | 11,355 | 13,085 | 10,157 | 7,544 | (21.7 | ) | 17.9 | |||||||||||||
| Income<br> tax expense | 2,435 | 2,948 | 3,427 | 2,658 | 1,931 | (17.4 | ) | 26.1 | |||||||||||||
| Net income | $ | 6,457 | $ | 8,407 | $ | 9,658 | $ | 7,499 | $ | 5,613 | (23.2 | ) | 15.0 | ||||||||
| Return<br> on average assets | 0.75 | % | 0.97 | % | 1.11 | % | 0.88 | % | 0.65 | % | (22 | )bp | 10 | bp | |||||||
| Return<br> on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2) | 0.84 | 1.09 | 1.17 | 0.94 | 0.76 | (25 | ) | 8 | |||||||||||||
| Return<br> on average equity | 7.25 | 9.22 | 10.72 | 8.52 | 6.45 | (197 | ) | 80 | |||||||||||||
| Return<br> on average tangible equity - Non-GAAP (1) | 10.09 | 12.83 | 13.98 | 11.41 | 9.40 | (274 | ) | 69 | |||||||||||||
| Net interest<br> margin | 3.18 | 3.35 | 3.38 | 3.10 | 2.76 | (17 | ) | 42 | |||||||||||||
| Efficiency<br> ratio - GAAP | 67.40 | 64.01 | 57.87 | 65.99 | 71.40 | 339 | (400 | ) | |||||||||||||
| Efficiency<br> ratio - Non-GAAP (1), (2) | 63.67 | 59.59 | 55.79 | 63.44 | 66.93 | 408 | (326 | ) | |||||||||||||
| PER SHARE DATA | |||||||||||||||||||||
| Basic and<br> diluted net income per common share | $ | 0.32 | $ | 0.42 | $ | 0.49 | $ | 0.38 | $ | 0.28 | (23.8 | )% | 14.3 | % | |||||||
| Dividends paid per common<br> share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | — | — | ||||||||||||||
| Book value per common share<br> at period end | 18.17 | 18.34 | 17.99 | 17.77 | 17.73 | (0.9 | ) | 2.5 | |||||||||||||
| Tangible<br> book value per common share at period end - Non-GAAP (1) | 14.74 | 14.87 | 14.50 | 14.26 | 14.19 | (0.9 | ) | 3.9 | |||||||||||||
| Market value at period end | 14.28 | 17.43 | 17.32 | 18.50 | 20.48 | (18.1 | ) | (30.3 | ) | ||||||||||||
| Market<br> range: | |||||||||||||||||||||
| High | 18.15 | 20.85 | 20.50 | 21.21 | 21.41 | (12.9 | ) | (15.2 | ) | ||||||||||||
| Low | 14.00 | 17.04 | 17.29 | 17.91 | 19.34 | (17.8 | ) | (27.6 | ) | ||||||||||||
| AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||
| Loans | $ | 2,611,644 | $ | 2,467,324 | $ | 2,327,279 | $ | 2,217,139 | $ | 2,135,734 | 5.8 | % | 22.3 | % | |||||||
| Investment<br> securities | 654,193 | 661,968 | 618,378 | 546,252 | 531,017 | (1.2 | ) | 23.2 | |||||||||||||
| Earning assets | 3,279,686 | 3,206,591 | 3,210,233 | 3,189,926 | 3,253,549 | 2.3 | 0.8 | ||||||||||||||
| Assets | 3,506,336 | 3,441,079 | 3,444,365 | 3,419,168 | 3,477,481 | 1.9 | 0.8 | ||||||||||||||
| Deposits | 2,968,448 | 3,006,734 | 3,012,658 | 2,993,098 | 3,044,213 | (1.3 | ) | (2.5 | ) | ||||||||||||
| Stockholders'<br> equity | 361,174 | 361,623 | 357,383 | 353,192 | 353,011 | (0.1 | ) | 2.3 | |||||||||||||
| CREDIT QUALITY DATA | |||||||||||||||||||||
| Net charge<br> offs/(recoveries) | $ | 20 | $ | 84 | $ | (119 | ) | $ | (573 | ) | $ | (166 | ) | (76.2 | )% | 112.0 | % | ||||
| Nonaccrual<br> loans | $ | 1,894 | $ | 1,908 | $ | 1,949 | $ | 2,693 | $ | 2,848 | (0.7 | ) | (33.5 | ) | |||||||
| Loans 90<br> days past due and still accruing | 611 | 1,841 | 644 | 803 | 459 | (66.8 | ) | 33.1 | |||||||||||||
| Other<br> real estate owned | 179 | 197 | 197 | 197 | 561 | (9.1 | ) | (68.1 | ) | ||||||||||||
| Total<br> nonperforming assets | $ | 2,684 | $ | 3,946 | $ | 2,790 | $ | 3,693 | $ | 3,868 | (32.0 | ) | (30.6 | ) | |||||||
| CAPITAL AND CREDIT QUALITY RATIOS | |||||||||||||||||||||
| Period-end<br> equity to assets | 10.18 | % | 10.48 | % | 10.36 | % | 10.25 | % | 10.07 | % | (30 | )bp | 11 | bp | |||||||
| Period-end<br> tangible equity to tangible assets - Non-GAAP (1) | 8.41 | 8.67 | 8.52 | 8.39 | 8.22 | (26 | ) | 19 | |||||||||||||
| Annualized<br> net (recoveries) to average loans | — | 0.01 | (0.02 | ) | (0.10 | ) | (0.03 | ) | (1 | ) | 3 | ||||||||||
| Allowance<br> for credit losses as a percent of: | |||||||||||||||||||||
| Period-end<br> loans (3) | 1.07 | 0.65 | 0.68 | 0.68 | 0.67 | 42 | 40 | ||||||||||||||
| Period-end<br> loans (4) | 1.07 | 0.78 | 0.84 | 0.89 | 0.92 | 29 | 15 | ||||||||||||||
| Nonaccrual<br> loans | 1,502.85 | 872.27 | 835.15 | 574.94 | 516.50 | 63,058 | 98,635 | ||||||||||||||
| Nonperforming<br> assets | 1,060.51 | 421.77 | 583.41 | 419.25 | 380.30 | 63,874 | 68,021 | ||||||||||||||
| As a percent<br> of total loans: | |||||||||||||||||||||
| Nonaccrual<br> loans | 0.07 | 0.07 | 0.08 | 0.12 | 0.13 | — | (6 | ) | |||||||||||||
| As a percent<br> of total loans+other real estate owned: | |||||||||||||||||||||
| Nonperforming<br> assets | 0.10 | 0.15 | 0.12 | 0.16 | 0.18 | (5 | ) | (8 | ) | ||||||||||||
| As a percent<br> of total assets: | |||||||||||||||||||||
| Nonaccrual<br> loans | 0.05 | 0.05 | 0.06 | 0.08 | 0.08 | — | (3 | ) | |||||||||||||
| Nonperforming<br> assets | 0.08 | 0.11 | 0.08 | 0.11 | 0.11 | (3 | ) | (3 | ) | ||||||||||||
| (1) | See the reconciliation table that begins on page 13. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | This ratio excludes merger related expenses (Non-GAAP) on page<br>9. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | Includes all loans held for investment,<br>including PPP loan balances for all periods shown. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (4) | For 2023, this ratio excludes only PPP loans given the company’s adoption of the CECL standard. For periods in 2022, this ratio<br>excludes PPP loans and loans acquired in the Severn and Northwest acquisitions. | ||||||||||||||||||||
| --- | --- |
Page 9 of 11
Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited)
(In thousands, except per share data)
| Q1 2023 | Q1 2023 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| compared to | compared to | |||||||||||||||||
| Q1<br> 2023 | Q4<br> 2022 | Q3<br> 2022 | Q2<br> 2022 | Q1<br> 2022 | Q4<br> 2022 | Q1<br> 2022 | ||||||||||||
| INTEREST INCOME | ||||||||||||||||||
| Interest<br> and fees on loans | $ | 30,828 | $ | 27,664 | $ | 25,924 | $ | 23,452 | $ | 22,085 | 11.4 | % | 39.6 | % | ||||
| Interest<br> on investment securities: | ||||||||||||||||||
| Taxable | 4,064 | 3,945 | 3,186 | 2,392 | 1,985 | 3.0 | 104.7 | |||||||||||
| Tax-exempt | 7 | 6 | — | — | — | 16.7 | 100.0 | |||||||||||
| Interest<br> on deposits with other banks | 163 | 664 | 1,466 | 826 | 254 | (75.5 | ) | (35.8 | ) | |||||||||
| Total interest<br> income | 35,062 | 32,279 | 30,576 | 26,670 | 24,324 | 8.6 | 44.1 | |||||||||||
| INTEREST EXPENSE | ||||||||||||||||||
| Interest<br> on deposits | 7,281 | 4,554 | 2,561 | 1,511 | 1,358 | 59.9 | 436.2 | |||||||||||
| Interest<br> on short-term borrowings | 1,361 | 72 | — | — | 2 | 1,790.3 | 67,950.0 | |||||||||||
| Interest<br> on long-term borrowings | 756 | 710 | 700 | 541 | 534 | 6.5 | 41.6 | |||||||||||
| Total interest<br> expense | 9,398 | 5,336 | 3,261 | 2,052 | 1,894 | 76.1 | 396.2 | |||||||||||
| NET INTEREST INCOME | 25,664 | 26,943 | 27,315 | 24,618 | 22,430 | (4.7 | ) | 14.4 | ||||||||||
| Provision for credit losses | 1,213 | 450 | 675 | 200 | 600 | 169.6 | 102.2 | |||||||||||
| NET<br> INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 24,451 | 26,493 | 26,640 | 24,418 | 21,830 | (7.7 | ) | 12.0 | ||||||||||
| NONINTEREST INCOME | ||||||||||||||||||
| Service<br> charges on deposit accounts | 1,213 | 1,346 | 1,509 | 1,438 | 1,359 | (9.9 | ) | (10.7 | ) | |||||||||
| Trust and<br> investment fee income | 432 | 401 | 421 | 447 | 514 | 7.7 | (16.0 | ) | ||||||||||
| Interchange<br> credits | 1,212 | 1,280 | 1,241 | 1,253 | 1,038 | (5.3 | ) | 16.8 | ||||||||||
| Mortgage-banking<br> revenue | 977 | 1,567 | 680 | 1,096 | 1,867 | (37.7 | ) | (47.7 | ) | |||||||||
| Title Company<br> revenue | 137 | 194 | 397 | 426 | 323 | (29.4 | ) | (57.6 | ) | |||||||||
| Other noninterest<br> income | 1,363 | 1,074 | 1,096 | 1,173 | 945 | 26.9 | 44.2 | |||||||||||
| Total noninterest<br> income | 5,334 | 5,862 | 5,344 | 5,833 | 6,046 | (9.0 | ) | (11.8 | ) | |||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||
| Salaries<br> and wages | 8,684 | 8,909 | 8,562 | 8,898 | 9,562 | (2.5 | ) | (9.2 | ) | |||||||||
| Employee<br> benefits | 2,921 | 2,786 | 2,191 | 2,269 | 2,662 | 4.8 | 9.7 | |||||||||||
| Occupancy<br> expense | 1,619 | 1,694 | 1,496 | 1,485 | 1,567 | (4.4 | ) | 3.3 | ||||||||||
| Furniture<br> and equipment expense | 534 | 648 | 533 | 411 | 429 | (17.6 | ) | 24.5 | ||||||||||
| Data processing | 1,798 | 1,856 | 1,759 | 1,668 | 1,607 | (3.1 | ) | 11.9 | ||||||||||
| Directors'<br> fees | 250 | 222 | 217 | 210 | 190 | 12.6 | 31.6 | |||||||||||
| Amortization<br> of intangible assets | 441 | 460 | 499 | 511 | 517 | (4.1 | ) | (14.7 | ) | |||||||||
| FDIC insurance<br> premium expense | 371 | 315 | 339 | 429 | 343 | 17.8 | 8.2 | |||||||||||
| Other real<br> estate owned expenses, net | (1 | ) | 13 | 1 | 57 | (6 | ) | (107.7 | ) | 83.3 | ||||||||
| Legal and<br> professional fees | 750 | 636 | 756 | 811 | 637 | 17.9 | 17.7 | |||||||||||
| Merger<br> related expenses | 691 | 967 | 159 | 241 | 730 | (28.5 | ) | (5.3 | ) | |||||||||
| Other noninterest<br> expenses | 2,835 | 2,494 | 2,387 | 3,104 | 2,094 | 13.7 | 35.4 | |||||||||||
| Total noninterest<br> expense | 20,893 | 21,000 | 18,899 | 20,094 | 20,332 | (0.5 | ) | 2.8 | ||||||||||
| Income before income taxes | 8,892 | 11,355 | 13,085 | 10,157 | 7,544 | (21.7 | ) | 17.9 | ||||||||||
| Income tax expense | 2,435 | 2,948 | 3,427 | 2,658 | 1,931 | (17.4 | ) | 26.1 | ||||||||||
| NET INCOME | $ | 6,457 | $ | 8,407 | $ | 9,658 | $ | 7,499 | $ | 5,613 | (23.2 | ) | 15.0 | |||||
| Weighted average shares outstanding - basic and<br> diluted | 19,886 | 19,862 | 19,852 | 19,847 | 19,828 | 0.1 | 0.3 | |||||||||||
| Basic and diluted net income per<br> common share | $ | 0.32 | $ | 0.42 | $ | 0.49 | $ | 0.38 | $ | 0.28 | (23.8 | ) | 14.3 | |||||
| Dividends paid per common share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | — | — |
Page 10 of 11
Shore Bancshares, Inc.
Consolidated Average Balance Sheets By Quarter (Unaudited)
(Dollars in thousands)
| Average<br> balance | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q1 2023 | Q1 2023 | ||||||||||||||||||||||||||||||||||
| compared to | compared to | ||||||||||||||||||||||||||||||||||
| Q4<br> 2022 | Q3<br> 2022 | Q2<br> 2022 | Q1<br> 2022 | Q4<br> 2022 | Q1<br> 2022 | ||||||||||||||||||||||||||||||
| Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||
| rate | balance | rate | balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||||
| Earning assets | |||||||||||||||||||||||||||||||||||
| Loans<br> (1), (2), (3) | 2,611,644 | 4.79 | % | $ | 2,467,324 | 4.45 | % | $ | 2,327,279 | 4.43 | % | $ | 2,217,139 | 4.25 | % | $ | 2,135,734 | 4.20 | % | 5.8 | % | 22.3 | % | ||||||||||||
| Investment<br> securities | |||||||||||||||||||||||||||||||||||
| Taxable | 653,527 | 2.49 | 661,519 | 2.39 | 618,378 | 2.06 | 546,252 | 1.75 | 531,017 | 1.49 | (1.2 | ) | 23.1 | ||||||||||||||||||||||
| Tax-exempt (1) | 666 | 5.41 | 449 | 6.24 | — | — | — | — | — | — | 100.0 | 100.0 | |||||||||||||||||||||||
| Interest-bearing<br> deposits | 13,849 | 4.77 | 77,299 | 3.40 | 264,576 | 2.20 | 426,535 | 0.78 | 586,798 | 0.18 | (82.1 | ) | (97.6 | ) | |||||||||||||||||||||
| Total<br> earning assets | 3,279,686 | 4.34 | % | 3,206,591 | 4.00 | % | 3,210,233 | 3.78 | % | 3,189,926 | 3.36 | % | 3,253,549 | 3.01 | % | 2.3 | 0.8 | ||||||||||||||||||
| Cash and due from banks | 28,602 | 29,358 | 31,724 | 26,162 | (15,253 | ) | (2.6 | ) | (287.5 | ) | |||||||||||||||||||||||||
| Other assets | 228,054 | 221,599 | 218,163 | 218,353 | 253,424 | 2.9 | (10.0 | ) | |||||||||||||||||||||||||||
| Allowance for credit losses | (30,006 | ) | (16,469 | ) | (15,755 | ) | (15,273 | ) | (14,239 | ) | 82.2 | 110.7 | |||||||||||||||||||||||
| Total assets | 3,506,336 | $ | 3,441,079 | $ | 3,444,365 | $ | 3,419,168 | $ | 3,477,481 | 1.9 | 0.8 | ||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Demand<br> deposits | 694,894 | 1.89 | % | $ | 670,424 | 1.31 | % | $ | 646,399 | 0.66 | % | $ | 644,881 | 0.22 | % | $ | 589,737 | 0.16 | % | 3.6 | 17.8 | ||||||||||||||
| Money<br> market and savings deposits | 1,004,553 | 0.96 | 1,043,076 | 0.60 | 1,034,580 | 0.35 | 1,019,295 | 0.21 | 1,075,791 | 0.23 | (3.7 | ) | (6.6 | ) | |||||||||||||||||||||
| Certificates<br> of deposit 100,000 or more | 241,436 | 1.81 | 217,051 | 0.79 | 222,697 | 0.55 | 234,325 | 0.58 | 286,587 | 0.40 | 11.2 | (15.8 | ) | ||||||||||||||||||||||
| Other<br> time deposits | 207,403 | 1.16 | 205,293 | 0.62 | 215,014 | 0.51 | 221,714 | 0.54 | 175,683 | 0.57 | 1.0 | 18.1 | |||||||||||||||||||||||
| Interest-bearing<br> deposits | 2,148,286 | 1.37 | 2,135,844 | 0.85 | 2,118,690 | 0.48 | 2,120,215 | 0.29 | 2,127,798 | 0.26 | 0.6 | 1.0 | |||||||||||||||||||||||
| Securities<br> sold under retail repurchase agreements and federal funds purchased | — | — | — | — | — | — | — | — | 2,770 | 0.29 | — | (100.0 | ) | ||||||||||||||||||||||
| Advances<br> from FHLB - short-term | 113,972 | 4.84 | 7,391 | 3.86 | — | — | — | — | — | — | 100.0 | 100.0 | |||||||||||||||||||||||
| Advances<br> from FHLB - long-term | — | — | 653 | (6.08 | ) | 10,035 | 0.63 | 10,075 | 0.60 | 10,116 | 0.57 | (100.0 | ) | (100.0 | ) | ||||||||||||||||||||
| Subordinated<br> debt | 43,108 | 7.11 | 43,031 | 6.64 | 42,953 | 6.33 | 42,876 | 4.93 | 42,804 | 4.93 | 0.2 | 0.7 | |||||||||||||||||||||||
| Total<br> interest-bearing liabilities | 2,305,366 | 1.65 | % | 2,186,919 | 0.96 | % | 2,171,678 | 0.60 | % | 2,173,166 | 0.38 | % | 2,183,488 | 0.35 | % | 5.4 | 5.6 | ||||||||||||||||||
| Noninterest-bearing deposits | 820,162 | 870,890 | 893,968 | 872,883 | 916,415 | (5.8 | ) | (10.5 | ) | ||||||||||||||||||||||||||
| Accrued expenses and other<br> liabilities | 19,634 | 21,647 | 21,336 | 19,927 | 24,567 | (9.3 | ) | (20.1 | ) | ||||||||||||||||||||||||||
| Stockholders' equity | 361,174 | 361,623 | 357,383 | 353,192 | 353,011 | (0.1 | ) | 2.3 | |||||||||||||||||||||||||||
| Total liabilities and stockholders'<br> equity | 3,506,336 | $ | 3,441,079 | $ | 3,444,365 | $ | 3,419,168 | $ | 3,477,481 | 1.9 | 0.8 | ||||||||||||||||||||||||
| Net interest spread | 2.69 | % | 3.04 | % | 3.18 | % | 2.98 | % | 2.66 | % | |||||||||||||||||||||||||
| Net interest margin | 3.18 | % | 3.35 | % | 3.38 | % | 3.10 | % | 2.76 | % |
All values are in US Dollars.
| (1) | All amounts are reported on a tax-equivalent basis computed<br>using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense. |
|---|---|
| (2) | Average loan balances include nonaccrual loans. |
| --- | --- |
| (3) | Interest income on loans includes accreted loan fees, net of<br>costs and accretion of discounts on acquired loans, which are included in the yield calculations. |
| --- | --- |
Page 11 of 11
Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP)
and Non-GAAP Measures (Unaudited)
(In thousands, except per share data)
| YTD | YTD | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q1<br> 2023 | Q4<br> 2022 | Q3<br> 2022 | Q2<br> 2022 | Q1<br> 2022 | 3/31/2023 | 3/31/2022 | |||||||||||||||
| The following reconciles return<br> on average equity and return on average tangible equity (Note 1): | |||||||||||||||||||||
| Net<br> Income | $ | 6,457 | $ | 8,407 | $ | 9,658 | $ | 7,499 | $ | 5,613 | $ | 6,457 | $ | 5,613 | |||||||
| Net Income<br> - annualized (A) | $ | 26,187 | $ | 33,354 | $ | 38,317 | $ | 30,078 | $ | 22,764 | $ | 26,187 | $ | 22,764 | |||||||
| Net<br> income, excluding net amortization of intangible assets and merger related expenses | $ | 7,279 | $ | 9,463 | $ | 10,144 | $ | 8,054 | $ | 6,541 | $ | 7,279 | $ | 6,541 | |||||||
| Net income,<br> excluding net amortization of intangible assets and merger related expenses - annualized (B) | $ | 29,520 | $ | 37,543 | $ | 40,245 | $ | 32,305 | $ | 26,527 | $ | 29,520 | $ | 26,527 | |||||||
| Return on average assets excluding<br> net amortization of intangible assets and merger related expenses - Non-GAAP | 0.84 | % | 1.09 | % | 1.17 | % | 0.94 | % | 0.76 | % | 0.84 | % | 0.76 | % | |||||||
| Average stockholders' equity (C) | $ | 361,174 | $ | 361,623 | $ | 357,383 | $ | 353,192 | $ | 353,011 | $ | 361,174 | $ | 353,011 | |||||||
| Less: Average<br> goodwill and other intangible assets | (68,607 | ) | (69,077 | ) | (69,558 | ) | (70,057 | ) | (70,711 | ) | (68,607 | ) | (70,711 | ) | |||||||
| Average<br> tangible equity (D) | $ | 292,567 | $ | 292,546 | $ | 287,825 | $ | 283,135 | $ | 282,300 | $ | 292,567 | $ | 282,300 | |||||||
| Return<br> on average equity (GAAP) (A)/(C) | 7.25 | % | 9.22 | % | 10.72 | % | 8.52 | % | 6.45 | % | 7.25 | % | 6.45 | % | |||||||
| Return<br> on average tangible equity (Non-GAAP) (B)/(D) | 10.09 | % | 12.83 | % | 13.98 | % | 11.41 | % | 9.40 | % | 10.09 | % | 9.40 | % | |||||||
| The following reconciles GAAP<br> efficiency ratio and non-GAAP efficiency ratio (Note 2): | |||||||||||||||||||||
| Noninterest expense (E) | $ | 20,893 | $ | 21,000 | $ | 18,899 | $ | 20,094 | $ | 20,332 | $ | 20,893 | $ | 20,332 | |||||||
| Less: Amortization<br> of intangible assets | (441 | ) | (460 | ) | (499 | ) | (511 | ) | (517 | ) | (441 | ) | (517 | ) | |||||||
| Merger Expenses | (691 | ) | (967 | ) | (159 | ) | (241 | ) | (730 | ) | (691 | ) | (730 | ) | |||||||
| Adjusted<br> noninterest expense (F) | $ | 19,761 | $ | 19,573 | $ | 18,241 | $ | 19,342 | $ | 19,085 | $ | 19,761 | $ | 19,085 | |||||||
| Net interest income (G) | $ | 25,664 | $ | 26,943 | $ | 27,315 | $ | 24,618 | $ | 22,430 | $ | 25,664 | $ | 22,430 | |||||||
| Add: Taxable-equivalent<br> adjustment | 40 | 40 | 35 | 38 | 39 | 40 | 39 | ||||||||||||||
| Taxable-equivalent<br> net interest income (H) | $ | 25,704 | $ | 26,983 | $ | 27,350 | $ | 24,656 | $ | 22,469 | $ | 25,704 | $ | 22,469 | |||||||
| Noninterest income (I) | $ | 5,334 | $ | 5,862 | $ | 5,344 | $ | 5,833 | $ | 6,046 | $ | 5,334 | 6,046 | ||||||||
| Less: Investment<br> securities (gains) | — | — | — | — | — | — | — | ||||||||||||||
| Adjusted<br> noninterest income (J) | $ | 5,334 | $ | 5,862 | $ | 5,344 | $ | 5,833 | $ | 6,046 | $ | 5,334 | $ | 6,046 | |||||||
| Efficiency<br> ratio (GAAP) (E)/(G)+(I) | 67.40 | % | 64.01 | % | 57.87 | % | 65.99 | % | 71.40 | % | 67.40 | % | 71.40 | % | |||||||
| Efficiency<br> ratio (Non-GAAP) (F)/(H)+(J) | 63.67 | % | 59.59 | % | 55.79 | % | 63.44 | % | 66.93 | % | 63.67 | % | 66.93 | % | |||||||
| The following reconciles book<br> value per common share and tangible book value per common share (Note 1): | |||||||||||||||||||||
| Stockholders' equity (L) | $ | 361,638 | $ | 364,285 | $ | 357,221 | $ | 352,777 | $ | 351,864 | |||||||||||
| Less: Goodwill<br> and other intangible assets | (68,372 | ) | (68,813 | ) | (69,288 | ) | (69,787 | ) | (70,299 | ) | |||||||||||
| Tangible<br> equity (M) | $ | 293,266 | $ | 295,472 | $ | 287,933 | $ | 282,990 | $ | 281,565 | |||||||||||
| Shares outstanding (N) | 19,898 | 19,865 | 19,858 | 19,850 | 19,843 | ||||||||||||||||
| Book value per common share<br> (GAAP) (L)/(N) | $ | 18.17 | $ | 18.34 | $ | 17.99 | $ | 17.77 | $ | 17.73 | |||||||||||
| Tangible<br> book value per common share (Non-GAAP) (M)/(N) | $ | 14.74 | $ | 14.87 | $ | 14.50 | $ | 14.26 | $ | 14.19 | |||||||||||
| The following reconciles equity<br> to assets and tangible equity to tangible assets (Note 1): | |||||||||||||||||||||
| Stockholders' equity (O) | $ | 361,638 | $ | 364,285 | $ | 357,221 | $ | 352,777 | $ | 351,864 | |||||||||||
| Less: Goodwill<br> and other intangible assets | (68,372 | ) | (68,813 | ) | (69,288 | ) | (69,787 | ) | (70,299 | ) | |||||||||||
| Tangible<br> equity (P) | $ | 293,266 | $ | 295,472 | $ | 287,933 | $ | 282,990 | $ | 281,565 | |||||||||||
| Assets (Q) | $ | 3,553,694 | $ | 3,477,276 | $ | 3,446,804 | $ | 3,442,550 | $ | 3,494,497 | |||||||||||
| Less: Goodwill<br> and other intangible assets | (68,372 | ) | (68,813 | ) | (69,288 | ) | (69,787 | ) | (70,299 | ) | |||||||||||
| Tangible<br> assets (R) | $ | 3,485,322 | $ | 3,408,463 | $ | 3,377,516 | $ | 3,372,763 | $ | 3,424,198 | |||||||||||
| Period-end<br> equity/assets (GAAP) (O)/(Q) | 10.18 | % | 10.48 | % | 10.36 | % | 10.25 | % | 10.07 | % | |||||||||||
| Period-end<br> tangible equity/tangible assets (Non-GAAP) (P)/(R) | 8.41 | % | 8.67 | % | 8.52 | % | 8.39 | % | 8.22 | % | |||||||||||
| Note 1: | Management believes that reporting tangible equity and tangible<br>assets more closely approximates the adequacy of capital for regulatory purposes. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| Note 2: | Management believes that reporting the non-GAAP efficiency ratio<br>more closely measures its effectiveness of controlling cash-based operating activities. | ||||||||||||||||||||
| --- | --- |