Shore Bancshares, Inc.

28969 Information Lane

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports Third Quarter and Nine-Month Results

 

Easton, Maryland (10/28/2013) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported a net loss of $11.4 million or $(1.35) per diluted common share for the third quarter of 2013, compared to net income of $361 thousand or $0.04 per diluted common share for the second quarter of 2013, and a net loss of $1.8 million or $(0.22) per diluted common share for the third quarter of 2012. The Company reported a net loss of $10.8 million or $(1.28) per diluted common share for the first nine months of 2013, compared to a net loss of $4.6 million or $(0.54) per diluted common share for the first nine months of 2012.

 

The losses for the three and nine months ended September 30, 2013 were due to pretax losses of $19.8 million recognized in connection with the execution of agreements by the Company’s wholly owned subsidiary, The Talbot Bank of Easton (the “Bank”) to sell loans and other real estate owned (the “Asset Sale”). On October 28, 2013, the Bank entered into agreements to sell assets with an aggregate book value of $45.0 million for a price of $25.2 million. The assets consisted of $11.1 million of nonaccrual loans, $30.4 million of accruing troubled debt restructurings (“TDRs”), $1.8 million of adversely classified performing loans and $1.7 million of other real estate owned. As a result, as of September 30, 2013, the $43.3 million of loans subject to the Asset Sale were transferred to loans held for sale and written down $19.6 million to reflect the value to be realized upon sale. Other real estate owned associated with the Asset Sale was written down $182 thousand. The Asset Sale is currently expected to be consummated in the fourth quarter of 2013, subject to certain closing conditions.

 

“In order to accelerate the disposition of our nonperforming assets and decrease our overall risk profile, we have made the difficult but prudent decision to sell approximately 50% of problem loans in our portfolio,” said Lloyd L. “Scott” Beatty, Jr., president and chief executive officer. “Disposing these loans will provide us with the opportunity to focus more on growing healthy new business, improving and sustaining earnings, and positioning the Company for future success. We were able to pursue this strategy because of our strong capital position and we continue to maintain solid underlying capital ratios. We believe that the economy in our region has shown some improvement as real estate pricing stabilizes. We hope to continue to work out of the remaining problem loans, many of which are troubled debt restructurings which are performing.”

 

Balance Sheet Review

Total assets were $1.051 billion at September 30, 2013, a $134.4 million, or 11.3%, decrease when compared to the $1.186 billion at the end of 2012. The decline in total assets was primarily due to a decrease in interest-bearing deposits with other banks ($85.7 million), loans ($66.5 million) and investment securities ($9.9 million). Loans held for sale associated with the pending Asset Sale were $23.6 million at the end of September 2013. Total deposits decreased $118.9 million, or 11.3%, to $930.4 million mainly due to a decline in money market deposit accounts associated with the Company’s participation in the Promontory Insured Network Deposits Program (“IND Program”). In December 2012, the Company decided to partially exit the IND Program as a way to decrease its excess liquidity and, in June 2013, the Company fully exited the IND Program. Total stockholders’ equity declined $12.0 million, or 10.5%, from the end of 2012. For the first nine months of 2013, the ratio of average equity to average assets was 10.49% and the ratio of average tangible equity to average tangible assets was 9.14%.

Page 2 of 13

 

Review of Quarterly Financial Results

Net interest income was $8.8 million for the third quarter of 2013, compared to $9.0 million for the second quarter of 2013 and $8.7 million for the third quarter of 2012. The decrease in net interest income when compared to the second quarter of 2013 was due to a greater decline in interest income than the decline in interest expense. The decrease in interest income was partially the result of a $308 thousand nonrecurring adjustment to loan income related to a TDR in the second quarter of 2013. The decrease in interest expense was mainly the result of lower balances of and rates paid on money market and savings deposits due to exiting the remainder of the IND Program and terminating the interest rate caps associated with these deposits in June of 2013. The slightly higher net interest income for the third quarter of 2013 when compared to the third quarter of 2012 was due to a greater decline in interest expense than the decline in interest income. The decrease in interest expense was mainly due to exiting the IND Program and terminating the interest rate caps associated with the IND Program. The Company’s net interest margin was 3.54% for the third quarter of 2013, 3.60% for the second quarter of 2013 and 3.15% for the third quarter of 2012.

 

The provision for credit losses was $2.9 million for the three months ended September 30, 2013. The comparable amounts were $2.7 million and $6.2 million for the three months ended June 30, 2013 and September 30, 2012, respectively. The higher level of provision for credit losses when comparing the third quarter of 2013 to the second quarter of 2013 was primarily due to increases in loan charge-offs while the lower level when comparing to the third quarter of 2012 was mainly due to declines in nonaccrual loans. Net charge-offs were $7.3 million for the third quarter of 2013, $2.7 million for the second quarter of 2013 and $6.2 million for the third quarter of 2012. The charge offs in all three quarters were mainly real estate related loans. Net charge-offs for the third quarter of 2013 included $2.4 million associated with loans in the Asset Sale. The ratio of quarter-to-date annualized net charge-offs to average loans was 3.74% for the third quarter of 2013, 1.38% for the second quarter of 2013 and 3.07% for the third quarter of 2012. The ratio of the allowance for credit losses to period-end loans was 1.57% at September 30, 2013, compared to 2.01% at June 30, 2013 and 1.60% at September 30, 2012.

 

At September 30, 2013, nonperforming assets excluding nonaccrual loans held for sale were $23.3 million, a decrease of $17.9 million, or 43.5%, when compared to June 30, 2013 and a decrease of $29.2 million, or 55.7%, when compared to September 30, 2012. Similarly, accruing TDRs excluding TDRs held for sale were $29.4 million at September 30, 2013, a decrease of $20.8 million, or 41.4%, when compared to June 30, 2013 and $21.3 million, or 42.0%, when compared to September 30, 2012. Partially offsetting the decline in accruing TDRs was the addition of a $9.6 million credit from one loan relationship. At September 30, 2013, the ratio of nonaccrual loans excluding nonaccrual loans held for sale to total assets was 1.66%, improving from 3.30% and 3.35% at June 30, 2013 and September 30, 2012, respectively. Likewise, the ratio of accruing TDRs excluding TDRs held for sale to total assets at September 30, 2013 was 2.80%, decreasing from 4.77% at June 30, 2013 and 4.31% at September 30, 2012. The positive trend in nonperforming assets and TDRs, as well as the corresponding asset quality ratios, was due primarily to the impact of the Asset Sale. See pages 4 and 9 of this release for additional detail.

 

Total noninterest income for the third quarter of 2013 decreased $19.0 million when compared to both the second quarter of 2013 and third quarter of 2012 mainly due to the $19.8 million write-downs of loans held for sale and other real estate owned to the value to be realized upon sale in connection with the Asset Sale. Included in noninterest income for the second quarter of 2013 was a $1.3 million loss incurred to recognize the remaining ineffective portion of the previously mentioned interest rate caps related to the IND Program which was substantially offset by $913 thousand in gains on sales of investment securities. These transactions in the prior quarter, along with a $297 thousand nonrecurring adjustment included in other noninterest income from an insurance investment, slightly offset the decline in noninterest income when compared to the second quarter of 2013. Slightly offsetting the decline in noninterest income when compared to the third quarter of 2012 were fewer losses on sales of other real estate owned ($524 thousand), the income from the insurance investment, and higher insurance agency commissions ($297 thousand).

 

Total noninterest expense remained fairly flat for the third quarter of 2013 when compared to both the second quarter of 2013 and the third quarter of 2012, increasing less than 1.0% for each comparative period.

 

Review of Nine-Month Financial Results

Net interest income for the first nine months of 2013 was $26.3 million, a decrease of $652 thousand, or 2.4%, when compared to the first nine months of 2012. The decrease was mainly due to lower yields earned on average earning assets and a decline in higher-yielding average loan balances. The decrease was partially offset by lower rates paid on and a decline in average balances of money market and savings deposits, and time deposits. However, the net interest margin improved to 3.48% for the first nine months of 2013 when compared to 3.31% for the first nine months of 2012.

Page 3 of 13

 

The provisions for credit losses for the nine months ended September 30, 2013 and 2012 were $7.7 million and $18.1 million, respectively, while net charge-offs were $12.4 million and $19.4 million, respectively. The ratio of year-to- date annualized net charge-offs to average loans was 2.12% for the first nine months of 2013 and 3.17% for the first nine months of 2012.

 

Total noninterest income for the nine months ended September 30, 2013 decreased $19.7 million when compared to the same period in 2012. As with the quarterly results, this decline was mainly due to the $19.8 million write-down of assets associated with the Asset Sale. Also included in total noninterest income for the first nine months of 2013 was the $1.3 million loss incurred to terminate the interest rate caps associated with the IND Program. Slightly offsetting the asset write-down and the loss on the termination of the interest rate caps were higher insurance agency commissions ($648 thousand), larger gains on sales of investment securities ($635 thousand), and the income from the insurance investment ($297 thousand).

 

Similar to the quarterly results, total noninterest expense for the first nine months of 2013 remained somewhat flat, increasing $166 thousand, or less than 1.0%, when compared to the same period in 2012.

 

Shore Bancshares Information

Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore. It is the parent company of two banks, The Talbot Bank of Easton, Maryland, and CNB; three insurance producer firms, The Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and Associates, Inc; a wholesale insurance company, TSGIA, Inc; and an insurance premium finance company, Mubell Finance, LLC. Shore Bancshares, Inc. engages in the trust services business through the trust department at CNB under the name “Wye Financial & Trust”. Additional information is available at www.shbi.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: George Rapp, Chief Financial Officer, 410-763-7800

 

  

Shore Bancshares, Inc.		Page 4 of 13
Financial Highlights
(Dollars in thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,												September 30,
		2013				2012				Change				2013				2012				Change
PROFITABILITY FOR THE PERIOD
Net interest income		$	8,828			$	8,730				1.1	%		$	26,306			$	26,958				(2.4	)%
Provision for credit losses			2,850				6,200				(54.0	)			7,700				18,095				(57.4	)
Noninterest income			(15,000	)			4,001				(474.9	)			(6,548	)			13,152				(149.8	)
Noninterest expense			9,786				9,709				0.8				30,036				29,870				0.6
Loss before income tax benefit			(18,808	)			(3,178	)			(491.8	)			(17,978	)			(7,855	)			(128.9	)
Income tax benefit			(7,416	)			(1,357	)			(446.5	)			(7,169	)			(3,291	)			(117.8	)
Net loss		$	(11,392	)		$	(1,821	)			(525.6	)		$	(10,809	)		$	(4,564	)			(136.8	)
Return on average assets			(4.24	)%			(0.61	)%			(363	)bp			(1.33	)%			(0.52	)%			(81	)bp
Return on average equity			(39.68	)			(6.07	)			(3,361	)			(12.66	)			(5.08	)			(758	)
Return on average tangible equity (1)			(46.03	)			(6.82	)			(3,921	)			(14.57	)			(5.65	)			(892	)
Net interest margin			3.54				3.15				39				3.48				3.31				17
Efficiency ratio - GAAP			(159.17	)			76.03				(23,520	)			151.42				74.23				7,719
Efficiency ratio - Non-GAAP (1)			71.18				76.95				(577	)			75.20				74.35				85
PER SHARE DATA
Basic net loss per common share		$	(1.35	)		$	(0.22	)			(513.6	)%		$	(1.28	)		$	(0.54	)			(137.0	)%
Diluted net loss per common share			(1.35	)			(0.22	)			(513.6	)			(1.28	)			(0.54	)			(137.0	)
Dividends paid per common share			-				-				-				-				0.01				(100.0	)
Book value per common share at period end			12.06				13.97				(13.7	)
Tangible book value per common share at period end (1)			10.16				12.04				(15.6	)
Market value at period end			8.80				6.02				46.2
Market range:
High			9.06				6.33				43.1				9.06				7.45				21.6
Low			7.06				4.98				41.8				5.20				4.91				5.9
AVERAGE BALANCE SHEET DATA
Loans		$	772,008			$	808,244				(4.5	)%		$	780,359			$	819,088				(4.7	)%
Securities			124,020				137,871				(10.0	)			137,240				135,411				1.4
Earning assets			993,068				1,108,256				(10.4	)			1,014,243				1,094,247				(7.3	)
Assets			1,064,919				1,184,146				(10.1	)			1,088,150				1,169,158				(6.9	)
Deposits			932,867				1,040,693				(10.4	)			954,390				1,024,390				(6.8	)
Stockholders' equity			113,904				119,321				(4.5	)			114,120				119,916				(4.8	)
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs		$	7,272			$	6,235				16.6	%		$	12,390			$	19,428				(36.2	)%
Nonaccrual loans excluding nonaccrual loans held for sale		$	17,501			$	39,442				(55.6	)
Loans 90 days past due and still accruing			9				4,675				(99.8	)
Other real estate owned			5,776				8,418				(31.4	)
Total nonperforming assets excluding nonaccrual loans held for sale			23,286				52,535				(55.7	)
Nonaccrual loans held for sale			7,265				-				-
Total nonperforming assets including nonaccrual loans held for sale		$	30,551			$	52,535				(41.8	)
Accruing troubled debt restructurings (TDRs) excluding TDRs held for sale		$	29,439			$	50,785				(42.0	)
Accruing TDRs held for sale			14,842				-				-
Total accruing TDRs including TDRs held for sale		$	44,281			$	50,785				(12.8	)
Total nonperforming assets and accruing TDRs excluding nonaccrual
loans and TDRs held for sale		$	52,725			$	103,320				(49.0	)
Nonaccrual loans and TDRs held for sale			22,107				-				-
Total nonperforming assets and accruing TDRs including nonaccrual
loans and TDRs held for sale		$	74,832			$	103,320				(27.6	)

 

(1)  See the reconciliation table on page 13 of 13.

 

 

Shore Bancshares, Inc.		Page 5 of 13
Financial Highlights
(Dollars in thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,												September 30,
		2013				2012				Change				2013				2012				Change
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets			10.70	%			10.08	%			62	bp			10.49	%			10.26	%			23	bp
Average tangible equity to average tangible assets (1)			9.33				8.81				52				9.14				8.97				17
Annualized net charge-offs to average loans			3.74				3.07				67				2.12				3.17				(105	)
Allowance for credit losses as a percent of:
Period-end loans			1.57				1.60				(3	)
Nonaccrual loans excluding nonaccrual loans held for sale			64.57				32.85				3,172
Nonaccrual loans including nonaccrual loans held for sale			45.63				32.85				1,278
Nonperforming assets excluding nonaccrual loans held for sale			48.53				24.66				2,387
Nonperforming assets including nonaccrual loans held for sale			36.99				24.66				1,233
Accruing TDRs excluding TDRs held for sale			38.39				25.51				1,288
Accruing TDRs including TDRs held for sale			25.52				25.51				1
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			21.43				12.54				889
Nonperforming assets and accruing TDRs including nonaccrual loans and
TDRs held for sale			15.10				12.54				256
As a percent of total loans:
Nonaccrual loans excluding nonaccrual loans held for sale			2.44				4.88				(244	)
Accruing TDRs excluding TDRs held for sale			4.10				6.29				(219	)
Nonaccrual loans and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			6.53				11.17				(464	)
As a percent of total loans+other real estate owned:
Nonperforming assets excluding nonaccrual loans held for sale			3.21				6.43				(322	)
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			7.28				12.65				(537	)
As a percent of total assets:
Nonaccrual loans excluding nonaccrual loans held for sale			1.66				3.35				(169	)
Nonaccrual loans including nonaccrual loans held for sale			2.36				3.35				(99	)
Nonperforming assets excluding nonaccrual loans held for sale			2.21				4.46				(225	)
Nonperforming assets including nonaccrual loans held for sale			2.91				4.46				(155	)
Accruing TDRs excluding TDRs held for sale			2.80				4.31				(151	)
Accruing TDRs including TDRs held for sale			4.21				4.31				(10	)
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			5.01				8.77				(376	)
Nonperforming assets and accruing TDRs including nonaccrual loans and
TDRs held for sale			7.12				8.77				(165	)
(1)  See the reconciliation table on page 13 of 13.

 

 

Shore Bancshares, Inc.		Page 6 of 13
Consolidated Balance Sheets
(In thousands, except per share data)

 

														September 30, 2013				September 30, 2013
		September 30,				December 31,				September 30,				compared to				compared to
		2013				2012				2012				December 31, 2012				September 30, 2012
ASSETS
Cash and due from banks		$	26,133			$	26,579			$	22,005				(1.7	)%			18.8	%
Interest-bearing deposits with other banks			79,165				164,864				138,422				(52.0	)			(42.8	)
Federal funds sold			1,624				8,750				23,021				(81.4	)			(92.9	)
Investments available for sale (at fair value)			135,862				145,508				126,372				(6.6	)			7.5
Investments held to maturity			2,357				2,657				4,075				(11.3	)			(42.2	)
Loans held for sale			23,635				-				-				-				-
Loans			718,627				785,082				808,030				(8.5	)			(11.1	)
Less: allowance for credit losses			(11,301	)			(15,991	)			(12,955	)			(29.3	)			(12.8	)
Loans, net			707,326				769,091				795,075				(8.0	)			(11.0	)
Premises and equipment, net			15,175				15,593				15,537				(2.7	)			(2.3	)
Goodwill			12,454				12,454				12,454				-				-
Other intangible assets, net			3,594				3,816				3,890				(5.8	)			(7.6	)
Other real estate owned, net			5,776				7,659				8,418				(24.6	)			(31.4	)
Other assets			38,283				28,836				29,364				32.8				30.4
Total assets		$	1,051,384			$	1,185,807			$	1,178,633				(11.3	)			(10.8	)
LIABILITIES
Noninterest-bearing deposits		$	166,225			$	153,992			$	156,579				7.9				6.2
Interest-bearing deposits			764,188				895,281				881,935				(14.6	)			(13.4	)
Total deposits			930,413				1,049,273				1,038,514				(11.3	)			(10.4	)
Short-term borrowings			11,468				13,761				13,079				(16.7	)			(12.3	)
Accrued expenses and other liabilities			7,502				8,747				8,422				(14.2	)			(10.9	)
Long-term debt			-				-				455				-				(100.0	)
Total liabilities			949,383				1,071,781				1,060,470				(11.4	)			(10.5	)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares			85				85				85				-				-
Additional paid in capital			32,187				32,155				32,120				0.1				0.2
Retained earnings			70,269				81,078				86,152				(13.3	)			(18.4	)
Accumulated other comprehensive (loss) income			(540	)			708				(194	)			(176.3	)			(178.4	)
Total stockholders' equity			102,001				114,026				118,163				(10.5	)			(13.7	)
Total liabilities and stockholders' equity		$	1,051,384			$	1,185,807			$	1,178,633				(11.3	)			(10.8	)
Period-end common shares outstanding			8,461				8,457				8,457				-				-
Book value per common share		$	12.06			$	13.48			$	13.97				(10.5	)			(13.7	)

 

  

Shore Bancshares, Inc.		Page 7 of 13
Consolidated Statements of Operations
(In thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,												September 30,
		2013				2012				% Change				2013				2012				% Change
INTEREST INCOME
Interest and fees on loans		$	9,767			$	10,604				(7.9	)%		$	29,816			$	32,505				(8.3	)%
Interest and dividends on investment securities:
Taxable			357				685				(47.9	)			1,568				2,149				(27.0	)
Tax-exempt			5				22				(77.3	)			14				92				(84.8	)
Interest on federal funds sold			-				3				(100.0	)			3				7				(57.1	)
Interest on deposits with other banks			53				79				(32.9	)			143				188				(23.9	)
Total interest income			10,182				11,393				(10.6	)			31,544				34,941				(9.7	)
INTEREST EXPENSE
Interest on deposits			1,348				2,647				(49.1	)			5,218				7,931				(34.2	)
Interest on short-term borrowings			6				10				(40.0	)			20				36				(44.4	)
Interest on long-term debt			-				6				(100.0	)			-				16				(100.0	)
Total interest expense			1,354				2,663				(49.2	)			5,238				7,983				(34.4	)
NET INTEREST INCOME			8,828				8,730				1.1				26,306				26,958				(2.4	)
Provision for credit losses			2,850				6,200				(54.0	)			7,700				18,095				(57.4	)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			5,978				2,530				136.3				18,606				8,863				109.9
NONINTEREST INCOME
Service charges on deposit accounts			600				628				(4.5	)			1,772				1,898				(6.6	)
Trust and investment fee income			401				410				(2.2	)			1,184				1,279				(7.4	)
Investment securities gains			-				278				(100.0	)			913				278				228.4
Insurance agency commissions			2,724				2,427				12.2				8,170				7,522				8.6
Loss on termination of cash flow hedge			-				-				-				(1,306	)			-				-
Loss on asset sale			(19,792	)			-				-				(19,792	)			-				-
Other noninterest income			1,067				258				313.6				2,511				2,175				15.4
Total noninterest income			(15,000	)			4,001				(474.9	)			(6,548	)			13,152				(149.8	)
NONINTEREST EXPENSE
Salaries and wages			4,420				4,386				0.8				13,010				13,178				(1.3	)
Employee benefits			971				945				2.8				3,111				3,071				1.3
Occupancy expense			566				625				(9.4	)			1,775				1,950				(9.0	)
Furniture and equipment expense			275				265				3.8				768				728				5.5
Data processing			718				703				2.1				2,127				2,063				3.1
Directors' fees			86				131				(34.4	)			262				367				(28.6	)
Amortization of intangible assets			74				96				(22.9	)			222				318				(30.2	)
Insurance agency commissions expense			409				275				48.7				1,328				1,004				32.3
FDIC insurance premium expense			467				376				24.2				1,200				993				20.8
Write-downs of other real estate owned			37				224				(83.5	)			765				1,077				(29.0	)
Other noninterest expenses			1,763				1,683				4.8				5,468				5,121				6.8
Total noninterest expense			9,786				9,709				0.8				30,036				29,870				0.6
Loss before income tax benefit			(18,808	)			(3,178	)			(491.8	)			(17,978	)			(7,855	)			(128.9	)
Income tax benefit			(7,416	)			(1,357	)			(446.5	)			(7,169	)			(3,291	)			(117.8	)
NET LOSS		$	(11,392	)		$	(1,821	)			(525.6	)		$	(10,809	)		$	(4,564	)			(136.8	)
Weighted average shares outstanding - basic			8,461				8,457				-				8,460				8,457				-
Weighted average shares outstanding - diluted			8,472				8,457				0.2				8,463				8,457				0.1
Basic net loss per common share		$	(1.35	)		$	(0.22	)			(513.6	)		$	(1.28	)		$	(0.54	)			(137.0	)
Diluted net loss per common share			(1.35	)			(0.22	)			(513.6	)			(1.28	)			(0.54	)			(137.0	)
Dividends paid per common share			-				-				-				-				0.01				(100.0	)

 

 

 

Shore Bancshares, Inc.		Page 8 of 13
Consolidated Average Balance Sheets
(Dollars in thousands)

 

		For the Three Months Ended																For the Nine Months Ended
		September 30,																September 30,
		2013								2012								2013								2012
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans		$	772,008				5.03	%		$	808,244				5.23	%		$	780,359				5.12	%		$	819,088				5.31	%
Investment securities
Taxable			123,499				1.15				135,257				2.01				136,680				1.53				131,863				2.18
Tax-exempt			521				5.27				2,614				5.07				560				4.97				3,548				5.27
Federal funds sold			1,618				0.07				11,971				0.11				4,241				0.10				10,992				0.09
Interest-bearing deposits			95,422				0.22				150,170				0.21				92,403				0.21				128,756				0.19
Total earning assets			993,068				4.08	%			1,108,256				4.10	%			1,014,243				4.17	%			1,094,247				4.28	%
Cash and due from banks			22,088								20,158								23,177								19,920
Other assets			65,001								69,921								67,036								69,514
Allowance for credit losses			(15,238	)							(14,189	)							(16,306	)							(14,523	)
Total assets		$	1,064,919							$	1,184,146							$	1,088,150							$	1,169,158
Interest-bearing liabilities
Demand deposits		$	172,143				0.16	%		$	167,423				0.18	%		$	169,476				0.16	%		$	157,835				0.18	%
Money market and savings deposits (1)			207,162				0.12				279,003				1.19				225,351				0.61				278,297				1.16
Certificates of deposit $100,000 or more			198,495				1.23				238,624				1.46				206,076				1.31				240,595				1.46
Other time deposits			192,878				1.24				207,547				1.66				197,201				1.34				204,789				1.74
Interest-bearing deposits			770,678				0.69				892,597				1.18				798,104				0.87				881,516				1.20
Short-term borrowings			10,695				0.23				14,909				0.27				11,140				0.25				15,448				0.31
Long-term debt			-				-				455				4.58				-				-				455				4.61
Total interest-bearing liabilities			781,373				0.69	%			907,961				1.17	%			809,244				0.87	%			897,419				1.19	%
Noninterest-bearing deposits			162,189								148,096								156,286								142,874
Accrued expenses and other liabilities			7,453								8,768								8,500								8,949
Stockholders' equity			113,904								119,321								114,120								119,916
Total liabilities and stockholders' equity		$	1,064,919							$	1,184,146							$	1,088,150							$	1,169,158
Net interest spread							3.39	%							2.93	%							3.30	%							3.09	%
Net interest margin							3.54	%							3.15	%							3.48	%							3.31	%

 

(1)

Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them.  This adjustment increased interest expense $0 and $524 thousand for the third quarter of 2013 and 2012, respectively, and $695 thousand and $1.5 million for the first nine months of 2013 and 2012, respectively.  The interest rate caps were terminated in June of 2013.

 

 

Shore Bancshares, Inc.		Page 9 of 13
Financial Highlights By Quarter
(Dollars in thousands, except per share data)

 

		3rd quarter				2nd quarter				1st quarter				4th quarter				3rd quarter				3Q 13				3Q 13
		2013				2013				2013				2012				2012				compared to				compared to
		(3Q 13)				(2Q 13)				(1Q 13)				(4Q 12)				(3Q 12)				2Q 13				3Q 12
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income		$	8,852			$	9,028			$	8,504			$	8,413			$	8,769				(1.9	)%			0.9	%
Less:  Taxable-equivalent adjustment			24				27				27				32				39				(11.1	)			(38.5	)
Net interest income			8,828				9,001				8,477				8,381				8,730				(1.9	)			1.1
Provision for credit losses			2,850				2,700				2,150				9,650				6,200				5.6				(54.0	)
Noninterest income			(15,000	)			3,962				4,490				2,606				4,001				(478.6	)			(474.9	)
Noninterest expense			9,786				9,759				10,491				9,685				9,709				0.3				0.8
(Loss) income before income taxes			(18,808	)			504				326				(8,348	)			(3,178	)			(3,831.7	)			(491.8	)
Income tax (benefit) expense			(7,416	)			143				104				(3,274	)			(1,357	)			(5,286.0	)			(446.5	)
Net (loss) income		$	(11,392	)		$	361			$	222			$	(5,074	)		$	(1,821	)			(3,255.7	)			(525.6	)
Return on average assets			(4.24	)%			0.13	%			0.08	%			(1.71	)%			(0.61	)%			(437	)bp			(363	)bp
Return on average equity			(39.68	)			1.27				0.79				(17.15	)			(6.07	)			(4,095	)			(3,361	)
Return on average tangible equity (1)			(46.03	)			1.66				1.11				(19.73	)			(6.82	)			(4,769	)			(3,921	)
Net interest margin			3.54				3.60				3.30				3.02				3.15				(6	)			39
Efficiency ratio - GAAP			(159.17	)			75.13				80.74				87.89				76.03				(23,430	)			(23,520	)
Efficiency ratio - Non-GAAP (1)			71.18				74.45				80.17				77.77				76.95				(327	)			(577	)
PER SHARE DATA
Basic net (loss) income per common share		$	(1.35	)		$	0.04			$	0.03			$	(0.60	)		$	(0.22	)			(3,475.0	)%			(513.6	)%
Diluted net (loss) income per common share			(1.35	)			0.04				0.03				(0.60	)			(0.22	)			(3,475.0	)			(513.6	)
Dividends paid per common share			-				-				-				-				-				-				-
Book value per common share at period end			12.06				13.43				13.51				13.48				13.97				(10.2	)			(13.7	)
Tangible book value per common share at period end (1)			10.16				11.52				11.60				11.56				12.04				(11.8	)			(15.6	)
Market value at period end			8.80				7.36				6.79				5.39				6.02				19.6				46.2
Market range:
High			9.06				7.75				6.91				6.98				6.33				16.9				43.1
Low			7.06				5.97				5.20				4.65				4.98				18.3				41.8
AVERAGE BALANCE SHEET DATA
Loans		$	772,008			$	785,442			$	783,757			$	799,512			$	808,244				(1.7	)%			(4.5	)%
Securities			124,020				141,193				146,756				144,459				137,871				(12.2	)			(10.0	)
Earning assets			993,068				1,005,474				1,044,755				1,108,585				1,108,256				(1.2	)			(10.4	)
Assets			1,064,919				1,077,852				1,122,310				1,183,135				1,184,146				(1.2	)			(10.1	)
Deposits			932,867				943,577				987,325				1,042,842				1,040,693				(1.1	)			(10.4	)
Stockholders' equity			113,904				114,208				114,250				117,700				119,321				(0.3	)			(4.5	)
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs		$	7,272			$	2,712			$	2,406			$	6,614			$	6,235				168.1	%			16.6	%
Nonaccrual loans excluding nonaccrual loans held for sale		$	17,501			$	34,818			$	31,813			$	36,474			$	39,442				(49.7	)			(55.6	)
Loans 90 days past due and still accruing			9				3				22				460				4,675				200.0				(99.8	)
Other real estate owned			5,776				6,408				8,366				7,659				8,418				(9.9	)			(31.4	)
Total nonperforming assets excluding nonaccrual loans held for sale			23,286				41,229				40,201				44,593				52,535				(43.5	)			(55.7	)
Nonaccrual loans held for sale			7,265				-				-				-				-				-				-
Total nonperforming assets including nonaccrual loans held for sale		$	30,551			$	41,229			$	40,201			$	44,593			$	52,535				(25.9	)			(41.8	)
Accruing troubled debt restructurings (TDRs) excluding TDRs held for sale		$	29,439			$	50,278			$	52,545			$	52,353			$	50,785				(41.4	)			(42.0	)
Accruing TDRs held for sale			14,842				-				-				-				-				-				-
Total accruing TDRs including TDRs held for sale		$	44,281			$	50,278			$	52,545			$	52,353			$	50,785				(11.9	)			(12.8	)
Total nonperforming assets and accruing TDRs excluding nonaccrual
loans and TDRs held for sale		$	52,725			$	91,507			$	92,746			$	96,946			$	103,320				(42.4	)			(49.0	)
Nonaccrual loans and TDRs held for sale			22,107				-				-				-				-				-				-
Total nonperforming assets and accruing TDRs including nonaccrual
loans and TDRs held for sale		$	74,832			$	91,507			$	92,746			$	96,946			$	103,320				(18.2	)			(27.6	)
(1)  See the reconciliation table on page 13 of 13.

 

 

  

Shore Bancshares, Inc.		Page 10 of 13
Financial Highlights By Quarter
(Dollars in thousands, except per share data)

 

		3rd quarter				2nd quarter				1st quarter				4th quarter				3rd quarter				3Q 13				3Q 13
		2013				2013				2013				2012				2012				compared to				compared to
		(3Q 13)				(2Q 13)				(1Q 13)				(4Q 12)				(3Q 12)				2Q 13				3Q 12
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets			10.70	%			10.60	%			10.18	%			9.95	%			10.08	%			10	bp			62	bp
Average tangible equity to average tangible assets (1)			9.33				9.23				8.86				8.69				8.81				10				52
Annualized net charge-offs to average loans			3.74				1.38				1.25				3.29				3.07				236				67
Allowance for credit losses as a percent of:
Period-end loans			1.57				2.01				2.00				2.04				1.60				(44	)			(3	)
Nonaccrual loans excluding nonaccrual loans held for sale			64.57				45.16				49.46				43.84				32.85				1,941				3,172
Nonaccrual loans including nonaccrual loans held for sale			45.63				45.16				49.46				43.84				32.85				47				1,278
Nonperforming assets excluding nonaccrual loans held for sale			48.53				38.14				39.14				35.86				24.66				1,039				2,387
Nonperforming assets including nonaccrual loans held for sale			36.99				38.14				39.14				35.86				24.66				(115	)			1,233
Accruing TDRs excluding TDRs held for sale			38.39				31.27				29.95				30.54				25.51				712				1,288
Accruing TDRs including TDRs held for sale			25.52				31.27				29.95				30.54				25.51				(575	)			1
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			21.43				17.18				16.97				16.49				12.54				425				889
Nonperforming assets and accruing TDRs including nonaccrual loans and
TDRs held for sale			15.10				17.18				16.97				16.49				12.54				(208	)			256
As a percent of total loans:
Nonaccrual loans excluding nonaccrual loans held for sale			2.44				4.45				4.05				4.65				4.88				(201	)			(244	)
Accruing TDRs excluding TDRs held for sale			4.10				6.43				6.69				6.67				6.29				(233	)			(219	)
Nonaccrual loans and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			6.53				10.88				10.74				11.31				11.17				(435	)			(464	)
As a percent of total loans+other real estate owned:
Nonperforming assets excluding nonaccrual loans held for sale			3.21				5.23				5.06				5.63				6.43				(202	)			(322	)
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			7.28				11.60				11.68				12.23				12.65				(432	)			(537	)
As a percent of total assets:
Nonaccrual loans excluding nonaccrual loans held for sale			1.66				3.30				2.88				3.08				3.35				(164	)			(169	)
Nonaccrual loans including nonaccrual loans held for sale			2.36				3.30				2.88				3.08				3.35				(94	)			(99	)
Nonperforming assets excluding nonaccrual loans held for sale			2.21				3.91				3.64				3.76				4.46				(170	)			(225	)
Nonperforming assets including nonaccrual loans held for sale			2.91				3.91				3.64				3.76				4.46				(100	)			(155	)
Accruing TDRs excluding TDRs held for sale			2.80				4.77				4.76				4.41				4.31				(197	)			(151	)
Accruing TDRs including TDRs held for sale			4.21				4.77				4.76				4.41				4.31				(56	)			(10	)
Nonperforming assets and accruing TDRs excluding nonaccrual loans and
TDRs held for sale			5.01				8.68				8.40				8.18				8.77				(367	)			(376	)
Nonperforming assets and accruing TDRs including nonaccrual loans and
TDRs held for sale			7.12				8.68				8.40				8.18				8.77				(156	)			(165	)
(1)  See the reconciliation table on page 13 of 13.

 

 

Shore Bancshares, Inc.		Page 11 of 13
Consolidated Statements of Operations By Quarter
(In thousands, except per share data)

 

																						3Q 13				3Q 13
																						compared to				compared to
		3Q 13				2Q 13				1Q 13				4Q 12				3Q 12				2Q 13				3Q 12
INTEREST INCOME
Interest and fees on loans		$	9,767			$	10,142			$	9,907			$	10,193			$	10,604				(3.7	)%			(7.9	)%
Interest and dividends on investment securities:
Taxable			357				568				643				666				685				(37.1	)			(47.9	)
Tax-exempt			5				4				5				12				22				25.0				(77.3	)
Interest on federal funds sold			-				1				2				3				3				(100.0	)			(100.0	)
Interest on deposits with other banks			53				40				50				86				79				32.5				(32.9	)
Total interest income			10,182				10,755				10,607				10,960				11,393				(5.3	)			(10.6	)
INTEREST EXPENSE
Interest on deposits			1,348				1,748				2,122				2,570				2,647				(22.9	)			(49.1	)
Interest on short-term borrowings			6				6				8				9				10				-				(40.0	)
Interest on long-term debt			-				-				-				-				6				-				(100.0	)
Total interest expense			1,354				1,754				2,130				2,579				2,663				(22.8	)			(49.2	)
NET INTEREST INCOME			8,828				9,001				8,477				8,381				8,730				(1.9	)			1.1
Provision for credit losses			2,850				2,700				2,150				9,650				6,200				5.6				(54.0	)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			5,978				6,301				6,327				(1,269	)			2,530				(5.1	)			136.3
NONINTEREST INCOME
Service charges on deposit accounts			600				600				572				653				628				-				(4.5	)
Trust and investment fee income			401				393				390				365				410				2.0				(2.2	)
Investment securities gains			-				913				-				-				278				(100.0	)			(100.0	)
Insurance agency commissions			2,724				2,633				2,813				2,292				2,427				3.5				12.2
Loss on termination of cash flow hedge			-				(1,306	)			-				(1,339	)			-				(100.0	)			-
Loss on asset sale			(19,792	)			-				-				-				-				-				-
Other noninterest income			1,067				729				715				635				258				46.4				313.6
Total noninterest income			(15,000	)			3,962				4,490				2,606				4,001				(478.6	)			(474.9	)
NONINTEREST EXPENSE
Salaries and wages			4,420				4,307				4,283				4,240				4,386				2.6				0.8
Employee benefits			971				1,006				1,134				923				945				(3.5	)			2.8
Occupancy expense			566				612				597				609				625				(7.5	)			(9.4	)
Furniture and equipment expense			275				243				250				235				265				13.2				3.8
Data processing			718				706				703				654				703				1.7				2.1
Directors' fees			86				55				121				107				131				56.4				(34.4	)
Amortization of intangible assets			74				74				74				74				96				-				(22.9	)
Insurance agency commissions expense			409				458				461				387				275				(10.7	)			48.7
FDIC insurance premium expense			467				367				366				387				376				27.2				24.2
Write-downs of other real estate owned			37				56				672				251				224				(33.9	)			(83.5	)
Other noninterest expenses			1,763				1,875				1,830				1,818				1,683				(6.0	)			4.8
Total noninterest expense			9,786				9,759				10,491				9,685				9,709				0.3				0.8
(Loss) income before income taxes			(18,808	)			504				326				(8,348	)			(3,178	)			(3,831.7	)			(491.8	)
Income tax (benefit) expense			(7,416	)			143				104				(3,274	)			(1,357	)			(5,286.0	)			(446.5	)
NET (LOSS) INCOME		$	(11,392	)		$	361			$	222			$	(5,074	)		$	(1,821	)			(3,255.7	)			(525.6	)
Weighted average shares outstanding - basic			8,461				8,461				8,458				8,457				8,457				-				-
Weighted average shares outstanding - diluted			8,472				8,465				8,458				8,457				8,457				0.1				0.2
Basic net (loss) income per common share		$	(1.35	)		$	0.04			$	0.03			$	(0.60	)		$	(0.22	)			(3,475.0	)			(513.6	)
Diluted net (loss) income per common share			(1.35	)			0.04				0.03				(0.60	)			(0.22	)			(3,475.0	)			(513.6	)
Dividends paid per common share			-				-				-				-				-				-				-

 

  

 

Shore Bancshares, Inc.		Page 12 of 13
Consolidated Average Balance Sheets By Quarter
(Dollars in thousands)

 

																																										Average balance
																																										3Q 13				3Q 13
																																										compared to				compared to
		3Q 13								2Q 13								1Q 13								4Q 12								3Q 12								2Q 13				3Q 12
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans		$	772,008				5.03	%		$	785,442				5.19	%		$	783,757				5.14	%		$	799,512				5.09	%		$	808,244				5.23	%			(1.7	)%			(4.5	)%
Investment securities
Taxable			123,499				1.15				140,614				1.62				146,176				1.78				143,137				1.85				135,257				2.01				(12.2	)			(8.7	)
Tax-exempt			521				5.27				579				4.81				580				4.85				1,322				5.05				2,614				5.07				(10.0	)			(80.1	)
Federal funds sold			1,618				0.07				2,992				0.10				8,184				0.11				7,782				0.12				11,971				0.11				(45.9	)			(86.5	)
Interest-bearing deposits			95,422				0.22				75,847				0.21				106,058				0.19				156,832				0.22				150,170				0.21				25.8				(36.5	)
Total earning assets			993,068				4.08	%			1,005,474				4.30	%			1,044,755				4.13	%			1,108,585				3.94	%			1,108,256				4.10	%			(1.2	)			(10.4	)
Cash and due from banks			22,088								22,510								24,966								21,258								20,158								(1.9	)			9.6
Other assets			65,001								66,967								69,185								67,596								69,921								(2.9	)			(7.0	)
Allowance for credit losses			(15,238	)							(17,099	)							(16,596	)							(14,304	)							(14,189	)							(10.9	)			7.4
Total assets		$	1,064,919							$	1,077,852							$	1,122,310							$	1,183,135							$	1,184,146								(1.2	)			(10.1	)
Interest-bearing liabilities
Demand deposits		$	172,143				0.16	%		$	162,589				0.15	%		$	173,714				0.17	%		$	169,398				0.18	%		$	167,423				0.18	%			5.9				2.8
Money market and savings deposits (1)			207,162				0.12				225,117				0.67				244,182				0.97				281,593				1.21				279,003				1.19				(8.0	)			(25.7	)
Certificates of deposit $100,000 or more			198,495				1.23				203,641				1.32				216,288				1.39				231,232				1.40				238,624				1.46				(2.5	)			(16.8	)
Other time deposits			192,878				1.24				197,644				1.30				201,171				1.47				204,213				1.59				207,547				1.66				(2.4	)			(7.1	)
Interest-bearing deposits			770,678				0.69				788,991				0.89				835,355				1.03				886,436				1.15				892,597				1.18				(2.3	)			(13.7	)
Short-term borrowings			10,695				0.23				10,752				0.24				11,987				0.27				13,573				0.27				14,909				0.27				(0.5	)			(28.3	)
Long-term debt			-				-				-				-				-				-				-				-				455				4.58				-				(100.0	)
Total interest-bearing liabilities			781,373				0.69	%			799,743				0.88	%			847,342				1.02	%			900,009				1.14	%			907,961				1.17	%			(2.3	)			(13.9	)
Noninterest-bearing deposits			162,189								154,586								151,970								156,406								148,096								4.9				9.5
Accrued expenses and other liabilities			7,453								9,315								8,748								9,020								8,768								(20.0	)			(15.0	)
Stockholders' equity			113,904								114,208								114,250								117,700								119,321								(0.3	)			(4.5	)
Total liabilities and stockholders' equity		$	1,064,919							$	1,077,852							$	1,122,310							$	1,183,135							$	1,184,146								(1.2	)			(10.1	)
Net interest spread							3.39	%							3.42	%							3.11	%							2.80	%							2.93	%
Net interest margin							3.54	%							3.60	%							3.30	%							3.02	%							3.15	%

  

(1)

Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense $0 for the third quarter of 2013, $279 thousand for the second quarter of 2013, $416 thousand for the first quarter of 2013, $552 thousand for the fourth quarter of 2012 and $524 thousand for the third quarter of 2012.  The interest rate caps were terminated in June of 2013.

 

 

Shore Bancshares, Inc.		Page 13 of 13
Reconciliation of Generally Accepted Accounting Principles (GAAP)
and Non-GAAP Measures
(In thousands, except per share data)

 

																						YTD				YTD
		3Q 13				2Q 13				1Q 13				4Q 12				3Q 12				09/30/2013				09/30/2012
The following reconciles return on average equity and return on
average tangible equity (Note 1):
Net (loss) income		$	(11,392	)		$	361			$	222			$	(5,074	)		$	(1,821	)		$	(10,809	)		$	(4,564	)
Net (loss) income - annualized (A)		$	(45,197	)		$	1,448			$	900			$	(20,186	)		$	(7,244	)		$	(14,452	)		$	(6,096	)
Net (loss) income, excluding net amortization of intangible assets		$	(11,347	)		$	406			$	267			$	(5,029	)		$	(1,763	)		$	(10,675	)		$	(4,371	)
Net (loss) income, excluding net amortization of intangible
assets - annualized (B)		$	(45,018	)		$	1,628			$	1,083			$	(20,007	)		$	(7,014	)		$	(14,272	)		$	(5,839	)
Average stockholders' equity (C)		$	113,904			$	114,208			$	114,250			$	117,700			$	119,321			$	114,120			$	119,916
Less:  Average goodwill and other intangible assets			(16,092	)			(16,166	)			(16,242	)			(16,313	)			(16,401	)			(16,166	)			(16,501	)
Average tangible equity (D)		$	97,812			$	98,042			$	98,008			$	101,387			$	102,920			$	97,954			$	103,415
Return on average equity (GAAP)  (A)/(C)			(39.68	)%			1.27	%			0.79	%			(17.15	)%			(6.07	)%			(12.66	)%			(5.08	)%
Return on average tangible equity (Non-GAAP)  (B)/(D)			(46.03	)%			1.66	%			1.11	%			(19.73	)%			(6.82	)%			(14.57	)%			(5.65	)%
The following reconciles GAAP efficiency ratio and non-GAAP
efficiency ratio (Note 2):
Noninterest expense (E)		$	9,786			$	9,759			$	10,491			$	9,685			$	9,709			$	30,036			$	29,870
Less:  Amortization of intangible assets			(74	)			(74	)			(74	)			(74	)			(96	)			(222	)			(318	)
Other nonrecurring adjustments			-				49				-				-				-				49				-
Adjusted noninterest expense (F)		$	9,712			$	9,734			$	10,417			$	9,611			$	9,613			$	29,863			$	29,552
Taxable-equivalent net interest income (G)		$	8,852			$	9,028			$	8,504			$	8,413			$	8,769			$	26,384			$	27,089
Nonrecurring adjustment			-				(308	)			-				-				-				(308	)			-
Taxable-equivalent net interest income excluding nonrecurring adjustment (H)		$	8,852			$	8,720			$	8,504			$	8,413			$	8,769			$	26,076			$	27,089
Noninterest income (I)		$	(15,000	)		$	3,962			$	4,490			$	2,606			$	4,001			$	(6,548	)		$	13,152
Less:  Investment securities (gains)/losses			-				(913	)			-				-				(278	)			(913	)			(278	)
Other nonrecurring (gains)/losses			19,792				1,306				-				1,339				-				21,098				(217	)
Adjusted noninterest income (J)		$	4,792			$	4,355			$	4,490			$	3,945			$	3,723			$	13,637			$	12,657
Efficiency ratio (GAAP)  (E)/(G)+(I)			(159.17	)%			75.13	%			80.74	%			87.89	%			76.03	%			151.42	%			74.23	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)			71.18	%			74.45	%			80.17	%			77.77	%			76.95	%			75.20	%			74.35	%
The following reconciles book value per common share and tangible
book value per common share (Note 1):
Stockholders' equity (K)		$	102,001			$	113,594			$	114,348			$	114,026			$	118,163
Less:  Goodwill and other intangible assets			(16,048	)			(16,122	)			(16,196	)			(16,270	)			(16,344	)
Tangible equity (L)		$	85,953			$	97,472			$	98,152			$	97,756			$	101,819
Shares outstanding (M)			8,461				8,461				8,461				8,457				8,457
Book value per common share (GAAP)  (K)/(M)		$	12.06			$	13.43			$	13.51			$	13.48			$	13.97
Tangible book value per common share (Non-GAAP)  (L)/(M)		$	10.16			$	11.52			$	11.60			$	11.56			$	12.04
The following reconciles average equity to average assets and
average tangible equity to average tangible assets (Note 1):
Average stockholders' equity (N)		$	113,904			$	114,208			$	114,250			$	117,700			$	119,321			$	114,120			$	119,916
Less:  Average goodwill and other intangible assets			(16,092	)			(16,166	)			(16,242	)			(16,313	)			(16,401	)			(16,166	)			(16,501	)
Average tangible equity (O)		$	97,812			$	98,042			$	98,008			$	101,387			$	102,920			$	97,954			$	103,415
Average assets (P)		$	1,064,919			$	1,077,852			$	1,122,310			$	1,183,135			$	1,184,146			$	1,088,150			$	1,169,158
Less:  Average goodwill and other intangible assets			(16,092	)			(16,166	)			(16,242	)			(16,313	)			(16,401	)			(16,166	)			(16,501	)
Average tangible assets (Q)		$	1,048,827			$	1,061,686			$	1,106,068			$	1,166,822			$	1,167,745			$	1,071,984			$	1,152,657
Average equity/average assets (GAAP)  (N)/(P)			10.70	%			10.60	%			10.18	%			9.95	%			10.08	%			10.49	%			10.26	%
Average tangible equity/average tangible assets (Non-GAAP)  (O)/(Q)			9.33	%			9.23	%			8.86	%			8.69	%			8.81	%			9.14	%			8.97	%

 

Note 1:  Management believes that reporting tangible equity and tangible assets approximates 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.