Exhibit 99.1

 

 

 

28969 Information Lane

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports Second Quarter and First-Half Results

 

Easton, Maryland (7/21/2016) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $2.272 million or $0.18 per diluted common share for the second quarter of 2016, compared to net income of $2.460 million or $0.19 per diluted common share for the first quarter of 2016, and net income of $1.627 million or $0.13 per diluted common share for the second quarter of 2015. The Company reported net income of $4.732 million or $0.37 per diluted common share for the first half of 2016, compared to net income of $3.0 million or $0.24 per diluted common share for the first half of 2015.

 

When comparing the second quarter of 2016 to the first quarter of 2016, the slightly lower result was primarily attributable to slightly lower noninterest income due to insurance agency contingent commissions which are typically received in the first quarter of the year. The timing impact of these contingent commissions was partially offset by an increase in net interest income of $140 thousand over the linked quarter and a decrease in the provision for credit losses of $75 thousand. When comparing the second quarter of 2016 to the second quarter of 2015, improved results were due to increases in net interest income and noninterest income of $700 thousand and $253 thousand, respectively, and a decrease in the provision for credit losses of $165 thousand. When comparing the first half of 2016 to the first half of 2015, improved earnings were due to increases in net interest income and noninterest income of $1.4 million and $709 thousand, respectively, coupled with decreases in both the provision for credit losses of $365 thousand and noninterest expenses of $300 thousand.

 

“We are happy to report another strong quarter of earnings. In addition, we completed a successful consolidation of our two subsidiary banks, Talbot Bank of Easton and CNB, into Shore United Bank on July 1, 2016,” said Lloyd L. “Scott” Beatty, Jr., president and chief executive officer. “The second quarter results signified a continued emphasis on sustained loan growth and diversifying our loan portfolio. Further, the consolidation of the banks will allow us to execute our Company-wide branding and marketing plan, create efficiencies and cost savings, and enable us to expand our footprint in the Delmarva region.”

 

Balance Sheet Review

Total assets were $1.126 billion at June 30, 2016, a $9.5 million, or 0.8%, decrease when compared to $1.135 billion at the end of 2015. The decrease in total assets included decreases in investment securities available for sale of $16.5 million, interest-bearing deposits with other banks of $8.8 million and federal funds sold of $4.5 million which was almost entirely offset by an increase in gross loans of $26.0 million, or a 6.5% annualized loan growth rate for the period.

 

Total deposits decreased $14.4 million, or 1.5%, when compared to December 31, 2015. The decrease in total deposits was mainly due to declines in interest-bearing demand deposits of $25.5 million and time deposits of $10.3 million, which were partially offset by an increase in money market and savings deposits of $19.5 million and non-interest bearing deposits of $1.9 million. Total stockholders’ equity increased $5.4 million, or 3.6%, when compared to the end of 2015. At June 30, 2016, the ratio of total equity to total assets was 13.53% and the ratio of total tangible equity to total tangible assets was 12.52%, higher than the 12.95% and 11.93%, respectively, at December 31, 2015.

 

 

Total assets at June 30, 2016 increased $41.3 million, or 3.8%, when compared to total assets at June 30, 2015. The increase in total assets was primarily due to an increase in gross loans of $80.0 million, or 10.8%. The increase was partially offset by a decrease in investment securities available for sale of $32.5 million used to fund loan growth. Total deposits increased $32.2 million, or 3.5%, when compared to June 30, 2015. The increase in total deposits was mainly due to increases in non-interest bearing deposits of $27.9 million, money market and savings deposits of $25.8 million and interest-bearing demand deposits of $14.3 million, partially offset by a decrease in time deposits of $35.8 million. Total stockholders’ equity increased $8.9 million, or 6.2%, when compared to June 30, 2015.

 

Review of Quarterly Financial Results

Net interest income was $9.4 million for the second quarter of 2016, compared to $9.2 million for the first quarter of 2016 and $8.7 million for the second quarter of 2015. The increase in net interest income when compared to the first quarter of 2016 was primarily due to an increase in average loans of $16.5 million resulting in $156 thousand in additional interest and fees on loans, coupled with a decline in volume of and rates paid on interest-bearing deposits. The increase in net interest income for the second quarter of 2016 when compared to the second quarter of 2015 was primarily due to an increase in average loans of $79.4 million resulting in $536 thousand in additional interest and fees on loans, compounded by lower volumes of and rates paid on time deposits. In addition, the Company was able to change its asset composition by transitioning from lower yielding securities to higher yielding loans which positively impacted net interest income despite a decrease in the overall yield on loans. The Company’s net interest margin increased over each of these periods, amounting to 3.57% for the second quarter of 2016, 3.50% for the first quarter of 2016, and 3.43% for the second quarter of 2015.

 

The provision for credit losses was $375 thousand for the three months ended June 30, 2016. The comparable amounts were $450 thousand and $540 thousand for the three months ended March 31, 2016 and June 30, 2015, respectively. The lower level of provision for credit losses when comparing the second quarter of 2016 to the first quarter of 2016 was primarily due to declines in net charge-offs. The lower level of provision for credit losses when comparing the second quarter of 2016 to the second quarter of 2015 was primarily due to decreases in both net charge-offs and nonaccrual loans. Net charge-offs were $326 thousand for the second quarter of 2016, $457 thousand for the first quarter of 2016 and $421 thousand for the second quarter of 2015. The ratio of annualized net charge-offs to average loans was 0.16% for the second quarter of 2016, and 0.23% for each of the first quarter of 2016 and the second quarter of 2015. The ratio of the allowance for credit losses to period-end loans was 1.02% at June 30, 2016, lower than the 1.04% at March 31, 2016 and 1.07% at June 30, 2015, which reflects improved credit quality in the loan portfolio.

 

At June 30, 2016, nonperforming assets were $15.4 million, a decrease of $422 thousand, or 2.7%, when compared to March 31, 2016 and accruing troubled debt restructurings (“TDRs”) decreased $1.4 million, or 9.6% over the same time period. When comparing June 30, 2016 to June 30, 2015, nonperforming assets decreased $1.1 million, or 6.7%, and accruing TDRs decreased $5.0 million, or 27.3%. The positive trend in nonperforming assets and TDRs when comparing June 30, 2016 to June 30, 2015 resulted from the Company’s continued workout efforts. The ratio of nonperforming assets to total assets was 1.37%, 1.40% and 1.53% at June 30, 2016, March 31, 2016 and June 30, 2015, respectively. In addition, the ratio of accruing TDRs to total assets at June 30, 2016 was 1.18%, compared to 1.30% at March 31, 2016 and 1.69% at June 30, 2015.

 

 

Total noninterest income for the second quarter of 2016 decreased $500 thousand, or 11.0%, when compared to the first quarter of 2016 and increased $253 thousand, or 6.7%, when compared to the second quarter of 2015. The decrease from the first quarter of 2016 was primarily due to a decline in insurance agency commissions of $818 thousand which was partially offset by an increase in other noninterest income of $248 thousand. Insurance agency commissions for the second quarter of 2016 were lower when compared to the first quarter of 2016 due to the fact that contingency commission payments are typically received in the first quarter of the year. The increase in other noninterest income for the second quarter 2016 was income from an insurance investment of $124 thousand over the linked quarter. The increase from the second quarter of 2015 was mainly due to higher service charges on deposit accounts of $212 thousand, partially offset by a decline in trust and investment fee income of $86 thousand.

 

Total noninterest expense for the second quarter of 2016 increased $26 thousand, or 0.3%, when compared to the first quarter of 2016 and increased $65 thousand, or 0.7%, when compared to the second quarter of 2015. The increase in noninterest expenses from the first quarter of 2016 was primarily due to an increase in legal and professional fees in connection with the consolidation of our two former bank subsidiaries, The Talbot Bank of Easton and CNB. Offsetting this increase were decreases in salaries and wages and employee benefits which are typically higher in the first quarter of 2016 due to maxing out certain payroll taxes, federal and state unemployment insurance, and 401(k) contributions. The increase compared to the second quarter of 2015 was primarily the result of slightly higher employee related costs and legal and professional fees.

 

Review of Six-Month Financial Results

Net interest income for the first six months of 2016 was $18.6 million, an increase of 8.2% when compared to the first six months of 2015. The increase was primarily due to significant growth of average loans of approximately $77.7 million and the decline in average interest-bearing deposits of $978 thousand. Although the yield declined on loans, the transition of lower yielding investment securities to loans allowed the overall yield on total earning assets to remain unchanged. This, coupled with the decline on volume of and rates paid on deposits, resulted in a net interest margin of 3.53% for the first six months of 2016 compared to 3.43% for the first six months of 2015.

 

The provision for credit losses for the six months ended June 30, 2016 and 2015 was $825 thousand and $1.2 million, respectively, while net charge-offs were $783 thousand and $968 thousand, respectively. The ratio of year-to-date annualized net charge-offs to average loans was 0.20% for the first half of 2016 and 0.27% for the first half of 2015.

 

Total noninterest income for the six months ended June 30, 2016 increased $709 thousand, or 9.0%, when compared to the same period in 2015. The increase in noninterest income primarily consists of increases in service charges on deposit accounts of $391 thousand, insurance agency commissions of $293 thousand and other noninterest income of $229 thousand, partially offset by a decline in trust and investment fee income of $204 thousand. The increase in other noninterest income consisted of bank service and loan fees of $136 thousand.

 

Total noninterest expense for the six months ended June 30, 2016 decreased $300 thousand, or 1.6%, when compared to the same period in 2015. The decrease was primarily due to a decline in legal and professional fees of $305 thousand and reduced FDIC insurance premiums of $140 thousand, partially offset by an increase in salaries and wages. The increased legal and professional fees in 2015 were the direct result of management outsourcing its internal audit function which resulted in significant implementation costs. In addition, the lower FDIC insurance premiums over the prior period are the direct result of the upgraded regulatory status and financial performance of The Talbot Bank of Easton in the second quarter of 2015.

 

 

Shore Bancshares Information

Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore.  It is the parent company of Shore United Bank; one retail insurance producer firm, The Avon-Dixon Agency, LLC (“Avon-Dixon”), with two specialty lines, Elliott Wilson Insurance (Trucking) and Jack Martin Associates (Marine); and an insurance premium finance company, Mubell Finance, LLC (“Mubell”).  Shore Bancshares Inc. engages in trust and wealth management services through Wye Financial & Trust, a division of Shore United Bank. Additional information is available at www.shorebancshares.com.

 

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

 

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

 

For further information contact: Edward Allen, Chief Financial Officer, 410-763-7800

 

 

 

 

Shore Bancshares, Inc.

Financial Highlights

(Dollars in thousands, except per share data)

 

		For the Three Months Ended												For the Six Months Ended
		June 30,												June 30,
		2016				2015				Change				2016				2015				Change
PROFITABILITY FOR THE PERIOD
Net interest income		$	9,383			$	8,683				8.1	%		$	18,626			$	17,222				8.2	%
Provision for credit losses			375				540				(30.6	)			825				1,190				(30.7	)
Noninterest income			4,041				3,788				6.7				8,582				7,873				9.0
Noninterest expense			9,365				9,300				0.7				18,704				19,004				(1.6	)
Income before income taxes			3,684				2,631				40.0				7,679				4,901				56.7
Income tax expense			1,412				1,004				40.6				2,947				1,865				58.0
Net income		$	2,272			$	1,627				39.6			$	4,732			$	3,036				55.9
Return on average assets			0.81	%			0.60	%			21	bp			0.84	%			0.56	%			28	bp
Return on average equity			6.04				4.56				148				6.34				4.29				205
Return on average tangible equity (1)			6.67				5.08				159				7.00				4.80				220
Net interest margin			3.57				3.43				14				3.53				3.43				10
Efficiency ratio - GAAP			69.60				74.47				(487	)			68.59				75.61				(702	)
Efficiency ratio - Non-GAAP (1)			69.35				74.20				(485	)			68.35				75.35				(700	)
PER SHARE DATA
Basic net income per common share		$	0.18			$	0.13				38.5	%		$	0.37			$	0.24				54.2	%
Diluted net income per common share			0.18				0.13				38.5				0.37				0.24				54.2
Dividends paid per common share			0.03				-				100.0				0.06				-				100.0
Book value per common share at period end			12.04				11.35				6.1
Tangible book value per common share at period end (1)			11.00				10.31				6.7
Market value at period end			11.75				9.43				24.6
Market range:
High			12.50				9.55				30.9				12.59				10.49				20.0
Low			10.23				9.43				8.5				10.23				8.57				19.4
AVERAGE BALANCE SHEET DATA
Loans		$	807,231			$	727,800				10.9	%		$	799,004			$	721,326				10.8	%
Investment securities			204,357				241,684				(15.4	)			209,672				242,985				(13.7	)
Earning assets			1,061,645				1,016,172				4.5				1,063,579				1,014,838				4.8
Assets			1,122,568				1,085,857				3.4				1,126,403				1,086,624				3.7
Deposits			959,397				931,637				3.0				964,194				932,045				3.4
Stockholders' equity			151,270				143,266				5.6				150,151				142,579				5.3
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs		$	326			$	421				(22.6	)%		$	783			$	968				(19.1	)%
Nonaccrual loans		$	13,531			$	14,009				(3.4	)
Loans 90 days past due and still accruing			6				35				(82.9	)
Other real estate owned			1,897				2,498				(24.1	)
Total nonperforming assets			15,434				16,542				(6.7	)
Accruing troubled debt restructurings (TDRs)			13,338				18,353				(27.3	)
Total nonperforming assets and accruing TDRs		$	28,772			$	34,895				(17.5	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			13.53	%			13.22	%			31	bp
Period-end tangible equity to tangible assets (1)			12.52				12.16				36
Annualized net charge-offs to average loans			0.16				0.23				(7	)			0.20	%			0.27	%			(7	)bp
Allowance for credit losses as a percent of:
Period-end loans			1.02				1.07				(5	)
Nonaccrual loans			61.77				56.51				526
Nonperforming assets			54.15				47.86				629
Accruing TDRs			62.66				43.14				1,952
Nonperforming assets and accruing TDRs			29.05				22.69				636
As a percent of total loans:
Nonaccrual loans			1.65				1.89				(24	)
Accruing TDRs			1.62				2.48				(86	)
Nonaccrual loans and accruing TDRs			3.27				4.37				(110	)
As a percent of total loans+other real estate owned:
Nonperforming assets			1.88				2.22				(34	)
Nonperforming assets and accruing TDRs			3.50				4.69				(119	)
As a percent of total assets:
Nonaccrual loans			1.20				1.29				(9	)
Nonperforming assets			1.37				1.53				(16	)
Accruing TDRs			1.18				1.69				(51	)
Nonperforming assets and accruing TDRs			2.55				3.22				(67	)

 

(1)

See the reconciliation table on page 12 of 12.

 

Shore Bancshares, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

														June 30, 2016				June 30, 2016
														compared to				compared to
		June 30,				December 31,				June 30,				December 31,				June 30,
		2016				2015				2015				2015				2015
ASSETS
Cash and due from banks		$	15,753			$	15,080			$	20,060				4.5	%			(21.5	)%
Interest-bearing deposits with other banks			45,455				54,223				39,696				(16.2	)			14.5
Federal funds sold			9				4,508				-				(99.8	)			-
Cash and cash equivalents			61,217				73,811				59,756				(17.1	)			2.4
Investment securities available for sale (at fair value)			195,681				212,165				228,210				(7.8	)			(14.3	)
Investment securities held to maturity			3,995				4,191				4,513				(4.7	)			(11.5	)
Loans			821,079				795,114				741,030				3.3				10.8
Less: allowance for credit losses			(8,358	)			(8,316	)			(7,917	)			0.5				5.6
Loans, net			812,721				786,798				733,113				3.3				10.9
Premises and equipment, net			16,708				16,864				16,801				(0.9	)			(0.6	)
Goodwill			11,931				11,931				11,931				-				-
Other intangible assets, net			1,145				1,211				1,264				(5.5	)			(9.4	)
Other real estate owned, net			1,897				4,252				2,498				(55.4	)			(24.1	)
Other assets			20,395				23,920				26,266				(14.7	)			(22.4	)
Total assets		$	1,125,690			$	1,135,143			$	1,084,352				(0.8	)			3.8
LIABILITIES
Noninterest-bearing deposits		$	231,614			$	229,686			$	203,678				0.8				13.7
Interest-bearing deposits			729,480				745,778				725,231				(2.2	)			0.6
Total deposits			961,094				975,464				928,909				(1.5	)			3.5
Short-term borrowings			6,868				6,672				6,629				2.9				3.6
Accrued expenses and other liabilities			5,407				6,040				5,412				(10.5	)			(0.1	)
Total liabilities			973,369				988,176				940,950				(1.5	)			3.4
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares			127				126				126				0.8				0.8
Additional paid in capital			63,995				63,815				63,725				0.3				0.4
Retained earnings			87,071				83,097				79,531				4.8				9.5
Accumulated other comprehensive (loss) income			1,128				(71	)			20				1,688.7				5,540.0
Total stockholders' equity			152,321				146,967				143,402				3.6				6.2
Total liabilities and stockholders' equity		$	1,125,690			$	1,135,143			$	1,084,352				(0.8	)			3.8
Period-end common shares outstanding			12,655				12,631				12,630				0.2				0.2
Book value per common share		$	12.04			$	11.64			$	11.35				3.4				6.1

 

Shore Bancshares, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

 

		For the Three Months Ended												For the Six Months Ended
		June 30,												June 30,
		2016				2015				% Change				2016				2015				% Change
INTEREST INCOME
Interest and fees on loans		$	9,117			$	8,581				6.2	%		$	18,078			$	17,072				5.9	%
Interest and dividends on investment securities:
Taxable			824				932				(11.6	)			1,694				1,856				(8.7	)
Tax-exempt			2				3				(33.3	)			4				6				(33.3	)
Interest on federal funds sold			2				-				-				5				1				400.0
Interest on deposits with other banks			58				26				123.1				130				52				150.0
Total interest income			10,003				9,542				4.8				19,911				18,987				4.9
INTEREST EXPENSE
Interest on deposits			617				856				(27.9	)			1,278				1,757				(27.3	)
Interest on short-term borrowings			3				3				-				7				8				(12.5	)
Total interest expense			620				859				(27.8	)			1,285				1,765				(27.2	)
NET INTEREST INCOME			9,383				8,683				8.1				18,626				17,222				8.2
Provision for credit losses			375				540				(30.6	)			825				1,190				(30.7	)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			9,008				8,143				10.6				17,801				16,032				11.0
NONINTEREST INCOME
Service charges on deposit accounts			870				658				32.2				1,683				1,292				30.3
Trust and investment fee income			364				450				(19.1	)			715				919				(22.2	)
Insurance agency commissions			1,941				1,932				0.5				4,700				4,407				6.6
Other noninterest income			866				748				15.8				1,484				1,255				18.2
Total noninterest income			4,041				3,788				6.7				8,582				7,873				9.0
NONINTEREST EXPENSE
Salaries and wages			4,422				4,393				0.7				8,899				8,706				2.2
Employee benefits			964				924				4.3				2,078				2,080				(0.1	)
Occupancy expense			583				611				(4.6	)			1,196				1,237				(3.3	)
Furniture and equipment expense			248				233				6.4				483				488				(1.0	)
Data processing			854				868				(1.6	)			1,663				1,651				0.7
Directors' fees			131				116				12.9				235				239				(1.7	)
Amortization of intangible assets			33				33				-				66				66				-
FDIC insurance premium expense			268				306				(12.4	)			550				690				(20.3	)
Write-downs of other real estate owned			66				54				22.2				73				81				(9.9	)
Legal and professional fees			609				573				6.3				994				1,299				(23.5	)
Other noninterest expenses			1,187				1,189				(0.2	)			2,467				2,467				-
Total noninterest expense			9,365				9,300				0.7				18,704				19,004				(1.6	)
Income before income taxes			3,684				2,631				40.0				7,679				4,901				56.7
Income tax expense			1,412				1,004				40.6				2,947				1,865				58.0
NET INCOME		$	2,272			$	1,627				39.6			$	4,732			$	3,036				55.9
Weighted average shares outstanding - basic			12,648				12,629				0.2				12,642				12,627				0.1
Weighted average shares outstanding - diluted			12,665				12,638				0.2				12,657				12,636				0.2
Basic net income per common share		$	0.18			$	0.13				38.5			$	0.37			$	0.24				54.2
Diluted net income per common share			0.18				0.13				38.5				0.37				0.24				54.2
Dividends paid per common share			0.03				-				-				0.06				-				-

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets

(Dollars in thousands)

 

		For the Three Months Ended																For the Six Months Ended
		June 30,																June 30,
		2016								2015								2016								2015
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans		$	807,231				4.56	%		$	727,800				4.74	%		$	799,004				4.57	%		$	721,326				4.78	%
Investment securities
Taxable			204,147				1.61				241,254				1.55				209,462				1.62				242,554				1.53
Tax-exempt			210				5.30				430				4.21				210				5.30				431				4.20
Federal funds sold			2,910				0.34				2,931				0.09				3,275				0.34				2,866				0.09
Interest-bearing deposits			47,147				0.50				43,757				0.24				51,628				0.51				47,661				0.22
Total earning assets			1,061,645				3.80	%			1,016,172				3.77	%			1,063,579				3.78	%			1,014,838				3.78	%
Cash and due from banks			14,776								18,723								15,491								19,989
Other assets			54,699								59,045								55,868								59,823
Allowance for credit losses			(8,552	)							(8,083	)							(8,535	)							(8,026	)
Total assets		$	1,122,568							$	1,085,857							$	1,126,403							$	1,086,624
Interest-bearing liabilities
Demand deposits		$	186,137				0.12	%		$	171,274				0.12	%		$	189,612				0.12	%		$	174,156				0.12	%
Money market and savings deposits			261,495				0.13				238,173				0.14				260,105				0.13				237,965				0.14
Certificates of deposit $100,000 or more			129,544				0.69				152,478				0.97				130,978				0.70				154,306				0.99
Other time deposits			151,577				0.68				166,277				0.85				152,675				0.71				167,921				0.88
Interest-bearing deposits			728,753				0.34				728,202				0.47				733,370				0.35				734,348				0.48
Short-term borrowings			5,792				0.24				4,872				0.23				6,017				0.24				6,100				0.25
Total interest-bearing liabilities			734,545				0.34	%			733,074				0.47	%			739,387				0.35	%			740,448				0.48	%
Noninterest-bearing deposits			230,644								203,435								230,824								197,697
Accrued expenses and other liabilities			6,109								6,082								6,041								5,900
Stockholders' equity			151,270								143,266								150,151								142,579
Total liabilities and stockholders' equity		$	1,122,568							$	1,085,857							$	1,126,403							$	1,086,624
Net interest spread							3.46	%							3.30	%							3.43	%							3.30	%
Net interest margin							3.57	%							3.43	%							3.53	%							3.43	%

 

Shore Bancshares, Inc.

Financial Highlights By Quarter

(Dollars in thousands, except per share data)

 

		2nd quarter				1st quarter				4th quarter				3rd quarter				2nd quarter				2Q 16				2Q 16
		2016				2016				2015				2015				2015				compared to				compared to
		(2Q 16)				(1Q 16)				(4Q 15)				(3Q 15)				(2Q 15)				1Q 16				2Q 15
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income		$	9,415			$	9,273			$	9,315			$	9,027			$	8,701				1.5	%		8.2	%
Less:  Taxable-equivalent adjustment			32				30				22				17				18				6.7			77.8
Net interest income			9,383				9,243				9,293				9,010				8,683				1.5			8.1
Provision for credit losses			375				450				475				410				540				(16.7	)		(30.6	)
Noninterest income			4,041				4,541				3,638				3,905				3,788				(11.0	)		6.7
Noninterest expense			9,365				9,339				8,950				9,396				9,300				0.3			0.7
Income before income taxes			3,684				3,995				3,506				3,109				2,631				(7.8	)		40.0
Income tax expense			1,412				1,535				1,343				1,200				1,004				(8.0	)		40.6
Net income		$	2,272			$	2,460			$	2,163			$	1,909			$	1,627				(7.6	)		39.6
Return on average assets			0.81	%			0.88	%			0.76	%			0.68	%			0.60	%			(7	)bp		21	bp
Return on average equity			6.04				6.64				5.93				5.23				4.56				(60	)		148
Return on average tangible equity (1)			6.67				7.34				6.58				5.81				5.08				(67	)		159
Net interest margin			3.57				3.50				3.45				3.43				3.43				7			14
Efficiency ratio - GAAP			69.60				67.61				69.10				72.66				74.47				199			(487	)
Efficiency ratio - Non-GAAP (1)			69.35				67.37				68.84				72.39				74.20				198			(485	)
PER SHARE DATA
Basic net income per common share		$	0.18			$	0.19			$	0.17			$	0.15			$	0.13				(5.3	)%		38.5	%
Diluted net income per common share			0.18				0.19				0.17				0.15				0.13				(5.3	)		38.5
Dividends paid per common share			0.03				0.03				0.02				0.02				-				-			100.0
Book value per common share at period end			12.04				11.88				11.64				11.55				11.35				1.3			6.1
Tangible book value per common share at period end (1)			11.00				10.84				10.59				10.51				10.31				1.5			6.7
Market value at period end			11.75				11.98				10.88				9.72				9.43				(1.9	)		24.6
Market range:
High			12.50				12.08				11.00				9.72				9.55				3.5			30.9
Low			10.23				11.95				10.64				9.37				9.43				(14.4	)		8.5
AVERAGE BALANCE SHEET DATA
Loans		$	807,231			$	790,777			$	785,572			$	763,306			$	727,800				2.1	%		10.9	%
Investment securities			204,357				214,988				213,307				230,222				241,684				(4.9	)		(15.4	)
Earning assets			1,061,645				1,065,514				1,072,728				1,044,230				1,016,172				(0.4	)		4.5
Assets			1,122,568				1,130,238				1,137,430				1,111,361				1,085,857				(0.7	)		3.4
Deposits			959,397				968,991				978,049				953,826				931,637				(1.0	)		3.0
Stockholders' equity			151,270				149,032				146,597				144,897				143,266				1.5			5.6
CREDIT QUALITY DATA AT PERIOD END
Net charge-offs		$	326			$	457			$	257			$	229			$	421				(28.7	)%		(22.6	)%
Nonaccrual loans		$	13,531			$	11,925			$	12,093			$	13,143			$	14,009				13.5			(3.4	)
Loans 90 days past due and still accruing			6				35				7				4				35				(82.9	)		(82.9	)
Other real estate owned			1,897				3,896				4,252				2,884				2,498				(51.3	)		(24.1	)
Total nonperforming assets		$	15,434			$	15,856			$	16,352			$	16,031			$	16,542				(2.7	)		(6.7	)
Accruing troubled debt restructurings (TDRs)		$	13,338			$	14,753			$	15,495			$	16,431			$	18,353				(9.6	)		(27.3	)
Total nonperforming assets and accruing TDRs		$	28,772			$	30,609			$	31,847			$	32,462			$	34,895				(6.0	)		(17.5	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			13.53	%			13.27	%			12.95	%			13.05	%			13.22	%			26	bp		31	bp
Period-end tangible equity to tangible assets (1)			12.52				12.25				11.93				12.02				12.16				27			36
Annualized net charge-offs to average loans			0.16				0.23				0.13				0.12				0.23				(7	)		(7	)
Allowance for credit losses as a percent of:
Period-end loans			1.02				1.04				1.05				1.04				1.07				(2	)		(5	)
Nonaccrual loans			61.77				69.68				68.77				61.61				56.51				(791	)		526
Nonperforming assets			54.15				52.40				50.86				50.51				47.86				175			629
Accruing TDRs			62.66				56.32				53.67				49.28				43.14				634			1,952
Nonperforming assets and accruing TDRs			29.05				27.15				26.11				24.95				22.69				190			636
As a percent of total loans:
Nonaccrual loans			1.65				1.49				1.52				1.69				1.89				16			(24	)
Accruing TDRs			1.62				1.85				1.95				2.11				2.48				(23	)		(86	)
Nonaccrual loans and accruing TDRs			3.27				3.34				3.47				3.80				4.37				(7	)		(110	)
As a percent of total loans+other real estate owned:
Nonperforming assets			1.88				1.98				2.05				2.06				2.22				(10	)		(34	)
Nonperforming assets and accruing TDRs			3.50				3.81				3.98				4.16				4.69				(31	)		(119	)
As a percent of total assets:
Nonaccrual loans			1.20				1.05				1.07				1.18				1.29				15			(9	)
Nonperforming assets			1.37				1.40				1.44				1.43				1.53				(3	)		(16	)
Accruing TDRs			1.18				1.30				1.37				1.47				1.69				(12	)		(51	)
Nonperforming assets and accruing TDRs			2.55				2.70				2.81				2.90				3.22				(15	)		(67	)

 

(1)

See the reconciliation table on page 12 of 12.

Shore Bancshares, Inc.

Consolidated Statements of Operations By Quarter

(In thousands, except per share data)

 

																						2Q 16				2Q 16
																						compared to				compared to
		2Q 16				1Q 16				4Q 15				3Q 15				2Q 15				1Q 16				2Q 15
INTEREST INCOME
Interest and fees on loans		$	9,117			$	8,961			$	9,142			$	8,912			$	8,581				1.7	%			6.2	%
Interest and dividends on investment securities:
Taxable			824				870				854				892				932				(5.3	)			(11.6	)
Tax-exempt			2				2				2				2				3				-				(33.3	)
Interest on federal funds sold			2				3				1				1				-				(33.3	)			-
Interest on deposits with other banks			58				72				48				30				26				(19.4	)			123.1
Total interest income			10,003				9,908				10,047				9,837				9,542				1.0				4.8
INTEREST EXPENSE
Interest on deposits			617				661				750				824				856				(6.7	)			(27.9	)
Interest on short-term borrowings			3				4				4				3				3				(25.0	)			-
Total interest expense			620				665				754				827				859				(6.8	)			(27.8	)
NET INTEREST INCOME			9,383				9,243				9,293				9,010				8,683				1.5				8.1
Provision for credit losses			375				450				475				410				540				(16.7	)			(30.6	)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			9,008				8,793				8,818				8,600				8,143				2.4				10.6
NONINTEREST INCOME
Service charges on deposit accounts			870				813				806				769				658				7.0				32.2
Trust and investment fee income			364				351				348				360				450				3.7				(19.1	)
Other noninterest income			1,941				2,759				1,760				2,107				1,932				(29.6	)			0.5
Total noninterest income			866				618				724				669				748				40.1				15.8
			4,041				4,541				3,638				3,905				3,788				(11.0	)			6.7
NONINTEREST EXPENSE
Salaries and wages
Employee benefits			4,422				4,477				4,366				4,468				4,393				(1.2	)			0.7
Occupancy expense			964				1,114				890				935				924				(13.5	)			4.3
Furniture and equipment expense			583				613				583				600				611				(4.9	)			(4.6	)
Data processing			248				235				215				223				233				5.5				6.4
Directors' fees			854				809				809				800				868				5.6				(1.6	)
Amortization of intangible assets			131				104				114				117				116				26.0				12.9
FDIC insurance premium expense			33				33				33				34				33				-				-
Write-downs of other real estate owned			268				282				281				243				306				(5.0	)			(12.4	)
Legal and professional fees			66				7				39				7				54				842.9				22.2
Other noninterest expenses			609				385				440				642				573				58.2				6.3
Total noninterest expense			1,187				1,280				1,180				1,327				1,189				(7.3	)			(0.2	)
			9,365				9,339				8,950				9,396				9,300				0.3				0.7
Income before income taxes
Income tax expense			3,684				3,995				3,506				3,109				2,631				(7.8	)			40.0
			1,412				1,535				1,343				1,200				1,004				(8.0	)			40.6
NET INCOME
		$	2,272			$	2,460			$	2,163			$	1,909			$	1,627				(7.6	)			39.6
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted			12,648				12,635				12,631				12,630				12,629				0.1				0.2
			12,665				12,649				12,645				12,640				12,638				0.1				0.2
Basic net income per common share
Diluted net income per common share		$	0.18			$	0.19			$	0.17			$	0.15			$	0.13				(5.3	)			38.5
Dividends paid per common share			0.18				0.19				0.17				0.15				0.13				(5.3	)			38.5
			0.03				0.03				0.02				0.02				-				-				-

 

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

 

																																										Average balance
																																										2Q 16				2Q 16
																																										compared to				compared to
		2Q 16								1Q 16								4Q 15								3Q 15								2Q 15								1Q 16				2Q 15
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans		$	807,231				4.56	%		$	790,777				4.57	%		$	785,572				4.63	%		$	763,306				4.64	%		$	727,800				4.74	%			2.1	%			10.9	%
Investment securities
Taxable			204,147				1.61				214,778				1.62				213,097				1.60				229,979				1.55				241,254				1.55				(4.9	)			(15.4	)
Tax-exempt			210				5.30				210				5.30				210				5.30				243				5.01				430				4.21				-				(51.2	)
Federal funds sold			2,910				0.34				3,640				0.33				3,886				0.12				2,341				0.10				2,931				0.09				(20.1	)			(0.7	)
Interest-bearing deposits			47,147				0.50				56,109				0.51				69,963				0.27				48,361				0.25				43,757				0.24				(16.0	)			7.7
Total earning assets			1,061,645				3.80	%			1,065,514				3.75	%			1,072,728				3.72	%			1,044,230				3.74	%			1,016,172				3.77	%			(0.4	)			4.5
Cash and due from banks			14,776								16,205								16,628								17,434								18,723								(8.8	)			(21.1	)
Other assets			54,699								57,037								56,512								57,891								59,045								(4.1	)			(7.4	)
Allowance for credit losses			(8,552	)							(8,518	)							(8,438	)							(8,194	)							(8,083	)							0.4				5.8
Total assets		$	1,122,568							$	1,130,238							$	1,137,430							$	1,111,361							$	1,085,857								(0.7	)			3.4
Interest-bearing liabilities
Demand deposits		$	186,137				0.12	%		$	193,087				0.12	%		$	190,237				0.13	%		$	184,471				0.13	%		$	171,274				0.12	%			(3.6	)			8.7
Money market and savings deposits			261,495				0.13				258,715				0.13				255,974				0.14				242,830				0.14				238,173				0.14				1.1				9.8
Certificates of deposit $100,000 or more			129,544				0.69				132,412				0.71				139,663				0.80				148,617				0.92				152,478				0.97				(2.2	)			(15.0	)
Other time deposits			151,577				0.68				153,774				0.74				158,011				0.80				163,224				0.82				166,277				0.85				(1.4	)			(8.8	)
Interest-bearing deposits			728,753				0.34				737,988				0.36				743,885				0.40				739,142				0.44				728,202				0.47				(1.3	)			0.1
Short-term borrowings			5,792				0.24				6,242				0.24				6,199				0.23				6,501				0.24				4,872				0.23				(7.2	)			18.9
Total interest-bearing liabilities			734,545				0.34	%			744,230				0.36	%			750,084				0.40	%			745,643				0.44	%			733,074				0.47	%			(1.3	)			0.2
Noninterest-bearing deposits			230,644								231,003								234,164								214,684								203,435								(0.2	)			13.4
Accrued expenses and other liabilities			6,109								5,973								6,585								6,137								6,082								2.3				0.4
Stockholders' equity			151,270								149,032								146,597								144,897								143,266								1.5				5.6
Total liabilities and stockholders' equity		$	1,122,568							$	1,130,238							$	1,137,430							$	1,111,361							$	1,085,857								(0.7	)			3.4
Net interest spread							3.46	%							3.39	%							3.32	%							3.30	%							3.30	%
Net interest margin							3.57	%							3.50	%							3.45	%							3.43	%							3.43	%

 

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures

(In thousands, except per share data)

 

																						YTD				YTD
		2Q 16				1Q 16				4Q 15				3Q 15				2Q 15				6/30/2016				6/30/2015
The following reconciles return on average equity and return on
average tangible equity (Note 1):
Net income		$	2,272			$	2,460			$	2,163			$	1,909			$	1,627			$	4,732			$	3,036
Net income - annualized (A)		$	9,138			$	9,894			$	8,581			$	7,574			$	6,526			$	9,516			$	6,122
Net income, excluding net amortization of intangible assets		$	2,292			$	2,480			$	2,183			$	1,930			$	1,647			$	4,772			$	3,076
Net income, excluding net amortization of intangible
assets - annualized (B)		$	9,218			$	9,975			$	8,661			$	7,657			$	6,606			$	9,596			$	6,203
Average stockholders' equity (C)		$	151,270			$	149,032			$	146,597			$	144,897			$	143,266			$	150,151			$	142,579
Less:  Average goodwill and other intangible assets			(13,096	)			(13,129	)			(13,155	)			(13,182	)			(13,215	)			(13,112	)			(13,231	)
Average tangible equity (D)		$	138,174			$	135,903			$	133,442			$	131,715			$	130,051			$	137,039			$	129,348
Return on average equity (GAAP)  (A)/(C)			6.04	%			6.64	%			5.85	%			5.23	%			4.56	%			6.34	%			4.29	%
Return on average tangible equity (Non-GAAP)  (B)/(D)			6.67	%			7.34	%			6.49	%			5.81	%			5.08	%			7.00	%			4.80	%
The following reconciles GAAP efficiency ratio and non-GAAP
efficiency ratio (Note 2):
Noninterest expense (E)		$	9,365			$	9,339			$	8,950			$	9,396			$	9,300			$	18,704			$	19,004
Less:  Amortization of intangible assets			(33	)			(33	)			(33	)			(34	)			(33	)			(66	)			(66	)
Adjusted noninterest expense (F)		$	9,332			$	9,306			$	8,917			$	9,362			$	9,267			$	18,638			$	18,938
Taxable-equivalent net interest income (G)		$	9,415			$	9,273			$	9,315			$	9,027			$	8,701			$	18,688			$	17,261
Taxable-equivalent net interest income excluding nonrecurring adjustment (H)		$	9,415			$	9,273			$	9,315			$	9,027			$	8,701			$	18,688			$	17,261
Noninterest income (I)		$	4,041			$	4,541			$	3,638			$	3,905			$	3,788			$	8,582			$	7,873
Adjusted noninterest income (J)		$	4,041			$	4,541			$	3,638			$	3,905			$	3,788			$	8,582			$	7,873
Efficiency ratio (GAAP)  (E)/(G)+(I)			69.60	%			67.61	%			69.10	%			72.66	%			74.47	%			68.59	%			75.61	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)			69.35	%			67.37	%			68.84	%			72.39	%			74.20	%			68.35	%			75.35	%
The following reconciles book value per common share and tangible
book value per common share (Note 1):
Stockholders' equity (K)		$	152,321			$	150,109			$	146,967			$	145,887			$	143,402
Less:  Goodwill and other intangible assets			(13,076	)			(13,109	)			(13,142	)			(13,162	)			(13,195	)
Tangible equity (L)		$	139,245			$	137,000			$	133,825			$	132,725			$	130,207
Shares outstanding (M)			12,655				12,640				12,631				12,630				12,630
Book value per common share (GAAP)  (K)/(M)		$	12.04			$	11.88			$	11.64			$	11.55			$	11.35
Tangible book value per common share (Non-GAAP)  (L)/(M)		$	11.00			$	10.84			$	10.59			$	10.51			$	10.31
The following reconciles equity to assets and
tangible equity to tangible assets (Note 1):
Stockholders' equity (N)		$	152,321			$	150,109			$	146,967			$	145,887			$	143,402
Less:  Goodwill and other intangible assets			(13,076	)			(13,109	)			(13,142	)			(13,162	)			(13,195	)
Tangible equity (O)		$	139,245			$	137,000			$	133,825			$	132,725			$	130,207
Assets (P)		$	1,125,690			$	1,131,175			$	1,135,143			$	1,117,813			$	1,084,352
Less:  Goodwill and other intangible assets			(13,076	)			(13,109	)			(13,142	)			(13,162	)			(13,195	)
Tangible assets (Q)		$	1,112,614			$	1,118,066			$	1,122,001			$	1,104,651			$	1,071,157
Period-end equity/assets (GAAP)  (N)/(P)			13.53	%			13.27	%			12.95	%			13.05	%			13.22	%
Period-end tangible equity/tangible assets (Non-GAAP)  (O)/(Q)			12.52	%			12.25	%			11.93	%			12.02	%			12.16	%

 

Note 1: Management believes that reporting tangible equity and tangible assets more closely approximates the adequacy of capital for regulatory purposes.

 

Note 2: Management believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling cash-based operating activities.

 

CONTACT: Edward Allen, Chief Financial Officer, 410-763-7800