Le Lézard
Classified in: Business
Subject: ERN

Shore Bancshares Reports First Quarter 2018 Financial Results


EASTON, Md., April 19, 2018 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) reported net income of $4.058 million or $0.32 per diluted common share for the first quarter of 2018, compared to net income of $2.698 million or $0.21 per diluted common share for the fourth quarter of 2017, and net income of $2.800 million or $0.22 per diluted common share for the first quarter of 2017. 

When comparing the first quarter of 2018 to the fourth quarter of 2017, the main reason for the improved results was a decrease in the federal income tax rate of 35% to 21% which became effective on January 1, 2018.  This lower enacted tax rate and the one-time adjustment for re-measurement of the net deferred tax assets in the fourth quarter of 2017 resulted in a decrease in income tax expenses of $1.6 million for the first quarter of 2018.  This reduction in income tax expense coupled with an increase of $590 thousand in noninterest income, was partially offset by an increase in noninterest expense of $830 thousand.  When comparing the first quarter of 2018 to the first quarter of 2017, the primary reasons for the improved results were the previously mentioned decrease in federal income taxes, increases in net interest income of $2.4 million and noninterest income of $122 thousand, partially offset by an increase in noninterest expenses of $1.8 million.      

"We are pleased to report financial results for the first quarter of 2018," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer.  "While earnings were below our expectations, we had an opportunity to remove a significant long-standing troubled debt from our books which resulted in a $379 thousand charge-off during the quarter. Excluding this charge off, the quarter was in-line with our target of $0.35 per share.  Loan growth remained strong with $26.4 million added to the portfolio for the quarter, which translates to 9.7% annualized growth for 2018.  We remain committed to positioning ourselves for growth and will continue to seek opportunities to improve earnings."     

Balance Sheet Review
Total assets were $1.422 billion at March 31, 2018, a $27.7 million, or 2.0%, increase when compared to $1.394 billion at the end of 2017.  The increase in total assets included increases in gross loans of $26.4 million and interest-bearing deposits with other banks of $19.0 million, offset by a decrease in cash and due from banks of $8.8 million and investment securities available for sale of $13.0 million which were used to fund loan growth for the quarter.                                    

Total deposits decreased $25.7 million, or less than 2.1%, when compared to December 31, 2017.  The decrease in total deposits was mainly due to a decrease in noninterest-bearing accounts of $4.5 million, checking accounts of $9.7 million and time deposits of $14.8 million, which were partially offset by an increase in money market and savings deposits of $3.3 million.  Total stockholders' equity increased $1.2 million, or 0.8%, when compared to the end of 2017.  At March 31, 2018, the ratio of total equity to total assets was 11.60% and the ratio of total tangible equity to total tangible assets was 9.55%.                                                                              

Total assets at March 31, 2018 increased $254.7 million, or 21.8%, when compared to total assets at March 31, 2017.  The primary factor contributing to the increase was the acquisition of three branches in the second quarter of 2017 which contributed $199.6 million of assets at March 31, 2018.  Absent the branch acquisition, total assets have increased $55.1 million since March 31, 2017 which primarily resulted from an increase in gross loans of $110.0 million

Total deposits at March 31, 2018 increased $175.5 million, or 17.5%, when compared to March 31, 2017.  The increase was the direct result of the deposits acquired in the branch purchase which had a balance of $193.0 million at March 31, 2018. Excluding the acquisition, deposits decreased $17.5 million.

Review of Quarterly Financial Results
Net interest income was $12.3 million for the first quarter of 2018, compared to $12.4 million for the fourth quarter of 2017 and $9.9 million for the first quarter of 2017.  Net interest income when compared to the fourth quarter of 2017 was slightly lower by $40 thousand due to two fewer earnings days as well as increased interest expense on short-term borrowings of $213 thousand. This was partially offset by higher interest income of $135 thousand the result of higher yields on loans and taxable investment securities.  The Company's net interest margin improved by 2 basis points to 3.83% over the fourth quarter of 2017.  The increase in net interest income when compared to the first quarter of 2017 was primarily the result of significant loan growth, with average loans increasing $225.4 million.  The Company's net interest margin when compared to the first quarter of 2017 increased 12 basis points from 3.71%, the result of transitioning lower yielding assets to fund loan volume and higher yields on investment securities, partially offset by an increase in average short-term borrowings of $52.4 million which also reflected an increase of 135bps from fed rate increases. 

The provision for credit losses was $489 thousand for the three months ended March 31, 2018.  The comparable amounts were $545 thousand and $427 thousand for the three months ended December 31, 2017 and March 31, 2017, respectively.  The provision for credit losses slightly decreased in the first quarter of 2018 over the fourth quarter of 2017.  The higher level of provision for credit losses when comparing the first quarter of 2018 to the first quarter of 2017 was primarily due to significant growth in the loan portfolio, offset by improving credit quality with decreases in total nonperforming assets of $2.6 million and troubled debt restructurings ("TDRs") of $3.1 million.  Net charge-offs were $352 thousand for the first quarter of 2018, $59 thousand for the fourth quarter of 2017 and $226 thousand for the first quarter of 2017.  The significant increase was primarily related to a TDR which required a charge-off of $379 thousand in which the underlying collateral was sold.  This TDR was a long-standing problem credit with an approximate value of $3.1 million.  The ratio of annualized net charge-offs to average loans was 0.13% for the first quarter of 2018, 0.02% for the fourth quarter of 2017 and 0.10% for the first quarter of 2017.  The ratio of the allowance for credit losses to period-end loans at March 31, 2018 and December 31, 2017 was 0.89%, lower than the 1.00% at March 31, 2017 due primarily to acquired loans recorded at fair value that do not require an allowance for loan losses.  

Nonperforming assets excluding accruing TDRs were $8.6 million at March 31, 2018, $7.4 million at December 31, 2017 and $11.2 million at March 31, 2017. Nonperforming assets including accruing TDRs at March 31, 2018 were $18.4 million, compared to $20.7 million at December 31, 2017 and $24.0 million at March 31, 2017.  The increase in nonperforming loans when compared to the fourth quarter of 2017 was due to an increase in nonaccrual loans of $2.0 million and the decrease in TDRs were the result of the previously mentioned TDR which was removed in the current quarter.  When comparing to the first quarter of 2017, the decreases in nonperforming assets and TDRs were the result of the continued work out efforts and charge-offs period over period.  At March 31, 2018, the ratio of nonaccrual loans to total assets was 0.49%, compared to 0.36% and 0.75% at December 31, 2017 and March 31, 2017, respectively.  In addition, the ratio of accruing TDRs to total assets at March 31, 2018 was 0.68%, improving from 0.96% and 1.10% at December 31, 2017 and March 31, 2017.

Total noninterest income for the first quarter of 2018 increased $590 thousand when compared to the fourth quarter of 2017 and increased $122 thousand when compared to the first quarter of 2017.  The increase from the fourth quarter of 2017 was the result of higher insurance agency commissions, mainly from contingency payments which are typically received in the first quarter of each year and are based on the prior year's performance.  The increase from the first quarter of 2017 was due to increases in service charges on deposit accounts of $71 thousand, trust and investment fee income of $39 thousand, and other noninterest income of $137 thousand which consisted of other bank service charges of $109 thousand.  These increases were partially offset by lower insurance agency commissions and contingencies of $125 thousand.

Total noninterest expense for the first quarter of 2018 increased $830 thousand when compared to the fourth quarter of 2017 and increased $1.8 million when compared to the first quarter of 2017.  The increase in noninterest expense compared to the fourth quarter of 2017 was primarily due to higher costs associated with employee benefits of $436 thousand, which included higher insurance premiums for group insurance and federal unemployment insurance which is usually paid in the first two quarters of the year. 

The increase in noninterest expense from the first quarter of 2017 was primarily due to increases in salary and wages of $971 thousand, employee benefits of $277 thousand and other noninterest expenses of $472 thousand.  These line items were impacted by the additional operation of four branches, three of which were acquired in the second quarter of 2017 and one newly opened branch in Onley, VA in the third quarter of 2017.  Also impacting salary and wages were pay increases and bonuses implemented during the period on a higher employee base than a year ago. Employee benefits were mainly impacted by higher insurance premium costs for the current year.  Other noninterest expenses increased due to operating expenses for the additional branches.

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

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

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

 

Shore Bancshares, Inc.







Financial Highlights







(Dollars in thousands, except per share data)






















   For the Three Months Ended



March 31,



2018


2017

 Change


     Net interest income

$      12,329


$      9,933


24.1

%

     Provision for credit losses

489


427


14.5


     Noninterest income

4,929


4,807


2.5


     Noninterest expense

11,462


9,651


18.8


     Income before income taxes

5,307


4,662


13.8


     Income tax expense 

1,249


1,862


(32.9)


     Net income 

$         4,058


$      2,800


44.9
















     Return on average assets 

1.18

%

0.99

%

19

bp

     Return on average equity 

9.97


7.27


270


     Return on average tangible equity (1)

12.64


7.98


466


     Net interest margin

3.83


3.71


12


     Efficiency ratio - GAAP 

66.42


65.47


95


     Efficiency ratio - Non-GAAP (1)

65.67


64.98


69
















PER SHARE DATA







     Basic net income per common share

$           0.32


$        0.22


45.5

%

     Diluted net income per common share

0.32


0.22


45.5


     Dividends paid per common share

0.07


0.05


40.0


     Book value per common share at period end

12.95


12.44


4.1


     Tangible book value per common share at period end (1)

10.42


11.41


(8.7)


     Market value at period end

18.86


16.71


12.9


     Market range:







       High

19.80


17.92


10.5


       Low

16.28


14.64


11.2
















AVERAGE BALANCE SHEET DATA







     Loans

$ 1,106,213


$  880,791


25.6

%

     Investment securities

197,285


178,074


10.8


     Earning assets

1,313,249


1,092,934


20.2


     Assets

1,396,001


1,148,757


21.5


     Deposits

1,168,613


982,956


18.9


     Stockholders' equity

165,070


156,274


5.6
















CREDIT QUALITY DATA AT PERIOD END







     Net charge-offs

$            352


$         226


55.8

%








     Nonaccrual loans 

$         7,009


$      8,729


(19.7)


     Loans 90 days past due and still accruing

61


118


(48.3)



1,569


2,354


(33.3)


     Total nonperforming assets 

8,639


11,201


(22.9)


     Accruing troubled debt restructurings (TDRs) 

9,726


12,782


(23.9)


     Total nonperforming assets and accruing TDRs 

$      18,365


$    23,983


(23.4)
















CAPITAL AND CREDIT QUALITY RATIOS







     Period-end equity to assets

11.60

%

13.51

%

(191)

bp

     Period-end tangible equity to tangible assets (1)

9.55


12.54


(299)









     Annualized net charge-offs to average loans

0.13


0.10


3









     Allowance for credit losses as a percent of:







     Period-end loans

0.89


1.00


(11)


     Nonaccrual loans 

141.50


102.27


3,923


     Nonperforming assets 

114.80


79.70


3,510


     Accruing TDRs 

101.97


69.84


3,213


     Nonperforming assets and accruing TDRs 

54.00


37.22


1,678









     As a percent of total loans:







     Nonaccrual loans 

0.63


0.98


(35)


     Accruing TDRs  

0.87


1.43


(56)


     Nonaccrual loans and accruing TDRs 

1.50


2.41


(91)









     As a percent of total loans+other real estate owned:







     Nonperforming assets

0.77


1.25


(48)


     Nonperforming assets and accruing TDRs 

1.64


2.68


(104)









     As a percent of total assets:







     Nonaccrual loans 

0.49


0.75


(26)


     Nonperforming assets 

0.61


0.96


(35)


     Accruing TDRs 

0.68


1.10


(42)


     Nonperforming assets and accruing TDRs 

1.29


2.06


(77)









(1)  See the reconciliation table on page 11 of 11.




 

 

Shore Bancshares, Inc.







Consolidated Balance Sheets








(In thousands, except per share data)





































March 31, 2018


March 31, 2018



March 31,


December 31,


March 31,


compared to


compared to



2018


2017


2017


December 31, 2017


March 31, 2017


ASSETS











    Cash and due from banks

$              12,752


$              21,534


$              14,884


(40.8)

%

(14.3)

%

    Interest-bearing deposits with other banks

29,243


10,286


33,967


184.3


(13.9)


  Cash and cash equivalents

41,995


31,820


48,851


32.0


(14.0)













    Investment securities available for sale (at fair value)

183,910


196,955


178,072


(6.6)


3.3


    Investment securities held to maturity 

6,162


6,247


6,615


(1.4)


(6.8)













    Loans

1,119,937


1,093,514


891,864


2.4


25.6


    Less: allowance for credit losses

(9,918)


(9,781)


(8,927)


1.4


(11.1)


    Loans, net

1,110,019


1,083,733


882,937


2.4


25.7













    Premises and equipment, net

23,188


23,054


16,831


0.6


37.8


    Goodwill

27,618


27,618


11,931


-


131.5


    Other intangible assets, net

4,608


4,719


1,047


(2.4)


340.1


    Other real estate owned, net

1,569


1,794


2,354


(12.5)


(33.3)


    Other assets

22,537


17,920


18,258


25.8


23.4













                         Total assets

$         1,421,606


$         1,393,860


$         1,166,896


2.0


21.8













LIABILITIES











    Noninterest-bearing deposits

$            323,849


$            328,322


$            266,611


(1.4)


21.5


    Interest-bearing deposits

853,213


874,459


734,931


(2.4)


16.1


                Total deposits

1,177,062


1,202,781


1,001,542


(2.1)


17.5













    Short-term borrowings

72,993


21,734


2,919


235.8


2,400.6


    Accrued expenses and other liabilities

6,574


5,609


4,809


17.2


36.7


                          Total liabilities

1,256,629


1,230,124


1,009,270


2.2


24.5













STOCKHOLDERS' EQUITY











    Common stock, par value $0.01; authorized  











       35,000,000 shares

127


127


127


-


-


    Additional paid in capital

65,399


65,256


64,619


0.2


1.2


    Retained earnings

102,829


99,662


93,131


3.2


10.4


    Accumulated other comprehensive loss

(3,378)


(1,309)


(251)


(158.1)


(1,245.8)


                          Total stockholders' equity

164,977


163,736


157,626


0.8


4.7













                          Total liabilities and stockholders' equity

$         1,421,606


$         1,393,860


$         1,166,896


2.0


21.8













Period-end common shares outstanding

12,736


12,688


12,673


0.4


0.5


Book value per common share

$                 12.95


$                 12.90


$                 12.44


0.4


4.1


 

 

Shore Bancshares, Inc.





Consolidated Statements of Income






(In thousands, except per share data)



















For the Three Months Ended



March 31,



2018


2017

% Change


INTEREST INCOME






    Interest and fees on loans 

$ 12,044


$    9,550

26.1

%

    Interest and dividends on investment securities:






        Taxable

1,021


827

23.5


        Tax-exempt 

-


2

(100.0)


    Interest on deposits with other banks

38


68

(44.1)


                   Total interest income

13,103


10,447

25.4








INTEREST EXPENSE






    Interest on deposits

548


511

7.2


    Interest on short-term borrowings

226


3

7,433.3


                   Total interest expense

774


514

50.6








NET INTEREST INCOME

12,329


9,933

24.1


Provision for credit losses

489


427

14.5








NET INTEREST INCOME AFTER PROVISION 






  FOR CREDIT LOSSES

11,840


9,506

24.6








NONINTEREST INCOME






    Service charges on deposit accounts

905


834

8.5


    Trust and investment fee income

400


361

10.8


    Insurance agency commissions

2,694


2,819

(4.4)


    Other noninterest income

930


793

17.3


                      Total noninterest income

4,929


4,807

2.5








NONINTEREST EXPENSE






    Salaries and wages

5,473


4,502

21.6


    Employee benefits

1,517


1,240

22.3


    Occupancy expense 

781


625

25.0


    Furniture and equipment expense

287


233

23.2


    Data processing

897


872

2.9


    Directors' fees

114


80

42.5


    Amortization of intangible assets

111


33

236.4


    FDIC insurance premium expense

205


164

25.0


    Other real estate owned expenses, net

(46)


65

(170.8)


    Legal and professional fees

464


660

(29.7)


    Other noninterest expenses

1,659


1,177

41.0


                      Total noninterest expense

11,462


9,651

18.8








Income before income taxes

5,307


4,662

13.8


Income tax expense 

1,249


1,862

(32.9)








NET INCOME 

$   4,058


$    2,800

44.9








Weighted average shares outstanding - basic

12,715


12,670

0.4


Weighted average shares outstanding - diluted

12,731


12,707

0.2








Basic net income per common share

$     0.32


$       0.22

45.5


Diluted net income per common share

0.32


0.22

45.5


Dividends paid per common share

0.07


0.05

40.0


 

 

Shore Bancshares, Inc.








Consolidated Average Balance Sheets









(Dollars in thousands)




























For the Three Months Ended



March 31,



2018


2017



Average 


Yield/


Average 


Yield/



balance


rate 


balance


rate 


Earning assets









  Loans (1), (2), (3)

$ 1,106,213


4.44

%

$    880,791


4.43

%

  Investment securities (1)









   Taxable

197,285


2.07


177,864


1.86


   Tax-exempt

-


-


210


5.38


  Interest-bearing deposits

9,751


1.60


34,069


0.80


    Total earning assets

1,313,249


4.06

%

1,092,934


3.90

%

Cash and due from banks

16,384




13,907




Other assets

76,336




50,763




Allowance for credit losses

(9,968)




(8,847)




Total assets

$ 1,396,001




$ 1,148,757






















Interest-bearing liabilities









  Demand deposits

$    216,808


0.23

%

$    195,005


0.14

%

  Money market and savings deposits 

380,890


0.13


276,175


0.13


  Certificates of deposit $100,000 or more

101,929


0.50


118,970


0.54


  Other time deposits

152,321


0.48


137,832


0.58


    Interest-bearing deposits

851,948


0.26


727,982


0.28


  Short-term borrowings

56,586


1.62


4,150


0.27


    Total interest-bearing liabilities

908,534


0.35

%

732,132


0.28

%

Noninterest-bearing deposits

316,665




254,974




Accrued expenses and other liabilities

5,732




5,377




Stockholders' equity

165,070




156,274




Total liabilities and stockholders' equity

$ 1,396,001




$ 1,148,757













Net interest spread



3.71

%



3.62

%

Net interest margin



3.83

%



3.71

%










(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate 

     of 21.0% for the first quarter of 2018 and 35.0% for all other quarters during 2017, exclusive of the

     alternative minimum tax rate and nondeductible interest expense.






(2) Average loan balances include nonaccrual loans.








(3) Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on 


     acquired loans, which are included in the yield calculations.







 

 

Shore Bancshares, Inc.










Financial Highlights By Quarter










(Dollars in thousands, except per share data)










































1st quarter


4th quarter


3rd quarter


2nd quarter


1st quarter


1Q 18


1Q 18



2018


2017


2017


2017


2017


compared to


compared to



(1Q 18)


(4Q 17)


(3Q 17)


(2Q 17)


(1Q 17)


4Q 17


1Q 17


PROFITABILITY FOR THE PERIOD















     Taxable-equivalent net interest income

$      12,357


$      12,430


$      12,384


$    10,961


$      9,994


(0.6)

%

23.6

%

     Less:  Taxable-equivalent adjustment

28


61


58


61


61


(54.1)


(54.1)


     Net interest income

12,329


12,369


12,326


10,900


9,933


(0.3)


24.1


     Provision for credit losses

489


545


345


974


427


(10.3)


14.5


     Noninterest income

4,929


4,339


4,425


4,179


4,807


13.6


2.5


     Noninterest expense

11,462


10,632


10,720


10,199


9,651


7.8


18.8


     Income before income taxes

5,307


5,531


5,686


3,906


4,662


(4.0)


13.8


     Income tax expense 

1,249


2,833


2,274


1,554


1,862


(55.9)


(32.9)


     Net income

$         4,058


$         2,698


$         3,412


$      2,352


$      2,800


50.4


44.9
































     Return on average assets 

1.18

%

0.78

%

0.98

%

0.76

%

0.99

%

40

bp

19

bp

     Return on average equity 

9.97


6.53


8.48


5.93


7.27


344


270


     Return on average tangible equity (1)

12.70


8.36


10.84


6.55


7.98


434


472


     Net interest margin

3.83


3.81


3.79


3.73


3.71


2


12


     Efficiency ratio - GAAP 

66.42


63.63


64.00


67.64


65.47


279


95


     Efficiency ratio - Non-GAAP (1)

65.67


62.73


63.11


67.00


64.98


294


69
































PER SHARE DATA















     Basic net income per common share

$           0.32


$           0.21


$           0.27


$        0.19


$        0.22


52.4

%

45.5

%

     Diluted net income per common share

0.32


0.21


0.27


0.19


0.22


52.4


45.5


     Dividends paid per common share

0.07


0.07


0.05


0.05


0.05


-


40.0


     Book value per common share at period end

12.95


12.90


12.82


12.61


12.44


0.4


4.1


     Tangible book value per common share at period end (1)

10.42


10.36


10.24


10.07


11.41


0.6


(8.7)


     Market value at period end

18.86


16.70


16.65


16.45


16.71


12.9


12.9


     Market range:















        High

19.80


18.49


17.34


17.53


17.92


7.1


10.5


        Low

16.28


15.74


15.97


15.17


14.64


3.4


11.2
































AVERAGE BALANCE SHEET DATA















     Loans

$ 1,106,213


$ 1,062,980


$ 1,034,553


$  953,049


$  880,791


4.1

%

25.6

%

     Investment securities

197,285


211,910


218,675


198,302


178,074


(6.9)


10.8


     Earning assets

1,313,249


1,294,768


1,295,432


1,178,507


1,092,934


1.4


20.2


     Assets

1,396,001


1,378,553


1,377,975


1,242,933


1,148,757


1.3


21.5


     Deposits

1,168,613


1,202,260


1,210,894


1,072,758


982,956


(2.8)


18.9


     Stockholders' equity

165,070


163,893


159,551


159,165


156,274


0.7


5.6
































CREDIT QUALITY DATA AT PERIOD END















     Net charge-offs

$            352


$              59


$            182


$         769


$         226


496.6

%

55.8

%
















     Nonaccrual loans 

$         7,009


$         4,971


$         6,289


$      7,157


$      8,729


41.0


(19.7)


     Loans 90 days past due and still accruing

61


639


5


314


118


(90.5)


(48.3)


     Other real estate owned

1,569


1,794


1,809


2,302


2,354


(12.5)


(33.3)


     Total nonperforming assets 

$         8,639


$         7,404


$         8,103


$      9,773


$    11,201


16.7


(22.9)

















     Accruing troubled debt restructurings (TDRs) 

$         9,726


$      13,326


$      13,493


$    12,124


$    12,782


(27.0)


(23.9)

















     Total nonperforming assets and accruing TDRs 

$      18,365


$      20,730


$      21,596


$    21,897


$    23,983


(11.4)


(23.4)
































CAPITAL AND CREDIT QUALITY RATIOS















     Period-end equity to assets

11.60

%

11.75

%

11.82

%

11.74

%

13.51

%

(15)

bp

(191)

bp

     Period-end tangible equity to tangible assets (1)

9.55


9.65


9.67


9.60


12.54


(10)


(299)

















     Annualized net charge-offs to average loans

0.13


0.02


0.07


0.32


0.10


11


3

















     Allowance for credit losses as a percent of:















     Period-end loans      

0.89


0.89


0.89


0.88


1.00


-


(11)


     Nonaccrual loans 

141.50


196.76


147.80


127.60


102.27


(5,526)


3,923


     Nonperforming assets 

114.80


132.10


114.71


93.44


79.70


(1,730)


3,510


     Accruing TDRs 

101.97


73.40


68.89


75.32


69.84


2,857


3,213


     Nonperforming assets and accruing TDRs 

54.00


47.18


43.04


41.70


37.22


682


1,678

















    As a percent of total loans:















    Nonaccrual loans 

0.63


0.45


0.60


0.69


0.98


18


(35)


    Accruing TDRs 

0.87


1.22


1.29


1.17


1.43


(35)


(56)


    Nonaccrual loans and accruing TDRs 

1.50


1.67


1.89


1.86


2.41


(17)


(91)

















    As a percent of total loans+other real estate owned:















    Nonperforming assets 

0.77


0.68


0.77


0.94


1.25


9


(48)


    Nonperforming assets and accruing TDRs 

1.64


1.89


2.06


2.11


2.68


(25)


(104)
































    As a percent of total assets:















    Nonaccrual loans 

0.49


0.36


0.46


0.53


0.75


13


(26)


    Nonperforming assets 

0.61


0.53


0.59


0.72


0.96


8


(35)


    Accruing TDRs 

0.68


0.96


0.98


0.89


1.10


(28)


(42)


    Nonperforming assets and accruing TDRs 

1.29


1.49


1.57


1.61


2.06


(20)


(77)

















(1)  See the reconciliation table on page 11 of 11.















 

 

Shore Bancshares, Inc.









Consolidated Statements of Income By Quarter










(In thousands, except per share data)



















































1Q 18


1Q 18













compared to


compared to



1Q 18


4Q 17


3Q 17


2Q 17


1Q 17


4Q 17


1Q 17


INTEREST INCOME















    Interest and fees on loans 

$ 12,044


$ 11,855


$ 11,771


$ 10,441


$    9,550


1.6

%

26.1

%

    Interest and dividends on investment securities:















        Taxable

1,021


1,048


1,035


937


827


(2.6)


23.5


        Tax-exempt

-


-


-


1


2


-


(100.0)


    Interest on deposits with other banks

38


65


131


70


68


(41.5)


(44.1)


                   Total interest income

13,103


12,968


12,937


11,449


10,447


1.0


25.4

















INTEREST EXPENSE















    Interest on deposits

548


586


607


538


511


(6.5)


7.2


    Interest on short-term borrowings

226


13


4


11


3


1,638.5


7,433.3


                   Total interest expense

774


599


611


549


514


29.2


50.6

















NET INTEREST INCOME

12,329


12,369


12,326


10,900


9,933


(0.3)


24.1


Provision for credit losses

489


545


345


974


427


(10.3)


14.5

















NET INTEREST INCOME AFTER PROVISION















  FOR CREDIT LOSSES

11,840


11,824


11,981


9,926


9,506


0.1


24.6

















NONINTEREST INCOME















    Service charges on deposit accounts

905


971


945


878


834


(6.8)


8.5


    Trust and investment fee income

400


410


389


372


361


(2.4)


10.8


    Investment securities gains 

-


-


5


-


-


-


-


    Insurance agency commissions 

2,694


1,898


2,088


2,032


2,819


41.9


(4.4)


    Other noninterest income

930


1,060


998


897


793


(12.3)


17.3


                      Total noninterest income

4,929


4,339


4,425


4,179


4,807


13.6


2.5

















NONINTEREST EXPENSE















    Salaries and wages

5,473


5,503


5,203


4,803


4,502


(0.5)


21.6


    Employee benefits

1,517


1,081


1,197


1,127


1,240


40.3


22.3


    Occupancy expense 

781


746


696


629


625


4.7


25.0


    Furniture and equipment expense

287


232


286


284


233


23.7


23.2


    Data processing

897


871


922


1,015


872


3.0


2.9


    Directors' fees

114


99


99


102


80


15.2


42.5


    Amortization of intangible assets

111


112


115


55


33


(0.9)


236.4


    FDIC insurance premium expense

205


201


189


45


164


2.0


25.0


    Other real estate owned expenses, net

(46)


(86)


185


108


65


46.5


(170.8)


    Legal and professional fees

464


453


493


702


660


2.4


(29.7)


    Other noninterest expenses

1,659


1,420


1,335


1,329


1,177


16.8


41.0


                      Total noninterest expense

11,462


10,632


10,720


10,199


9,651


7.8


18.8

















Income before income taxes

5,307


5,531


5,686


3,906


4,662


(4.0)


13.8


Income tax expense 

1,249


2,833


2,274


1,554


1,862


(55.9)


(32.9)

















NET INCOME 

$   4,058


$   2,698


$   3,412


$   2,352


$    2,800


50.4


44.9

















Weighted average shares outstanding - basic

12,715


12,688


12,687


12,681


12,670


0.2


0.4


Weighted average shares outstanding - diluted

12,731


12,750


12,718


12,732


12,707


(0.1)


0.2

















Basic net income per common share

$     0.32


$     0.21


$     0.27


$     0.19


$      0.22


52.4


45.5


Diluted net income per common share

0.32


0.21


0.27


0.19


0.22


52.4


45.5


Dividends paid per common share

0.07


0.07


0.05


0.05


0.05


-


40.0


 

 

Shore Bancshares, Inc.




















Consolidated Average Balance Sheets By Quarter




















(Dollars in thousands)































































































Average balance























1Q 18


1Q 18























compared to


compared to



1Q 18


4Q 17


3Q 17


2Q 17


1Q 17


4Q 17


1Q 17



Average 


Yield/


Average 


Yield/


Average 


Yield/


Average 


Yield/


Average 


Yield/







balance


rate


balance


rate


balance


rate


balance


rate


balance


rate






Earning assets

























  Loans (1), (2), (3)

$ 1,106,213


4.44

%

$ 1,062,980


4.45

%

$ 1,034,553


4.54

%

$    953,049


4.42

%

$    880,791


4.43

%

4.1

%

25.6

%

  Investment securities (1)

























   Taxable

197,285


2.07


211,910


1.98


218,675


1.89


198,161


1.89


177,864


1.86


(6.9)


10.9


   Tax-exempt

-


-


-


-


-


-


141


5.36


210


5.38


-


(100.0)


  Interest-bearing deposits

9,751


1.60


19,878


1.30


42,204


1.23


27,156


1.05


34,069


0.80


(50.9)


(71.4)


    Total earning assets

1,313,249


4.06

%

1,294,768


3.99

%

1,295,432


3.98

%

1,178,507


3.92

%

1,092,934


3.90

%

1.4


20.2


Cash and due from banks

16,384




18,589




16,232




14,798




13,907




(11.9)


17.8


Other assets

76,336




74,700




75,611




58,692




50,763




2.2


50.4


Allowance for credit losses

(9,968)




(9,504)




(9,300)




(9,064)




(8,847)




4.9


12.7


Total assets

$ 1,396,001




$ 1,378,553




$ 1,377,975




$ 1,242,933




$ 1,148,757




1.3


21.5




















































Interest-bearing liabilities

























  Demand deposits

$    216,808


0.23

%

$    222,321


0.24

%

$    224,180


0.23

%

$    198,593


0.16

%

$    195,005


0.14

%

(2.5)


11.2


  Money market and savings deposits 

380,890


0.13


382,438


0.12


378,711


0.12


320,967


0.12


276,175


0.13


(0.4)


37.9


  Certificates of deposit $100,000 or more

101,929


0.50


110,458


0.49


123,538


0.50


121,967


0.51


118,970


0.54


(7.7)


(14.3)


  Other time deposits

152,321


0.48


158,241


0.49


164,459


0.50


150,953


0.55


137,832


0.58


(3.7)


10.5


    Interest-bearing deposits

851,948


0.26


873,458


0.27


890,888


0.27


792,480


0.27


727,982


0.28


(2.5)


17.0


  Short-term borrowings

56,586


1.62


6,087


0.86


2,274


0.62


5,589


0.82


4,150


0.27


829.6


1,263.5


    Total interest-bearing liabilities

908,534


0.35

%

879,545


0.27

%

893,162


0.27

%

798,069


0.28

%

732,132


0.28

%

3.3


24.1


Noninterest-bearing deposits

316,665




328,802




320,006




280,278




254,974




(3.7)


24.2


Accrued expenses and other liabilities

5,732




6,313




5,256




5,421




5,377




(9.2)


6.6


Stockholders' equity

165,070




163,893




159,551




159,165




156,274




0.7


5.6


Total liabilities and stockholders' equity

$ 1,396,001




$ 1,378,553




$ 1,377,975




$ 1,242,933




$ 1,148,757




1.3


21.5



























Net interest spread



3.71

%



3.72

%



3.71

%



3.64

%



3.62

%





Net interest margin



3.83

%



3.81

%



3.79

%



3.73

%



3.71

%






























(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0% for the first quarter of 2018 and 35.0% for all quarters during 2017, 

      exclusive of the alternative minimum tax rate and and nondeductible interest expense.











(2) Average loan balances include nonaccrual loans.
























(3) Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.



































 

 

Shore Bancshares, Inc.



Reconciliation of Generally Accepted Accounting Principles (GAAP) 




and Non-GAAP Measures






(In thousands, except per share data)























1Q 18


4Q 17


3Q 17


2Q 17


1Q 17













The following reconciles return on average equity and return on











  average tangible equity (Note 1):






















Net income

$          4,058


$          2,698


$          3,412


$          2,352


$          2,800


Net income - annualized (A)

$       16,457


$       10,704


$       13,537


$          9,434


$       11,356













Net income, excluding net amortization of intangible assets

$          4,143


$          2,766


$          3,482


$          2,385


$          2,820













Net income, excluding net amortization of intangible 











  assets - annualized (B)

$       16,802


$       10,974


$       13,814


$          9,566


$       11,437













Average stockholders' equity (C)

$     165,070


$     163,893


$     159,551


$     159,165


$     156,274


Less:  Average goodwill and other intangible assets

(32,721)


(32,678)


(32,097)


(13,173)


(12,997)


Average tangible equity (D)

$     132,349


$     131,215


$     127,454


$     145,992


$     143,277













Return on average equity (GAAP)  (A)/(C)

9.97

%

6.53

%

8.48

%

5.47

%

7.27

%

Return on average tangible equity (Non-GAAP)  (B)/(D)

12.70

%

8.36

%

10.84

%

6.01

%

7.98

%























The following reconciles GAAP efficiency ratio and non-GAAP 











  efficiency ratio (Note 2):






















Noninterest expense (E)

$       11,462


$       10,632


$       10,720


$       10,199


$          9,651


Less:  Amortization of intangible assets

(111)


(112)


(115)


(55)


(33)


Adjusted noninterest expense (F)

$       11,351


$       10,520


$       10,605


$       10,144


$          9,618













Net interest income (G)

12,329


12,369


12,326


10,900


9,933


Add:  Taxable-equivalent adjustment

28


61


58


61


61


Taxable-equivalent net interest income (H)

$       12,357


$       12,430


$       12,384


$       10,961


$          9,994













Noninterest income (I)

$         4,929


$         4,339


$          4,425


$         4,179


$          4,807


Less:  Investment securities (gains)

-


-


(5)


-


-


Adjusted noninterest income (K)

$       4,929


$       4,339


$       4,420


$       4,179


$           4,807













Efficiency ratio (GAAP)  (E)/(G)+(I) 

66.42

%

63.63

%

64.00

%

67.64

%

65.47

%

Efficiency ratio (Non-GAAP)  (F)/(H)+(J)

65.67

%

62.73

%

63.11

%

67.00

%

64.98

%























Stockholders' equity (K)

$     164,977


$     163,736


$     162,648


$     159,940


$     157,626


Less:  Goodwill and other intangible assets

(32,226)


(32,337)


(32,740)


(32,153)


(12,978)


Tangible equity (L)

$     132,751


$     131,399


$     129,908


$     127,787


$     144,648













Shares outstanding (M)

12,736


12,688


12,687


12,685


12,673













Book value per common share (GAAP)  (K)/(M)

$          12.95


$          12.90


$          12.82


$          12.61


$          12.44


Tangible book value per common share (Non-GAAP)  (L)/(M)

$          10.42


$          10.36


$          10.24


$          10.07


$          11.41













The following reconciles equity to assets and











  tangible equity to tangible assets (Note 1):






















Stockholders' equity (N)

$     164,977


$     163,736


$     162,648


$     159,940


$     157,626


Less:  Goodwill and other intangible assets

(32,226)


(32,337)


(32,740)


(32,153)


(12,978)


Tangible equity (O)

$     132,751


$     131,399


$     129,908


$     127,787


$     144,648













Assets (P)

$  1,421,606


$  1,393,860


$  1,376,127


$  1,362,798


$  1,166,896


Less:  Goodwill and other intangible assets

(32,226)


(32,337)


(32,740)


(32,153)


(12,978)


Tangible assets (Q)

$  1,389,380


$  1,361,523


$  1,343,387


$  1,330,645


$  1,153,918













Period-end equity/assets (GAAP)  (N)/(P)

11.60

%

11.75

%

11.82

%

11.74

%

13.51

%

Period-end tangible equity/tangible assets (Non-GAAP)  (O)/(Q)

9.55

%

9.65

%

9.67

%

9.60

%

12.54

%























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.  













 

 

SOURCE Shore Bancshares, Inc.


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