0001144204-14-024999.txt : 20140425 0001144204-14-024999.hdr.sgml : 20140425 20140425172957 ACCESSION NUMBER: 0001144204-14-024999 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20140424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20140425 DATE AS OF CHANGE: 20140425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHORE BANCSHARES INC CENTRAL INDEX KEY: 0001035092 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521974638 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22345 FILM NUMBER: 14786586 BUSINESS ADDRESS: STREET 1: 18 EAST DOVER STREET CITY: EASTON STATE: MD ZIP: 21601-3013 BUSINESS PHONE: 4108221400 MAIL ADDRESS: STREET 1: 18 EAST DOVER STREET CITY: EASTON STATE: MD ZIP: 21601-3013 8-K 1 v375972_8k.htm FORM 8-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 25, 2014 (April 24, 2014)

 

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland   0-22345   52-1974638
(State or other jurisdiction of   (Commission file number)   (IRS Employer
incorporation or organization)       Identification No.)

 

28969 Information Lane, Easton, Maryland 21601

 

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (410) 763-7800

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

 

Item 2.02. Results of Operation and Financial Condition.

 

On April 24, 2014, Shore Bancshares, Inc. (the “Company”) issued a press release setting forth the Company’s first quarter 2014 financial results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

 

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SHORE BANCSHARES, INC.
   
Dated: April 25, 2014 By:  /s/ Lloyd L. Beatty, Jr.
    Lloyd L. Beatty, Jr.
    President and Chief Executive Officer

 

 
 

 

EXHIBIT INDEX

 

Exhibit
Number		   Description
99.1   Press release dated April 24, 2014 (filed herewith).

 

 

 

 EX-99.1 2 v375972_ex99-1.htm EXHIBIT 99.1

 

 

28969 Information Lane

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports First Quarter 2014 Financial Results

 

Easton, Maryland (04/24/2014) - Shore Bancshares, Inc. (NASDAQ - SHBI) today reported net income of $1.3 million or $0.15 per diluted common share for the first quarter of 2014, compared to net income of $1.2 million or $0.14 per diluted common share for the fourth quarter of 2013, and net income of $222 thousand or $0.03 per diluted common share for the first quarter of 2013.

 

When comparing the first quarter of 2014 to the fourth quarter of 2013, the primary reasons for the improved results were a $573 thousand increase in noninterest income and a $353 thousand decline in noninterest expense, which were partially offset by a $501 thousand increase in the provision for credit losses and a $247 thousand decline in net interest income. When comparing the first quarter of 2014 to the first quarter of 2013, the primary reasons for the improved results were a $1.2 million decline in the provision for credit losses which was impacted by the sale of loans and other real estate owned (the “Asset Sale”) by the Company’s wholly-owned subsidiary, The Talbot Bank of Easton, Maryland (“Talbot Bank”), during the fourth quarter of 2013, a $376 thousand decline in noninterest expense and a $298 thousand increase in noninterest income, which were partially offset by a $154 thousand decline in net interest income.

 

“We are pleased to report improved earnings over the linked quarter and the first quarter of 2013,” said Lloyd L. “Scott” Beatty, Jr., president and chief executive officer. “Much of this improvement is due to lower credit-related expenses as a result of the Asset Sale, which was recorded in the third quarter and completed during the fourth quarter of 2013. With the Asset Sale, we are able to re-emphasize our focus on healthy loan originations and overall business development; however, we still see that the slowly improving local economy is delaying our progress. Our total stockholders’ equity to total assets was 9.97% at March 31, 2014, improving from the 9.80% at the end of 2013.”

 

Balance Sheet Review

Total assets were $1.050 billion at March 31, 2014, a $4.6 million, or less than 1%, decrease when compared to the $1.054 billion at the end of 2013. The decrease in total assets included a decline in total loans of $8.3 million, or 1.2%, partially offset by an increase in investment securities of $5.0 million, or 3.3%. Loans held for sale at December 31, 2013 were reclassified to loans during the first quarter of 2014. Total deposits decreased $4.0 million, or less than 1%, when compared to December 31, 2013. The decrease in total deposits was mainly due to a decline in noninterest-bearing deposits ($7.3 million) and time deposits ($11.3 million), which was partially offset by a shift to money market and savings deposits ($11.5 million) and interest-bearing demand deposits ($3.1 million). Total stockholders’ equity increased $1.3 million, or 1.3%, when compared to the end of 2013. At March 31, 2014, the ratio of total equity to total assets was 9.97% and the ratio of total tangible equity to total tangible assets was 8.58%.

 

 
 

 

Total assets at March 31, 2014, decreased $55.1 million, or 5%, when compared to total assets at March 31, 2013. The decrease in assets was primarily due to a decline in loans as a result of the Asset Sale during the fourth quarter of 2013. Total deposits decreased $40.7 million, or 4.2%, when compared to March 31, 2013. The decrease in total deposits was mainly due to a decline in time deposits ($44.4 million) and money market and savings deposits ($12.2 million). The decrease in money market deposit accounts was 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 to decrease its excess liquidity and, in June 2013, the Company fully exited the IND Program in which $20 million in money market deposits remained. The decrease in time deposits also reduced the Company’s excess liquidity.

 

Review of Quarterly Financial Results

Net interest income was $8.3 million for the first quarter of 2014, compared to $8.6 million for the fourth quarter of 2013 and $8.5 million for the first quarter of 2013. The decrease in net interest income when compared to the fourth quarter of 2013 was primarily due to lower volumes of average loan balances, partially offset by lower volumes of and rates paid on time deposits. The decrease in net interest income when compared to the first quarter of 2013 was primarily due to lower volumes of average loan balances, partially offset by lower volumes of and rates paid on money market and savings deposits, and time deposits. However, the Company’s net interest margin improved to 3.50% for the first quarter of 2014 when compared to the 3.47% for the fourth quarter of 2013 and 3.30% for the first quarter of 2013. The higher net interest margin when compared to the fourth quarter of 2013 was mainly due to a decline of $211 thousand in reversals of nonaccrual income. The higher net interest margin for the first quarter of 2014 when compared to the first quarter of 2013 was mainly due to the impact of exiting the IND Program, which resulted in a reduction in both the money market account balances as well as the associated higher rate related to this program.

 

The provision for credit losses was $975 thousand for the three months ended March 31, 2014. The comparable amounts were $474 thousand and $2.2 million for the three months ended December 31, 2013 and March 31, 2013, respectively. The higher level of provision for credit losses when comparing the first quarter of 2014 to the fourth quarter of 2013 was primarily due to increases in loan charge-offs and nonaccrual loans. The lower level of provision for credit losses when comparing the first quarter of 2014 to the first quarter of 2013 was primarily due to decreases in loan charge-offs and nonaccrual loans. Net charge-offs were $1.6 million for the first quarter of 2014, $1.1 million for the fourth quarter of 2013 and $2.4 million for the first quarter of 2013. The ratio of annualized net charge-offs to average loans was 0.93% for the first quarter of 2014, 0.58% for the fourth quarter of 2013 and 1.25% for the first quarter of 2013. The ratio of the allowance for credit losses to period-end loans was 1.43% at March 31, 2014, compared to 1.51% at December 31, 2013 and 2.00% at March 31, 2013.

 

At March 31, 2014, nonperforming assets were $23.9 million, an increase of $1.8 million, or 7.9%, when compared to December 31, 2013. This increase was primarily due to the addition of one nonaccrual commercial real estate loan, net of the transfer of one nonaccrual residential real estate loan to other real estate owned. Additionally, accruing troubled debt restructurings (“TDRs”) were $25.3 million at March 31, 2014, a decrease of $755 thousand, or 2.9%, when compared to December 31, 2013. When comparing March 31, 2014 to March 31, 2013, nonperforming assets decreased $16.3 million, or 40.4%, and accruing TDRs decreased $27.2 million, or 51.8%. The positive trend in nonperforming assets and TDRs when comparing March 31, 2014 to March 31, 2013, was mainly accomplished with the previously-mentioned Asset Sale. At March 31, 2014, the ratio of nonaccrual loans to total assets was 1.83%, compared to 1.72% and 2.88% at December 31, 2013 and March 31, 2013, respectively. In addition, the ratio of accruing TDRs to total assets at March 31, 2014 was 2.41%, improving from 2.47% at December 31, 2013 and 4.76% at March 31, 2013.

 

Page 2 of 12
 

 

Total noninterest income for the first quarter of 2014 increased $573 thousand when compared to the fourth quarter of 2013 and $298 thousand when compared to the first quarter of 2013. The increase for both periods was primarily due to 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.

 

Total noninterest expense for the first quarter of 2014 declined $353 thousand when compared to the fourth quarter of 2013 and $376 thousand when compared to the first quarter of 2013. The decrease in noninterest expense was primarily due to lower costs associated with problem assets, which was a positive result of the Asset Sale. The decrease from the fourth quarter of 2013 was mainly due to lower write-downs of other real estate owned ($296 thousand), loan collection ($137 thousand) and marketing ($125 thousand) included in other noninterest expense, and FDIC insurance premiums ($155 thousand) due to improved capital ratios at Talbot Bank. These decreases in noninterest expense were partially offset by an increase in employee benefits of $199 thousand, which included higher payroll taxes ($116 thousand) and group insurance ($73 thousand). When compared to the first quarter of 2013, the decrease in noninterest expense for the first quarter of 2014 was primarily due to lower write-downs of other real estate owned.

 

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; and a registered investment adviser firm, Wye Financial Services, 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.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 risks 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

 

Page 3 of 12
 

 

Shore Bancshares, Inc.

Financial Highlights

(Dollars in thousands, except per share data)

 

   For the Three Months Ended 
   March 31, 
   2014   2013   Change 
PROFITABILITY FOR THE PERIOD               
Net interest income  $8,323   $8,477    (1.8)%
Provision for credit losses   975    2,150    (54.7)
Noninterest income   4,788    4,490    6.6 
Noninterest expense   10,115    10,491    (3.6)
Income before income taxes   2,021    326    519.9 
Income tax expense   763    104    633.7 
Net income  $1,258   $222    466.7 
                
Return on average assets   0.49%   0.08%   41bp
Return on average equity   4.88    0.79    409 
Return on average tangible equity (1)   5.97    1.11    486 
Net interest margin   3.50    3.30    20 
Efficiency ratio - GAAP   77.01    80.74    (373)
Efficiency ratio - Non-GAAP (1)   76.44    80.17    (373)
                
PER SHARE DATA               
Basic net income per common share  $0.15   $0.03    400.0%
Diluted net income per common share   0.15    0.03    400.0 
Dividends paid per common share   -    -    - 
Book value per common share at period end   12.35    13.51    (8.6)
Tangible book value per common share at period end (1)   10.47    11.60    (9.7)
Market value at period end   9.51    6.79    40.1 
Market range:               
High   9.99    6.91    44.6 
Low   9.00    5.20    73.1 
                
AVERAGE BALANCE SHEET DATA               
Loans  $707,708   $783,757    (9.7)%
Investment securities   155,556    146,756    6.0 
Earning assets   966,304    1,044,755    (7.5)
Assets   1,044,568    1,122,310    (6.9)
Deposits   923,524    987,325    (6.5)
Stockholders' equity   104,462    114,250    (8.6)
                
CREDIT QUALITY DATA AT PERIOD END               
Net charge-offs  $1,631   $2,406    (32.2)%
                
Nonaccrual loans  $19,156   $31,813    (39.8)
Loans 90 days past due and still accruing   121    22    450.0 
Other real estate owned   4,672    8,366    (44.2)
Total nonperforming assets   23,949    40,201    (40.4)
Accruing troubled debt restructurings (TDRs)   25,333    52,545    (51.8)
Total nonperforming assets and accruing TDRs  $49,282   $92,746    (46.9)
                
CAPITAL AND CREDIT QUALITY RATIOS               
Period-end equity to assets   9.97%   10.35%   (38)bp
Period-end tangible equity to tangible assets (1)   8.58    9.02    (44)
                
Annualized net charge-offs to average loans   0.93    1.25    (32)
                
Allowance for credit losses as a percent of:               
Period-end loans   1.43    2.00    (57)
Nonaccrual loans   52.56    49.46    310 
Nonperforming assets   42.04    39.14    290 
Accruing TDRs   39.75    29.95    980 
Nonperforming assets and accruing TDRs   20.43    16.97    346 
                
As a percent of total loans:               
Nonaccrual loans   2.72    4.05    (133)
Accruing TDRs   3.60    6.69    (309)
Nonaccrual loans and accruing TDRs   6.32    10.74    (442)
                
As a percent of total loans+other real estate owned:               
Nonperforming assets   3.38    5.06    (168)
Nonperforming assets and accruing TDRs   6.96    11.68    (472)
                
As a percent of total assets:               
Nonaccrual loans   1.83    2.88    (105)
Nonperforming assets   2.28    3.64    (136)
Accruing TDRs   2.41    4.76    (235)
Nonperforming assets and accruing TDRs   4.70    8.40    (370)

 

(1) See the reconciliation table on page 12 of 12.

 

Page 4 of 12
 

 

Shore Bancshares, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

               March 31, 2014   March 31, 2014 
   March 31,   December 31,   March 31,   compared to   compared to 
   2014   2013   2013   December 31, 2013   March 31, 2013 
ASSETS                         
Cash and due from banks  $22,668   $21,238   $24,808    6.7%   (8.6)%
Interest-bearing deposits with other banks   109,831    109,384    94,090    0.4    16.7 
Federal funds sold   399    468    2,789    (14.7)   (85.7)
Investment securities available for sale (at fair value)   152,247    147,101    142,238    3.5    7.0 
Investment securities held to maturity   5,074    5,185    2,594    (2.1)   95.6 
                          
Loans held for sale   -    3,521    -    (100.0)   - 
                          
Loans   703,637    711,919    785,753    (1.2)   (10.5)
Less: allowance for credit losses   (10,069)   (10,725)   (15,735)   (6.1)   (36.0)
Loans, net   693,568    701,194    770,018    (1.1)   (9.9)
                          
Premises and equipment, net   15,108    15,198    15,502    (0.6)   (2.5)
Goodwill   12,454    12,454    12,454    -    - 
Other intangible assets, net   3,446    3,520    3,742    (2.1)   (7.9)
Other real estate owned, net   4,672    3,779    8,366    23.6    (44.2)
Other assets   30,047    31,082    28,010    (3.3)   7.3 
                          
Total assets  $1,049,514   $1,054,124   $1,104,611    (0.4)   (5.0)
                          
LIABILITIES                         
Noninterest-bearing deposits  $165,459   $172,797   $155,412    (4.2)   6.5 
Interest-bearing deposits   763,985    760,671    814,747    0.4    (6.2)
Total deposits   929,444    933,468    970,159    (0.4)   (4.2)
                          
Short-term borrowings   8,070    10,140    11,088    (20.4)   (27.2)
Accrued expenses and other liabilities   7,368    7,217    9,016    2.1    (18.3)
Total liabilities   944,882    950,825    990,263    (0.6)   (4.6)
                          
STOCKHOLDERS' EQUITY                         
Common stock, par value $0.01; authorized 35,000,000 shares   85    85    85    -    - 
Additional paid in capital   32,229    32,207    32,151    0.1    0.2 
Retained earnings   72,702    71,444    81,300    1.8    (10.6)
Accumulated other comprehensive (loss) income   (384)   (437)   812    12.1    (147.3)
Total stockholders' equity   104,632    103,299    114,348    1.3    (8.5)
                          
Total liabilities and stockholders' equity  $1,049,514   $1,054,124   $1,104,611    (0.4)   (5.0)
                          
Period-end common shares outstanding   8,471    8,471    8,461    -    0.1 
Book value per common share  $12.35   $12.19   $13.51    1.3    (8.6)

 

Page 5 of 12
 

 

Shore Bancshares, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

 

   For the Three Months Ended 
   March 31, 
   2014   2013   % Change 
INTEREST INCOME               
Interest and fees on loans  $8,875   $9,907    (10.4)%
Interest and dividends on investment securities:               
Taxable   521    643    (19.0)
Tax-exempt   3    5    (40.0)
Interest on federal funds sold   -    2    (100.0)
Interest on deposits with other banks   56    50    12.0 
Total interest income   9,455    10,607    (10.9)
                
INTEREST EXPENSE               
Interest on deposits   1,127    2,122    (46.9)
Interest on short-term borrowings   5    8    (37.5)
Total interest expense   1,132    2,130    (46.9)
                
NET INTEREST INCOME   8,323    8,477    (1.8)
Provision for credit losses   975    2,150    (54.7)
                
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES   7,348    6,327    16.1 
                
NONINTEREST INCOME               
Service charges on deposit accounts   558    572    (2.4)
Trust and investment fee income   431    390    10.5 
Investment securities gains   -    -    - 
Insurance agency commissions   3,077    2,813    9.4 
Other noninterest income   722    715    1.0 
Total noninterest income   4,788    4,490    6.6 
                
NONINTEREST EXPENSE               
Salaries and wages   4,314    4,283    0.7 
Employee benefits   1,182    1,134    4.2 
Occupancy expense   627    597    5.0 
Furniture and equipment expense   273    250    9.2 
Data processing   760    703    8.1 
Directors' fees   112    121    (7.4)
Amortization of intangible assets   74    74    - 
Insurance agency commissions expense   512    461    11.1 
FDIC insurance premium expense   458    366    25.1 
Write-downs of other real estate owned   75    672    (88.8)
Other noninterest expenses   1,728    1,830    (5.6)
Total noninterest expense   10,115    10,491    (3.6)
                
Income before income taxes   2,021    326    519.9 
Income tax expense   763    104    633.7 
                
NET INCOME  $1,258   $222    466.7 
                
Weighted average shares outstanding - basic   8,471    8,458    0.2 
Weighted average shares outstanding - diluted   8,484    8,458    0.3 
                
Basic net income per common share  $0.15   $0.03    400.0 
Diluted net income per common share   0.15    0.03    400.0 
Dividends paid per common share   -    -    - 

 

Page 6 of 12
 

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets

(Dollars in thousands)

 

   For the Three Months Ended 
   March 31, 
   2014   2013 
   Average   Yield/   Average   Yield/ 
   balance   rate   balance   rate 
Earning assets                    
Loans  $707,708    5.10%  $783,757    5.14%
Loans held for sale   2,425    -    -    - 
Investment securities                    
Taxable   155,123    1.36    146,176    1.78 
Tax-exempt   433    4.25    580    4.85 
Federal funds sold   1,708    0.05    8,184    0.11 
Interest-bearing deposits   98,907    0.23    106,058    0.19 
Total earning assets   966,304    3.98%   1,044,755    4.13%
Cash and due from banks   22,708         24,966      
Other assets   66,203         69,185      
Allowance for credit losses   (10,647)        (16,596)     
Total assets  $1,044,568        $1,122,310      
                     
Interest-bearing liabilities                    
Demand deposits  $173,801    0.14%  $173,714    0.17%
Money market and savings deposits (1)   222,378    0.12    244,182    0.97 
Certificates of deposit $100,000 or more   178,792    1.13    216,288    1.39 
Other time deposits   186,960    1.08    201,171    1.47 
Interest-bearing deposits   761,931    0.60    835,355    1.03 
Short-term borrowings   9,345    0.22    11,987    0.27 
Total interest-bearing liabilities   771,276    0.60%   847,342    1.02%
Noninterest-bearing deposits   161,593         151,970      
Accrued expenses and other liabilities   7,237         8,748      
Stockholders' equity   104,462         114,250      
Total liabilities and stockholders' equity  $1,044,568        $1,122,310      
                     
Net interest spread        3.38%        3.11%
Net interest margin        3.50%        3.30%

 

(1)Interest on money market and savings deposits for the three months ended March 31, 2013 included an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense $416 thousand for the three months ended March 31, 2013. Interest expense for the three months ended March 31, 2014 did not reflect this adjustment because the interest rate caps were terminated in June of 2013.
  
Page 7 of 12
 

 

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 14    1Q 14  
   2014   2013   2013   2013   2013   compared to   compared to  
   (1Q 14)   (4Q 13)   (3Q 13)   (2Q 13)   (1Q 13)   4Q 13    1Q 13  
PROFITABILITY FOR THE PERIOD                                     
Taxable-equivalent net interest income  $8,347   $8,595   $8,852   $9,028   $8,504    (2.9)%    (1.8)% 
Less: Taxable-equivalent adjustment   24    25    24    27    27    (4.0)    (11.1) 
Net interest income   8,323    8,570    8,828    9,001    8,477    (2.9)    (1.8) 
Provision for credit losses   975    474    22,460    2,700    2,150    105.7     (54.7) 
Noninterest income   4,788    4,215    4,792    3,962    4,490    13.6     6.6  
Noninterest expense   10,115    10,468    9,968    9,759    10,491    (3.4)    (3.6) 
Income (loss) before income taxes   2,021    1,843    (18,808)   504    326    9.7     519.9  
Income tax expense (benefit)   763    668    (7,416)   143    104    14.2     633.7  
Net income (loss)  $1,258   $1,175   $(11,392)  $361   $222    7.1     466.7  
                                      
Return on average assets   0.49%   0.44%   (4.24)%   0.13%   0.08%   5bp    41bp 
Return on average equity   4.88    4.50    (39.68)   1.27    0.79    38     409  
Return on average tangible equity (1)   5.97    5.53    (46.03)   1.66    1.11    44     486  
Net interest margin   3.50    3.47    3.54    3.60    3.30    3     20  
Efficiency ratio - GAAP   77.01    81.72    73.06    75.13    80.74    (471)    (373) 
Efficiency ratio - Non-GAAP (1)   76.44    81.14    74.13    74.45    80.17    (470)    (373) 
                                      
PER SHARE DATA                                     
Basic net income (loss) per common share  $0.15   $0.14   $(1.35)  $0.04   $0.03    7.1%    400.0% 
Diluted net income (loss) per common share   0.15    0.14    (1.35)   0.04    0.03    7.1     400.0  
Dividends paid per common share   -    -    -    -    -    -     -  
Book value per common share at period end   12.35    12.19    12.06    13.43    13.51    1.3     (8.6) 
Tangible book value per common share at period end (1)   10.47    10.31    10.16    11.52    11.60    1.6     (9.7) 
Market value at period end   9.51    9.22    8.80    7.36    6.79    3.1     40.1  
Market range:                                     
High   9.99    9.45    9.06    7.75    6.91    5.7     44.6  
Low   9.00    8.50    7.06    5.97    5.20    5.9     73.1  
                                      
AVERAGE BALANCE SHEET DATA                                     
Loans  $707,708   $718,070   $772,008   $785,442   $783,757    (1.4)%    (9.7)% 
Investment securities   155,556    145,181    124,020    141,193    146,756    7.1     6.0  
Earning assets   966,304    982,519    993,068    1,005,474    1,044,755    (1.7)    (7.5) 
Assets   1,044,568    1,060,315    1,064,919    1,077,852    1,122,310    (1.5)    (6.9) 
Deposits   923,524    938,293    932,867    943,577    987,325    (1.6)    (6.5) 
Stockholders' equity   104,462    103,507    113,904    114,208    114,250    0.9     (8.6) 
                                      
CREDIT QUALITY DATA AT PERIOD END                                     
Net charge-offs  $1,631   $1,050   $26,882   $2,712   $2,406    55.3%    (32.2)% 
                                      
Nonaccrual loans excluding nonaccrual loans held for sale (hfs)  $19,156   $14,626   $17,501   $34,818   $31,813    31.0     (39.8) 
Loans 90 days past due and still accruing   121    270    9    3    22    (55.2)    450.0  
Other real estate owned   4,672    3,779    5,776    6,408    8,366    23.6     (44.2) 
Total nonperforming assets excluding nonaccrual loans hfs   23,949    18,675    23,286    41,229    40,201    28.2     (40.4) 
Nonaccrual loans hfs   -    3,521    7,265    -    -    (100.0)    -  
Total nonperforming assets including nonaccrual loans hfs  $23,949   $22,196   $30,551   $41,229   $40,201    7.9     (40.4) 
                                      
Accruing troubled debt restructurings (TDRs) excluding TDRs hfs  $25,333   $26,088   $29,439   $50,278   $52,545    (2.9)    (51.8) 
Accruing TDRs hfs   -    -    14,842    -    -    -     -  
Total accruing TDRs including TDRs hfs  $25,333   $26,088   $44,281   $50,278   $52,545    (2.9)    (51.8) 
                                      
Total nonperforming assets and accruing TDRs excluding nonaccrual loans and TDRs hfs  $49,282   $44,763   $52,725   $91,507   $92,746    10.1     (46.9) 
Nonaccrual loans and TDRs hfs   -    3,521    22,107    -    -    (100.0)    -  
Total nonperforming assets and accruing TDRs including nonaccrual loans and TDRs hfs  $49,282   $48,284   $74,832   $91,507   $92,746    2.1     (46.9) 

 

(1) See the reconciliation table on page 12 of 12.

 

Page 8 of 12
 

 

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 14   1Q 14 
   2014   2013   2013   2013   2013   compared to   compared to 
   (1Q 14)   (4Q 13)   (3Q 13)   (2Q 13)   (1Q 13)   4Q 13   1Q 13 
CAPITAL AND CREDIT QUALITY RATIOS                                   
Period-end equity to assets   9.97%   9.80%   9.70%   10.77%   10.35%   17bp   (38)bp
Period-end tangible equity to tangible assets (1)   8.58    8.41    8.30    9.39    9.02    17    (44)
                                    
Annualized net charge-offs to average loans   0.93    0.58    13.81    1.38    1.25    35    (32)
                                    
Allowance for credit losses as a percent of (excluding loans hfs):                                   
Period-end loans   1.43    1.51    1.57    2.01    2.00    (8)   (57)
Nonaccrual loans   52.56    73.33    64.57    45.16    49.46    (2,077)   310 
Nonperforming assets   42.04    57.43    48.53    38.14    39.14    (1,539)   290 
Accruing TDRs   39.75    41.11    38.39    31.27    29.95    (136)   980 
Nonperforming assets and accruing TDRs   20.43    23.96    21.43    17.18    16.97    (353)   346 
                                    
Allowance for credit losses as a percent of (including loans hfs):                                   
Nonaccrual loans   52.56    59.10    45.63    45.16    49.46    (654)   310 
Nonperforming assets   42.04    48.32    36.99    38.14    39.14    (628)   290 
Accruing TDRs   39.75    41.11    25.52    31.27    29.95    (136)   980 
Nonperforming assets and accruing TDRs   20.43    22.21    15.10    17.18    16.97    (178)   346 
                                    
As a percent of total loans (excluding loans hfs):                                   
Nonaccrual loans   2.72    2.05    2.44    4.45    4.05    67    (133)
Accruing TDRs   3.60    3.66    4.10    6.43    6.69    (6)   (309)
Nonaccrual loans and accruing TDRs   6.32    5.71    6.54    10.88    10.74    61    (442)
                                    
As a percent of total loans+other real estate owned (excluding loans hfs):                                   
Nonperforming assets   3.38    2.61    3.21    5.23    5.06    77    (168)
Nonperforming assets and accruing TDRs   6.96    6.25    7.28    11.60    11.68    71    (472)
                                    
As a percent of total assets (excluding loans hfs):                                   
Nonaccrual loans   1.83    1.39    1.66    3.30    2.88    44    (105)
Nonperforming assets   2.28    1.77    2.21    3.91    3.64    51    (136)
Accruing TDRs   2.41    2.47    2.80    4.77    4.76    (6)   (235)
Nonperforming assets and accruing TDRs   4.70    4.25    5.01    8.68    8.40    45    (370)
                                    
As a percent of total assets (including loans hfs):                                   
Nonaccrual loans   1.83    1.72    2.36    3.30    2.88    11    (105)
Nonperforming assets   2.28    2.11    2.91    3.91    3.64    17    (136)
Accruing TDRs   2.41    2.47    4.21    4.77    4.76    (6)   (235)
Nonperforming assets and accruing TDRs   4.70    4.58    7.12    8.68    8.40    12    (370)

 

(1) See the reconciliation table on page 12 of 12.

 

Page 9 of 12
 

 

Shore Bancshares, Inc.

Consolidated Statements of Operations By Quarter

(In thousands, except per share data)

 

                       1Q 14   1Q 14 
                       compared to   compared to 
   1Q 14   4Q 13   3Q 13   2Q 13   1Q 13   4Q 13   1Q 13 
INTEREST INCOME                                   
Interest and fees on loans  $8,875   $9,242   $9,767   $10,142   $9,907    (4.0)%   (10.4)%
Interest and dividends on investment securities:                                   
Taxable   521    504    357    568    643    3.4    (19.0)
Tax-exempt   3    3    5    4    5    -    (40.0)
Interest on federal funds sold   -    1    -    1    2    (100.0)   (100.0)
Interest on deposits with other banks   56    57    53    40    50    (1.8)   12.0 
Total interest income   9,455    9,807    10,182    10,755    10,607    (3.6)   (10.9)
                                    
INTEREST EXPENSE                                   
Interest on deposits   1,127    1,230    1,348    1,748    2,122    (8.4)   (46.9)
Interest on short-term borrowings   5    7    6    6    8    (28.6)   (37.5)
Total interest expense   1,132    1,237    1,354    1,754    2,130    (8.5)   (46.9)
                                    
NET INTEREST INCOME   8,323    8,570    8,828    9,001    8,477    (2.9)   (1.8)
Provision for credit losses   975    474    22,460    2,700    2,150    105.7    (54.7)
                                    
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR CREDIT LOSSES   7,348    8,096    (13,632)   6,301    6,327    (9.2)   16.1 
                                    
NONINTEREST INCOME                                   
Service charges on deposit accounts   558    599    600    600    572    (6.8)   (2.4)
Trust and investment fee income   431    429    401    393    390    0.5    10.5 
Investment securities gains   -    -    -    913    -    -    - 
Insurance agency commissions   3,077    2,477    2,724    2,633    2,813    24.2    9.4 
Loss on termination of cash flow hedge   -    -    -    (1,306)   -    -    - 
Other noninterest income   722    710    1,067    729    715    1.7    1.0 
Total noninterest income   4,788    4,215    4,792    3,962    4,490    13.6    6.6 
                                    
NONINTEREST EXPENSE                                   
Salaries and wages   4,314    4,336    4,420    4,307    4,283    (0.5)   0.7 
Employee benefits   1,182    983    971    1,006    1,134    20.2    4.2 
Occupancy expense   627    569    566    612    597    10.2    5.0 
Furniture and equipment expense   273    252    275    243    250    8.3    9.2 
Data processing   760    773    718    706    703    (1.7)   8.1 
Directors' fees   112    92    86    55    121    21.7    (7.4)
Amortization of intangible assets   74    74    74    74    74    -    - 
Insurance agency commissions expense   512    470    409    458    461    8.9    11.1 
FDIC insurance premium expense   458    613    467    367    366    (25.3)   25.1 
Write-downs of other real estate owned   75    371    219    56    672    (79.8)   (88.8)
Other noninterest expenses   1,728    1,935    1,763    1,875    1,830    (10.7)   (5.6)
Total noninterest expense   10,115    10,468    9,968    9,759    10,491    (3.4)   (3.6)
                                    
Income (loss) before income taxes   2,021    1,843    (18,808)   504    326    9.7    519.9 
Income tax expense (benefit)   763    668    (7,416)   143    104    14.2    633.7 
                                    
NET INCOME (LOSS)  $1,258   $1,175   $(11,392)  $361   $222    7.1    466.7 
                                    
Weighted average shares outstanding - basic   8,471    8,463    8,461    8,461    8,458    0.1    0.2 
Weighted average shares outstanding - diluted   8,484    8,474    8,461    8,465    8,458    0.1    0.3 
                                    
Basic net income (loss) per common share  $0.15   $0.14   $(1.35)  $0.04   $0.03    7.1    400.0 
Diluted net income (loss) per common share   0.15    0.14    (1.35)   0.04    0.03    7.1    400.0 
Dividends paid per common share   -    -    -    -    -    -    - 

 

Page 10 of 12
 

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter

(Dollars in thousands)

 

                                           Average balance 
                                           1Q 14   1Q 14 
                                           compared to   compared to 
   1Q 14   4Q 13   3Q 13   2Q 13   1Q 13   4Q 13   1Q 13 
   Average   Yield/   Average   Yield/   Average   Yield/   Average   Yield/   Average   Yield/         
   balance   rate   balance   rate   balance   rate   balance   rate   balance   rate         
Earning assets                                                            
Loans  $707,708    5.10%  $718,070    5.07%  $772,008    5.03%  $785,442    5.19%  $783,757    5.14%   (1.4)%   (9.7)%
Loans held for sale   2,425    -    15,047    2.38    -    -    -    -    -    -    (83.9)   - 
Investment securities                                                            
Taxable   155,123    1.36    144,699    1.38    123,499    1.15    140,614    1.62    146,176    1.78    7.2    6.1 
Tax-exempt   433    4.25    482    4.39    521    5.27    579    4.81    580    4.85    (10.2)   (25.3)
Federal funds sold   1,708    0.05    2,692    0.06    1,618    0.07    2,992    0.10    8,184    0.11    (36.6)   (79.1)
Interest-bearing deposits   98,907    0.23    101,529    0.22    95,422    0.22    75,847    0.21    106,058    0.19    (2.6)   (6.7)
Total earning assets   966,304    3.98%   982,519    3.97%   993,068    4.08%   1,005,474    4.30%   1,044,755    4.13%   (1.7)   (7.5)
Cash and due from banks   22,708         20,900         22,088         22,510         24,966         8.7    (9.0)
Other assets   66,203         70,048         65,001         66,967         69,185         (5.5)   (4.3)
Allowance for credit losses   (10,647)        (13,152)        (15,238)        (17,099)        (16,596)        (19.0)   (35.8)
Total assets  $1,044,568        $1,060,315        $1,064,919        $1,077,852        $1,122,310         (1.5)   (6.9)
                                                             
Interest-bearing liabilities                                                            
Demand deposits  $173,801    0.14%  $176,492    0.15%  $172,143    0.16%  $162,589    0.15%  $173,714    0.17%   (1.5)   0.1 
Money market and savings deposits (1)   222,378    0.12    211,294    0.12    207,162    0.12    225,117    0.67    244,182    0.97    5.2    (8.9)
Certificates of deposit $100,000 or more   178,792    1.13    190,117    1.16    198,495    1.23    203,641    1.32    216,288    1.39    (6.0)   (17.3)
Other time deposits   186,960    1.08    188,645    1.14    192,878    1.24    197,644    1.30    201,171    1.47    (0.9)   (7.1)
Interest-bearing deposits   761,931    0.60    766,548    0.64    770,678    0.69    788,991    0.89    835,355    1.03    (0.6)   (8.8)
Short-term borrowings   9,345    0.22    10,505    0.23    10,695    0.23    10,752    0.24    11,987    0.27    (11.0)   (22.0)
Total interest-bearing liabilities   771,276    0.60%   777,053    0.63%   781,373    0.69%   799,743    0.88%   847,342    1.02%   (0.7)   (9.0)
Noninterest-bearing deposits   161,593         171,745         162,189         154,586         151,970         (5.9)   6.3 
Accrued expenses and other liabilities   7,237         8,010         7,453         9,315         8,748         (9.7)   (17.3)
Stockholders' equity   104,462         103,507         113,904         114,208         114,250         0.9    (8.6)
Total liabilities and stockholders' equity  $1,044,568        $1,060,315        $1,064,919        $1,077,852        $1,122,310         (1.5)   (6.9)
                                                             
Net interest spread        3.38%        3.34%        3.39%        3.42%        3.11%          
Net interest margin        3.50%        3.47%        3.54%        3.60%        3.30%          

 

(1)Interest on money market and savings deposits for the second and first quarters of 2013 included an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense $279 thousand for the second quarter of 2013 and $416 thousand for the first quarter of 2013. Interest expense for the other quarters presented did not reflect this adjustment because the interest rate caps were terminated in June of 2013.

 

Page 11 of 12
 

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures

(In thousands, except per share data)

 

                     
   1Q 14   4Q 13   3Q 13   2Q 13   1Q 13 
                     
The following reconciles return on average equity and return on average tangible equity (Note 1):                         
                          
Net income (loss)  $1,258   $1,175   $(11,392)  $361   $222 
Net income (loss) - annualized (A)  $5,102   $4,662   $(45,197)  $1,448   $900 
                          
Net income (loss), excluding net amortization of intangible assets  $1,303   $1,220   $(11,347)  $406   $267 
                          
Net income (loss), excluding net amortization of intangible assets - annualized (B)  $5,284   $4,840   $(45,018)  $1,628   $1,083 
                          
Average stockholders' equity (C)  $104,462   $103,507   $113,904   $114,208   $114,250 
Less: Average goodwill and other intangible assets   (15,945)   (16,018)   (16,092)   (16,166)   (16,242)
Average tangible equity (D)  $88,517   $87,489   $97,812   $98,042   $98,008 
                          
Return on average equity (GAAP) (A)/(C)   4.88%   4.50%   (39.68)%   1.27%   0.79%
Return on average tangible equity (Non-GAAP) (B)/(D)   5.97%   5.53%   (46.03)%   1.66%   1.11%
                          
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):                         
                          
Noninterest expense (E)  $10,115   $10,468   $9,968   $9,759   $10,491 
Less: Amortization of intangible assets   (74)   (74)   (74)   (74)   (74)
   Other nonrecurring adjustments   -    -    -    49    - 
Adjusted noninterest expense (F)  $10,041   $10,394   $9,894   $9,734   $10,417 
                          
Taxable-equivalent net interest income (G)  $8,347   $8,595   $8,852   $9,028   $8,504 
Nonrecurring adjustment   -    -    -    (308)   - 
Taxable-equivalent net interest income excluding nonrecurring adjustment (H)  $8,347   $8,595   $8,852   $8,720   $8,504 
                          
Noninterest income (I)  $4,788   $4,215   $4,792   $3,962   $4,490 
Less: Investment securities (gains)/losses   -    -    -    (913)   - 
  Other nonrecurring (gains)/losses   -    -    (297)   1,306    - 
Adjusted noninterest income (J)  $4,788   $4,215   $4,495   $4,355   $4,490 
                          
Efficiency ratio (GAAP) (E)/(G)+(I)   77.01%   81.72%   73.06%   75.13%   80.74%
Efficiency ratio (Non-GAAP) (F)/(H)+(J)   76.44%   81.14%   74.13%   74.45%   80.17%
                          
The following reconciles book value per common share and tangible book value per common share (Note 1):                         
                          
Stockholders' equity (K)  $104,632   $103,299   $102,001   $113,594   $114,348 
Less: Goodwill and other intangible assets   (15,900)   (15,974)   (16,048)   (16,122)   (16,196)
Tangible equity (L)  $88,732   $87,325   $85,953   $97,472   $98,152 
                          
Shares outstanding (M)   8,471    8,471    8,461    8,461    8,461 
                          
Book value per common share (GAAP) (K)/(M)  $12.35   $12.19   $12.06   $13.43   $13.51 
Tangible book value per common share (Non-GAAP) (L)/(M)  $10.47   $10.31   $10.16   $11.52   $11.60 
                          
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):                         
                          
Stockholders' equity (N)  $104,632   $103,299   $102,001   $113,594   $114,348 
Less: Goodwill and other intangible assets   (15,900)   (15,974)   (16,048)   (16,122)   (16,196)
Tangible equity (O)  $88,732   $87,325   $85,953   $97,472   $98,152 
                          
Assets (P)  $1,049,514   $1,054,124   $1,051,384   $1,054,277   $1,104,611 
Less: Goodwill and other intangible assets   (15,900)   (15,974)   (16,048)   (16,122)   (16,196)
Tangible assets (Q)  $1,033,614   $1,038,150   $1,035,336   $1,038,155   $1,088,415 
                          
Period-end equity/assets (GAAP) (N)/(P)   9.97%   9.80%   9.70%   10.77%   10.35%
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)   8.58%   8.41%   8.30%   9.39%   9.02%

 

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: George Rapp, Chief Financial Officer, 410-763-7800

 

Page 12 of 12

 

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