EASTON, Md., April 28, 2022 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company") reported net income of $5.613 million or $0.28 per diluted common share for the first quarter of 2022, compared to net income of $2.723 million or $0.16 per diluted common share for the fourth quarter of 2021, and net income of $3.998 million or $0.34 per diluted common share for the first quarter of 2021. Net income, excluding merger related expenses for the first quarter of 2022 was $6.156 million or $0.31 per diluted common share, compared to net income, excluding merger related expenses of $7.914 million or $0.46 per diluted common share for the fourth quarter of 2021.

Shore Bancshares Logo (PRNewsfoto/Shore Bancshares, Inc.)

When comparing net income, excluding merger related expenses, for the first quarter of 2022 to the fourth quarter of 2021, net income decreased $1.8 million, primarily due increases in noninterest expenses of $3.7 million and provision for credit losses of $2.3 million, partially offset by increases in net interest income of $1.8 million and noninterest income of $917 thousand. When comparing net income, excluding merger related expenses, for the first quarter of 2022 to the first quarter of 2021, net income increased $2.4 million, primarily due to increases in net interest income of $8.6 million and noninterest income of $3.5 million, partially offset by an increase in noninterest expenses of $9.1 million

"We are pleased to announce our first quarter earnings and financial results," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer. "We saw significant growth in both loans and deposits during the quarter, resulting from our ability to be competitive in all areas of our footprint. Our current size allows us the ability to originate larger loans than some of our competitors, while providing the opportunity for borrowers to remain with a local community bank. We are already experiencing the advantages of having a stronger presence in Central Maryland, particularly Anne Arundel County, and continue to capitalize on opportunities in our Delaware market."

Balance Sheet Review

Total assets were $3.494 billion at March 31, 2022, a $34.4 million, or 1.0%, increase when compared to $3.460 billion at the end of 2021. This increase was due to an increase in loans held for investment of $61.9 million, or 2.9%, partially offset by a decrease in loans held for sale of $24.8 million, or 65.8%. The positive organic loan growth for loans held for investment was due to strong loan demand, specifically within our commercial real estate, construction and consumer portfolios, while loan demand for residential real estate was limited by an increasing interest rate environment and lack of inventory. As of March 31, 2022, the Company had 114 Paycheck Protection Program ("PPP") loans totaling $14.9 million that were outstanding.

Total deposits increased $42.3 million, or 1.4%, when compared to December 31, 2021. The increase in total deposits was primarily due to $171.3 million in additional checking deposits, partially offset by decreases in money market and savings deposits of $77.9 million and noninterest-bearing deposits of $51.1 million.  

Total stockholders' equity increased $1.2 million, or less than 1%, when compared to December 31, 2021, primarily due to first quarter earnings, partially offset by unrealized losses of $2.2 million on available for sale securities during the quarter, which are recorded in accumulated other comprehensive loss. At March 31, 2022, the ratio of total equity to total assets was 10.07% and the ratio of total tangible equity to total tangible assets was 8.22%.

Review of Quarterly Financial Results

Net interest income was $22.4 million for the first quarter of 2022, compared to $20.6 million for the fourth quarter of 2021 and $13.8 million for the first quarter of 2021. The increase in net interest income when compared to the fourth quarter of 2021 was primarily due to increases in interest and fees on loans of $1.5 million, interest on taxable investment securities of $322 thousand and interest on deposits with other banks of $85 thousand, partially offset by increases in expense on interest-bearing deposits of $86 thousand and long-term borrowings of $25 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $248.6 million, or 13.2%. The acquisition of loans from Severn had a significant impact on the average balance of loans due to carrying these loans for a full quarter but was also complemented by significant organic loan growth of $61.9 million, fees received from PPP loan forgiveness of $272 thousand and accretion income from loans acquired of $258 thousand. The increase in interest on deposits with other banks was primarily due to an increase in the average balance of $100.6 million, or 20.7%, combined with an increase in the yield on these deposits of 4bps due to an increase in the Fed funds rate during the first quarter. The increase in interest on taxable investment securities was driven by an increase in the average balance within these securities of $62.3 million, or 13.3%, due to a full quarter of acquired securities from Severn and additional purchases of held to maturity securities during the first quarter of 2022. The increase in deposits with other banks and investment securities was primarily due to excess liquidity. The increase in interest expense on interest-bearing deposits was primarily due an increase in the average balance of interest-bearing deposits of $284.4 million, or 15.4%, the result of both a full quarter of deposits acquired from Severn and $93.3 million in organic deposit growth during the first quarter of 2022. The rates paid on interest-bearing deposits decreased slightly to 26bps in the first quarter of 2022 from 27bps in the fourth quarter of 2021, maintaining a low cost of funds on core deposits. The increase in interest expenses was due to a full quarter of additional long-term debt, specifically the junior subordinated debt acquired from Severn.

The increase in net interest income when compared to the first quarter of 2021 was primarily due to increases in interest and fees on loans of $7.7 million, interest on taxable investment securities of $1.1 million and interest on deposits with other banks of $207 thousand, partially offset by increases in expense on interest-bearing deposits of $174 thousand and long-term borrowings of $175 thousand.  The increase in interest income was due to a higher average balance in loans, taxable investment securities and deposits with other banks of $684.9 million, $303.2 million and $397.6 million, respectively. These assets were significantly impacted by the acquisition of Severn in the fourth quarter of 2021 as well as organic loan growth and excess liquidity throughout 2021 and 2022. Interest-bearing liabilities also increased when compared to the first quarter of 2021 due to a higher average balance in interest-bearing deposits of $902.9 million, coupled with the addition of long-term advances from the FHLB of $10.1 million and subordinated debt of $18.2 million net of a fair value adjustment of $2.4 million, both of which were acquired from Severn in the fourth quarter of 2021. The long-term advances from the FHLB are set to mature in October of 2022 and the subordinated debt acquired from Severn may be called at any time.

The Company's net interest margin decreased to 2.78% for the first quarter of 2022 from 2.87% for the fourth quarter of 2021 and 3.00% for the first quarter of 2021. The decrease in net interest margin in the first quarter of 2022 when compared to the fourth quarter of 2021, was primarily due to lower yields on loans of 13bps resulting from decreases in accretion income on the acquired loan portfolio and PPP fee income. In addition, excess liquidity continues to put downward pressure on earning assets due to excess cash being invested in lower yielding assets. The decrease in net interest margin in the first quarter of 2022 when compared to the first quarter of 2021, was primarily due to a lower yield on taxable investment securities of 14bps, which was magnified by an increase in the average balance in these securities of $303.2 million, partially offset by a higher yield on loans of 17bps and lower rates paid on interest-bearing liabilities of 13bps. As previously mentioned, excess liquidity when compared to the first quarter of 2021 continues to compress the overall net interest margin. Absent excess liquidity of $400 million, we estimate our margin for the first quarter of 2022 would have been 3.07%.

The provision for credit losses was $600 thousand for the three months ended March 31, 2022.  The comparable amounts were $(1.7) million and $425 thousand for the three months ended December 31, 2021 and March 31, 2021, respectively. The increase in the provision for credit losses during the first quarter of 2022 as compared to the prior quarter was primarily attributed to the Company's reduction of pandemic related qualitative factors. The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.92% at March 31, 2022, compared to 0.93% at December 31, 2021 and 1.11% at March 31, 2021. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to the fourth quarter of 2021, was due to further reduced pandemic qualitative factors previously mentioned, partially offset by the addition of organic loan growth in the first quarter of 2022 which required additional reserves. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to the first quarter of 2021, was primarily due to improved credit quality and reduced pandemic qualitative factors, during the fourth quarter of 2021 and first quarter of 2022. The Company reported net recoveries of $166 thousand in the first quarter of 2022, compared to net recoveries of $142 thousand in the fourth quarter of 2021 and no net charge offs or recoveries in the first quarter of 2021.

At March 31, 2022, nonperforming assets were $3.9 million, compared to $3.8 million at December 31, 2021. The balance of nonperforming assets slightly increased due to increases in nonaccrual loans of $62 thousand, or 2.2%, and other real estate owned of $29 thousand, or 5.5%. Accruing troubled debt restructurings ("TDRs") decreased $663 thousand, or 11.7% at March 31, 2022 compared to December 31, 2021. When comparing the first quarter of 2022 to the first quarter of 2021, nonperforming assets decreased $2.4 million, or 38.3%, primarily due to decreases in nonaccrual loans of $2.0 million, or 41.6%, and loans 90 days past due and still accruing of $729 thousand, or 61.4%. Accruing TDRs decreased $1.5 million, or 22.5%, and other real estate owned increased $356 thousand, or 173.7%, mainly due to acquiring other real estate owned from the Severn acquisition. The ratio of nonperforming assets and accruing TDRs to total assets was 0.25%, 0.27% and 0.63% at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.  In addition, the ratio of accruing TDRs to total loans at March 31, 2022 was 0.23%, compared to 0.27% at December 31, 2021 and 0.44% at March 31, 2021.

Total noninterest income for the first quarter of 2022 increased $917 thousand, or 17.9%, when compared to the fourth quarter of 2021 and increased $3.5 million, or 136.4%, when compared to the first quarter of 2021. The increase compared to the fourth quarter of 2021 was primarily due to increases in revenue associated with the mortgage division of $919 thousand, service charges on deposit accounts of $125 thousand and revenue from Mid-Maryland Title Company, Inc. ("Mid-MD") of $76 thousand, partially offset by a reduction in other noninterest income primarily related to higher expenses related to retirement funding costs as well as lower other loan fee income. The increase in noninterest income when compared to the first quarter of 2021, was among all noninterest income categories, but primarily impacted by the addition of mortgage-banking revenue of $1.9 million, service charges on deposit accounts of $685 thousand, additional rental fee income of $345 thousand and Mid-MD revenue of $323 thousand.

Total noninterest expense, excluding merger related expenses, for the first quarter of 2022 increased $3.7 million, or 15.8%, when compared to the fourth quarter of 2021 and increased $9.1 million, or 86.7%, when compared to the first quarter of 2021. The increase in noninterest expense when compared to the fourth and first quarters of 2021 was primarily due to increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and legal and professional fees, which were all significantly impacted by adding Severn and its operations for a full quarter in 2022. In addition, salaries and wages were impacted by incentive increases which took effect in January.

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, 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. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; the magnitude and duration of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

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

 

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)




For the Three Months Ended




March 31, 




2022


2021


 Change


PROFITABILITY FOR THE PERIOD










     Net interest income


$

22,430


$

13,800


62.5

%

     Provision for credit losses



600



425


41.2


     Noninterest income



6,046



2,557


136.4


     Noninterest expense



20,332



10,499


93.7


     Income before income taxes



7,544



5,433


38.9


     Income tax expense



1,931



1,435


34.6


Net income


$

5,613


$

3,998


40.4






















     Return on average assets



0.65

%


0.82

%

(17)

bp

     Return on average assets excluding amortization of
     intangibles and merger related expenses - Non-GAAP (2)



0.76



0.82


(6)


     Return on average equity



6.45



8.28


(183)


     Return on average tangible equity - Non-GAAP (1), (2)



9.40



9.40



     Net interest margin



2.78



3.00


(22)


     Efficiency ratio - GAAP



71.40



64.19


721


     Efficiency ratio - Non-GAAP (1), (2)



66.93



63.28


365












PER SHARE DATA










     Basic and diluted net income per common share


$

0.28


$

0.34


(17.6)

%











     Dividends paid per common share


$

0.12


$

0.12



     Book value per common share at period end



17.73



16.69


6.2


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



14.19



15.06


(5.8)


     Market value at period end



20.48



17.02


20.3


     Market range:










          High



21.41



18.10


18.3


          Low



19.34



12.99


48.9












AVERAGE BALANCE SHEET DATA










     Loans


$

2,135,734


$

1,450,883


47.2

%

     Investment securities



531,017



227,816


133.1


     Earning assets



3,253,549



1,867,930


74.2


     Assets



3,477,481



1,975,951


76.0


     Deposits



3,044,213



1,742,666


74.7


     Stockholders' equity



353,011



195,791


80.3












CREDIT QUALITY DATA










     Net (recoveries) charge-offs


$

(166)


$


(100.0)

%











     Nonaccrual loans


$

2,848


$

4,880


(41.6)


     Loans 90 days past due and still accruing



459



1,188


(61.4)


     Other real estate owned



561



205



     Total nonperforming assets



3,868



6,273


(38.3)


     Accruing troubled debt restructurings (TDRs) excluding acquired



5,004



6,456


(22.5)


     Total nonperforming assets and accruing TDRs excluding acquired


$

8,872


$

12,729


(30.3)






















CAPITAL AND CREDIT QUALITY RATIOS










     Period-end equity to assets



10.07

%


9.61

%

46

bp

     Period-end tangible equity to tangible assets - Non-GAAP (1)



8.22



8.76


(54)












     Annualized net (recoveries) charge-offs to average loans



(0.03)




(3)












     Allowance for credit losses as a percent of:










     Period-end loans (3)



0.67



0.98


(31)


     Period-end loans (4)



0.92



1.11


(19)


     Nonaccrual loans



516.50



293.30


223


     Nonperforming assets



380.30



228.17


152


     Accruing TDRs



293.96



221.70


72


     Nonperforming assets and accruing TDRs



165.80



112.44


53












     As a percent of total loans:










     Nonaccrual loans



0.13



0.33


(20)


     Accruing TDRs



0.23



0.44


(21)


     Nonaccrual loans and accruing TDRs



0.36



0.78


(42)












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










     Nonperforming assets



0.18



0.43


(25)


     Nonperforming assets and accruing TDRs



0.41



0.87


(46)












     As a percent of total assets:










     Nonaccrual loans



0.08



0.24


(16)


     Nonperforming assets



0.11



0.31


(20)


     Accruing TDRs



0.14



0.32


(18)


     Nonperforming assets and accruing TDRs



0.25



0.63


(38)












(1)

See the recociliation table that begins on page 14 of 15.

(2)

This ratio excludes merger related expenses (Non-GAAP).

(3)

As of March 31, 2022 and March 31, 2021, these ratios included all loans held for investment, including PPP loans of $14.9 million and $129.1 million, respectively.

(4)

As of March 31, 2022 and March 31, 2021, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)


























March 31, 2022





March 31, 



December 31, 


March 31, 


compared to




2022


2021


2021


December 31, 2021


ASSETS













     Cash and due from banks


$

16,206


$

16,919


$

14,553


(4.2)

%

     Interest-bearing deposits with other banks



554,770



566,694



212,533


(2.1)


Cash and cash equivalents



570,976



583,613



227,086


(2.2)















     Investment securities available for sale (at fair value)



106,695



116,982



124,103


(8.8)


     Investment securities held to maturity (at amortized cost)



407,138



404,594



125,929


0.6


     Equity securities, at fair value



1,305



1,372



1,382


(4.9)


     Restricted securities



9,894



4,159



3,189


137.9















     Loans held for sale, at fair value



12,906



37,749



-


(65.8)















     Loans held for investment



2,181,106



2,119,175



1,461,522


2.9


     Less: allowance for credit losses



(14,710)



(13,944)



(14,313)


5.5


     Loans, net



2,166,396



2,105,231



1,447,209


2.9















     Premises and equipment, net



52,049



51,624



25,308


0.8


     Goodwill



63,281



63,421



17,518


(0.2)


     Other intangible assets, net



7,018



7,535



1,593


(6.9)


     Other real estate owned, net



561



532



205


5.5


     Mortgage servicing rights



5,113



4,087




25.1


     Right of use assets, net



10,180



11,370



7,229


(10.5)


     Other assets



80,985



67,867



58,880


19.3


          Total assets


$

3,494,497


$

3,460,136


$

2,039,631


1.0















LIABILITIES













     Noninterest-bearing deposits


$

876,415


$

927,497


$

533,823


(5.5)


     Interest-bearing deposits



2,192,080



2,098,739



1,266,813


4.4


          Total deposits



3,068,495



3,026,236



1,800,636


1.4















     Securities sold under retail repurchase agreements





4,143



3,501


(100.0)


     Advances from FHLB - long-term



10,094



10,135




(0.4)


     Subordinated debt



42,840



42,762



24,460


0.2


          Total borrowings



52,934



57,040



27,961

















     Lease liabilities



10,397



11,567



7,329


(10.1)


     Accrued expenses and other liabilities



10,807



14,600



7,601


(26.0)


          Total liabilities



3,142,633



3,109,443



1,843,527


1.1















COMMITMENTS AND CONTINGENCIES


























STOCKHOLDERS' EQUITY













     Common stock, par value $0.01; authorized 35,000,000 shares



198



198



118



     Additional paid in capital



200,640



200,473



51,445


0.1


     Retained earnings



153,198



149,966



143,794


2.2


     Accumulated other comprehensive income (loss)



(2,172)



56



747


(3,978.6)


          Total stockholders' equity



351,864



350,693



196,104


0.3


          Total liabilities and stockholders' equity


$

3,494,497


$

3,460,136


$

2,039,631


1.0















Period-end common shares outstanding



19,843



19,808



11,752


0.2


Book value per common share


$

17.73


$

17.71


$

16.69


0.1


 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)














For the Three Months Ended




March 31, 




2022


2021


% Change


INTEREST INCOME










     Interest and fees on loans


$

22,085


$

14,366


53.7

%

     Interest on investment securities:










          Taxable



1,985



931


113.2


     Interest on deposits with other banks



254



47


440.4


          Total interest income



24,324



15,344


58.5












INTEREST EXPENSE










     Interest on deposits



1,358



1,184


14.7


     Interest on short-term borrowings



2



1


100.0


     Interest on long-term borrowings



534



359


48.7


          Total interest expense



1,894



1,544


22.7












NET INTEREST INCOME



22,430



13,800


62.5


Provision for credit losses



600



425


41.2












NET INTEREST INCOME AFTER PROVISION










     FOR CREDIT LOSSES



21,830



13,375


63.2












NONINTEREST INCOME










     Service charges on deposit accounts



1,359



674


101.6


     Trust and investment fee income



514



407


26.3


     Interchange credits



1,038



869


19.4


     Mortgage-banking revenue



1,867





     Title Company revenue



323





     Other noninterest income



945



607


55.7


          Total noninterest income



6,046



2,557


136.4


NONINTEREST EXPENSE










     Salaries and wages



9,562



4,142


130.9


     Employee benefits



2,662



1,844


44.4


     Occupancy expense



1,567



814


92.5


     Furniture and equipment expense



429



307


39.7


     Data processing



1,607



1,127


42.6


     Directors' fees



190



149


27.5


     Amortization of intangible assets



517



126


310.3


     FDIC insurance premium expense



343



185


85.4


     Other real estate owned, net



(6)



1


(700.0)


     Legal and professional fees



637



516


23.4


     Merger related expenses



730





     Other noninterest expenses



2,094



1,288


62.6


          Total noninterest expense



20,332



10,499


93.7












Income before income taxes



7,544



5,433


38.9


Income tax expense



1,931



1,435


34.6












NET INCOME


$

5,613


$

3,998


40.4












Weighted average shares outstanding - basic



19,828



11,745


68.8


Weighted average shares outstanding - diluted



19,828



11,747


68.8












Basic and diluted net income per common share


$

0.28


$

0.34


(17.6)












Dividends paid per common share



0.12



0.12



 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)
















For the Three Months Ended




March 31, 




2022


2021




Average


Yield/


Average


Yield/




balance


rate


balance


rate


Earning assets












     Loans (1), (2), (3)


$

2,135,734


4.20

%

$

1,450,883


4.03

%

     Investment securities












          Taxable



531,017


1.49



227,816


1.63


     Interest-bearing deposits



586,798


0.18



189,231


0.10


          Total earning assets



3,253,549


3.01

%


1,867,930


3.34

%

Cash and due from banks



(15,253)





19,245




Other assets



253,424





103,010




Allowance for credit losses



(14,239)





(14,234)




Total assets


$

3,477,481




$

1,975,951




























Interest-bearing liabilities












     Demand deposits


$

589,737


0.16

%

$

438,340


0.14

%

     Money market and savings deposits



1,075,791


0.23



510,881


0.18


     Certificates of deposit $100,000 or more



286,587


0.40



130,745


1.26


     Other time deposits



175,683


0.57



144,919


1.10


          Interest-bearing deposits



2,127,798


0.26



1,224,885


0.39


     Securities sold under retail repurchase












        agreements and federal funds purchased



2,770


0.29



2,238


0.18


     Advances from FHLB - long-term



10,116


0.57





     Subordinated debt



42,804


4.93



24,443


5.96


          Total interest-bearing liabilities



2,183,488


0.35

%


1,251,566


0.50

%

Noninterest-bearing deposits



916,415





517,781




Accrued expenses and other liabilities



24,567





10,813




Stockholders' equity



353,011





195,791




Total liabilities and stockholders' equity


$

3,477,481




$

1,975,951
















Net interest spread





2.66

%




2.84

%

Net interest margin





2.78

%




3.00

%













(1)

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)

Average loan balances include nonaccrual loans.

(3)

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

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

























1st Quarter


4th Quarter


3rd Quarter


2nd Quarter



1st Quarter


Q1 2022


Q1 2022




2022


2021


2021


2021



2021


compared to


compared to




Q1 2022


Q4 2021


Q3 2021


Q2 2021



Q1 2021


Q4 2021


Q1 2021


PROFITABILITY FOR THE PERIOD





















     Taxable-equivalent net interest income


$

22,469


$

20,652


$

15,623


$

14,141


$

13,836


8.8

%

62.4

%

     Less: Taxable-equivalent adjustment



39



13



34



38



36


200.0


8.3


     Net interest income



22,430



20,639



15,589



14,103



13,800


8.7


62.5


     Provision for credit losses



600



(1,723)



290



650



425


134.8


41.2


     Noninterest income



6,046



5,129



2,909



2,903



2,557


17.9


136.4


     Noninterest expense



20,332



23,497



11,934



10,876



10,499


(13.5)


93.7


     Income before income taxes



7,544



3,994



6,274



5,480



5,433


88.9


38.9


     Income tax expense



1,931



1,271



1,657



1,449



1,435


51.9


34.6


Net income


$

5,613


$

2,723


$

4,617


$

4,031


$

3,998


106.1


40.4























     Return on average assets



0.65

%


0.36

%


0.84

%


0.78

%


0.82

%

29

bp

(17)

bp

     Return on average assets excluding
      merger expenses - Non-GAAP (2)



0.76



1.07



0.94



0.86



0.82


(31)


(6)


     Return on average equity



6.45



3.59



9.12



8.19



8.28


286


(183)


     Return on average tangible equity - Non-GAAP (1)



9.40



13.06



11.12



9.89



9.40


(366)



     Net interest margin



2.78



2.87



2.99



2.91



3.00


(9)


(22)


     Efficiency ratio - GAAP



71.40



91.19



64.52



63.95



64.19


(1,979)


721


     Efficiency ratio - Non-GAAP (1), (2)



66.93



60.13



60.92



60.90



63.28


680


365























PER SHARE DATA





















     Basic and diluted net income per common share


$

0.28


$

0.16


$

0.39


$

0.34


$

0.34


75.0

%

(17.6)

%






















     Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




     Book value per common share at period end



17.73



17.71



17.15



16.91



16.69


0.1


6.2


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



14.19



14.12



15.55



15.29



15.06


0.5


(5.8)


     Market value at period end



20.48



20.85



17.73



16.75



17.02


(1.8)


20.3


     Market range:





















          High



21.41



23.19



18.00



18.01



18.10


(7.7)


18.3


          Low



19.34



17.50



16.35



16.10



12.99


10.5


48.9























AVERAGE BALANCE SHEET DATA





















     Loans


$

2,135,734


$

1,887,126


$

1,487,281


$

1,444,684


$

1,450,883


13.2

%

47.2

%

     Investment securities



531,017



468,724



334,205



286,121



227,816


13.3


133.1


     Earning assets



3,253,549



2,842,097



2,071,505



1,949,509



1,867,930


14.5


74.2


     Assets



3,477,481



3,037,262



2,184,448



2,061,214



1,975,951


14.5


76.0


     Deposits



3,044,213



2,547,151



1,943,225



1,822,148



1,742,666


19.5


74.7


     Stockholders' equity



353,011



301,095



200,881



197,532



195,791


17.2


80.3























CREDIT QUALITY DATA





















     Net (recoveries) charge-offs


$

(166)


$

(142)


$

(147)


$

(125)


$


(16.9)

%

(100.0)

%






















     Nonaccrual loans


$

2,848


$

2,786


$

3,457


$

3,947


$

4,880


2.2


(41.6)


     Loans 90 days past due and still accruing



459



508



748



752



1,188


(9.6)


(61.4)


     Other real estate owned



561



532



203



203



205


5.5


173.7


     Total nonperforming assets


$

3,868


$

3,826


$

4,408


$

4,902


$

6,273


1.1


(38.3)























     Accruing troubled debt restructurings
      (TDRs) excluding acquired


$

5,004


$

5,667


$

5,750


$

6,338


$

6,456


(11.7)


(22.5)























     Total nonperforming assets and accruing TDRs


$

8,872


$

9,493


$

10,158


$

11,240


$

12,729


(6.5)


(30.3)























CAPITAL AND CREDIT QUALITY RATIOS





















     Period-end equity to assets



10.07

%


10.14

%


8.92

%


9.37

%


9.61

%

(7)

bp

46

bp

     Period-end tangible equity to tangible assets - Non-GAAP (1)



8.22



8.25



8.15



8.55



8.76


(3)


(54)























     Annualized net (recoveries) charge-offs to average loans



(0.03)



(0.03)



(0.04)



(0.03)





(3)























     Allowance for credit losses as a percent of:





















     Period-end loans (3)



0.67



0.66



1.04



1.02



0.98


1


(31)


     Period-end loans (4)



0.92



0.93



1.10



1.12



1.11


(1)


(19)


     Nonaccrual loans



516.50



500.50



449.09



382.27



293.30


1,600


223


     Nonperforming assets



380.30



364.45



352.20



307.79



228.17


1,585


152


     Accruing TDRs



293.96



246.06



270.00



238.06



221.70


4,790


72


     Nonperforming assets and accruing TDRs



165.80



146.89



152.84



134.23



112.44


1,891


53























     As a percent of total loans:





















     Nonaccrual loans



0.13



0.13



0.23



0.27



0.33



(20)


     Accruing TDRs excluding acquired



0.23



0.27



0.38



0.43



0.44


(4)


(21)


     Nonaccrual loans and accruing TDRs excluding acquired



0.36



0.40



0.62



0.70



0.78


(4)


(42)























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





















     Nonperforming assets



0.18



0.18



0.29



0.33



0.43



(25)


     Nonperforming assets and accruing TDRs



0.41



0.45



0.68



0.76



0.87


(4)


(46)























     As a percent of total assets:





















     Nonaccrual loans



0.08



0.08



0.15



0.19



0.24



(16)


     Nonperforming assets



0.11



0.11



0.19



0.23



0.31



(20)


     Accruing TDRs



0.14



0.16



0.25



0.30



0.32


(2)


(18)


     Nonperforming assets and accruing TDRs



0.25



0.27



0.44



0.53



0.63


(2)


(38)












(1)

See the reconciliation table that begins on page 14 of 15.

(2)

This ratio excludes merger related expenses (Non-GAAP).

(3)

Includes all loans held for investment, including PPP loan balances for all periods shown.

(4)

For all periods shown, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)








































Q1 2022


Q1 2022



















compared to


compared to




Q1 2022


Q4 2021


Q3 2021


Q2 2021


Q1 2021


Q4 2021


Q1 2021


INTEREST INCOME





















     Interest and fees on loans


$

22,085


$

20,564


$

15,484


$

14,381


$

14,366


7.4

%

53.7

%

     Interest on investment securities:





















          Taxable



1,985



1,663



1,318



1,095



931


19.4


113.2


     Interest on deposits with other banks



254



169



97



55



47


50.3


440.4


          Total interest income



24,324



22,396



16,899



15,531



15,344


8.6


58.5























INTEREST EXPENSE





















     Interest on deposits



1,358



1,272



949



1,056



1,184


6.8


14.7


     Interest on short-term borrowings



2



3



2



2



1


(33.3)


100.0


     Interest on long-term borrowings



534



482



359



370



359


10.8


48.7


          Total interest expense



1,894



1,757



1,310



1,428



1,544


7.8


22.7























NET INTEREST INCOME



22,430



20,639



15,589



14,103



13,800


8.7


62.5


Provision for credit losses



600



(1,723)



290



650



425


134.8


41.2























NET INTEREST INCOME AFTER PROVISION





















     FOR CREDIT LOSSES



21,830



22,362



15,299



13,453



13,375


(2.4)


63.2























NONINTEREST INCOME





















     Service charges on deposit accounts



1,359



1,234



805



683



674


10.1


101.6


     Trust and investment fee income



514



522



477



475



407


(1.5)


26.3


     Gains on sales and calls of investment      securities







2








     Interchange credits



1,038



1,043



1,016



1,036



869


(0.5)


19.4


     Mortgage-banking revenue



1,867



948








96.9



     Title Company revenue



323



247








30.8



     Other noninterest income



945



1,135



609



709



607


(16.7)


55.7


          Total noninterest income



6,046



5,129



2,909



2,903



2,557


17.9


136.4























NONINTEREST EXPENSE





















     Salaries and wages



9,562



7,727



5,091



4,262



4,142


23.7


130.9


     Employee benefits



2,662



2,271



1,654



1,493



1,844


17.2


44.4


     Occupancy expense



1,567



1,263



843



770



814


24.1


92.5


     Furniture and equipment expense



429



385



449



412



307


11.4


39.7


     Data processing



1,607



1,487



1,170



1,217



1,127


8.1


42.6


     Directors' fees



190



170



147



154



149


11.8


27.5


     Amortization of intangible assets



517



381



107



120



126


35.7


310.3


     FDIC insurance premium expense



343



362



245



223



185


(5.2)


85.4


     Other real estate owned expenses, net



(6)



(2)



4



1



1


(200.0)


(700.0)


     Legal and professional fees



637



150



428



648



516


324.7


23.4


     Merger related expenses



730



7,615



538



377




(90.4)



     Other noninterest expenses



2,094



1,688



1,258



1,199



1,288


24.1


62.6


          Total noninterest expense



20,332



23,497



11,934



10,876



10,499


(13.5)


93.7























Income before income taxes



7,544



3,994



6,274



5,480



5,433


88.9


38.9


Income tax expense



1,931



1,271



1,657



1,449



1,435


51.9


34.6























NET INCOME


$

5,613


$

2,723


$

4,617


$

4,031


$

3,998


106.1


40.4























Weighted average shares outstanding - basic



19,828



17,180



11,752



11,752



11,745


15.4


68.8


Weighted average shares outstanding - diluted



19,828



17,180



11,752



11,754



11,747


15.4


68.8























Basic and diluted net income per common share


$

0.28


$

0.16


$

0.39


$

0.34


$

0.34


75.0


(17.6)























Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)




























































Average balance





























Q1 2022


Q1 2022





























compared to


compared to




Q1 2022


Q4 2021


Q3 2021


Q2 2021


Q1 2021


Q4 2021


Q1 2021




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)


$

2,135,734


4.20

%

$

1,887,126


4.33

%

$

1,487,281


4.14

%

$

1,444,684


4.00

%

$

1,450,883


4.03

%

13.2

%

47.2

%

   Investment securities































      Taxable



531,017


1.49



468,724


1.42



334,205


1.58



286,121


1.53



227,816


1.63


13.3


133.1


   Interest-bearing deposits



586,798


0.18



486,247


0.14



250,019


0.15



218,704


0.10



189,231


0.10


20.7


210.1


      Total earning assets



3,253,549


3.01

%


2,842,097


3.11

%


2,071,505


3.24

%


1,949,509


3.20

%


1,867,930


3.34

%

14.5


74.2


Cash and due from banks



(15,253)





22,625





19,453





16,908





19,245




(167.4)


(179.3)


Other assets



253,424





188,399





108,989





109,457





103,010




34.5


146.0


Allowance for credit losses



(14,239)





(15,859)





(15,499)





(14,660)





(14,234)




(10.2)



Total assets


$

3,477,481




$

3,037,262




$

2,184,448




$

2,061,214




$

1,975,951




14.5


76.0

































Interest-bearing liabilities































   Demand deposits


$

589,737


0.16

%

$

494,081


0.14

%

$

462,950


0.14

%

$

405,473


0.13

%

$

438,340


0.14

%

19.4


34.5


   Money market and savings deposits



1,075,791


0.23



1,001,115


0.26



644,330


0.18



605,202


0.17



510,881


0.18


7.5


110.6


   Certificates of deposit $100,000 or more



286,587


0.40



174,268


0.49



136,059


0.71



135,376


1.04



130,745


1.26


64.5


119.2


   Other time deposits



175,683


0.57



173,975


0.50



142,777


0.68



143,821


0.90



144,919


1.10


1.0


21.2


      Interest-bearing deposits



2,127,798


0.26



1,843,439


0.27



1,386,116


0.27



1,289,872


0.33



1,224,885


0.39


15.4


73.7


Securities sold under retail repurchase agreements































    and federal funds purchased



2,770


0.29



3,972


0.30



2,718


0.29



3,123


0.26



2,238


0.18


(30.3)


23.8


Advances from FHLB - long-term



10,116


0.57



6,630


2.21











100.0


100.0


Subordinated debt



42,804


4.93



36,589


5.12



24,504


5.81



24,474


6.06



24,443


5.96


17.0


75.1


      Total interest-bearing liabilities



2,183,488


0.35

%


1,890,630


0.37

%


1,413,338


0.37

%


1,317,469


0.43

%


1,251,566


0.50

%

15.5


74.5


Noninterest-bearing deposits



916,415





703,712





557,109





532,276





517,781




30.2


77.0


Accrued expenses and other liabilities



24,567





141,825





13,120





13,937





10,813




(82.7)


127.2


Stockholders' equity



353,011





301,095





200,881





197,532





195,791




17.2


80.3


Total liabilities and stockholders' equity


$

3,477,481




$

3,037,262




$

2,184,448




$

2,061,214




$

1,975,951




14.5


76.0

































Net interest spread





2.66

%




2.74

%




2.87

%




2.77

%




2.84

%





Net interest margin





2.78

%




2.87

%




2.99

%




2.91

%




3.00

%















(1)

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)

Average loan balances include nonaccrual loans.

(3)

Interest income on loans includes accreted loan fees, net of 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 (Unaudited)

(In thousands, except per share data)










































YTD


YTD




Q1 2022


Q4 2021


Q3 2021


Q2 2021


Q1 2021


3/31/2022


3/31/2021

























The following reconciles return on average equity and return
on average tangible equity (Note 1):














































Net Income


$

5,613


$

2,723


$

4,617


$

4,031


$

3,998


$

5,613


$

3,998


Net Income - annualized (A)


$

22,764


$

10,803


$

18,317


$

16,168


$

16,214


$

22,764


$

16,214

























Net income, excluding net amortization of intangible assets























    and merger related expenses


$

6,541


$

8,176


$

5,098


$

4,402


$

4,092


$

6,541


$

4,092


Net income, excluding net amortization of intangible assets
and merger related expenses - annualized (B)


$

26,527


$

32,437


$

20,226


$

17,656


$

16,595


$

26,527


$

16,595

























Return on average assets excluding net amortization of intangible assets
and merger related expenses - Non-GAAP



0.76

%


1.07

%


0.94

%


0.86

%


0.82

%


0.76

%


0.82

%
























Average stockholders' equity (C)


$

353,011


$

301,095


$

200,881


$

197,532


$

195,791


$

353,011


$

195,791


Less:  Average goodwill and other intangible assets



(70,711)



(52,692)



(18,942)



(19,053)



(19,178)



(70,711)



(19,178)


Average tangible equity (D)


$

282,300


$

248,403


$

181,939


$

178,479


$

176,613


$

282,300


$

176,613

























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



6.45

%


3.59

%


9.12

%


8.19

%


8.28

%


6.45

%


8.28

%

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



9.40

%


13.06

%


11.12

%


9.89

%


9.40

%


9.40

%


9.40

%
























The following reconciles GAAP efficiency ratio and non
-GAAP efficiency ratio (Note 2):














































Noninterest expense (E)


$

20,332


$

23,497


$

11,934


$

10,876


$

10,499


$

20,332


$

10,499


Less:  Amortization of intangible assets



(517)



(381)



(107)



(120)



(126)



(517)



(126)


           Merger Expenses



(730)



(7,615)



(538)



(377)





(730)




Adjusted noninterest expense (F)


$

19,085


$

15,501


$

11,289


$

10,379


$

10,373


$

19,085


$

10,373

























Net interest income (G)



22,430



20,639



15,589



14,103



13,800



22,430



13,800


Add:  Taxable-equivalent adjustment



39



13



34



38



36



39



36


Taxable-equivalent net interest income (H)


$

22,469


$

20,652


$

15,623


$

14,141


$

13,836


$

22,469


$

13,836

























Noninterest income (I)


$

6,046


$

5,129


$

2,909


$

2,903


$

2,557


$

6,046



2,557


Less:  Investment securities (gains)







(2)










Adjusted noninterest income (J)


$

6,046


$

5,129


$

2,907


$

2,903


$

2,557


$

6,046


$

2,557

























Efficiency ratio (GAAP)  (E)/(G)+(I)



71.40

%


91.19

%


64.52

%


63.95

%


64.19

%


71.40

%


64.19

%

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



66.93

%


60.13

%


60.92

%


60.90

%


63.28

%


66.93

%


63.28

%
























The following reconciles book value per common share
and tangible book value per common share (Note 1):














































Stockholders' equity (L)


$

351,864


$

350,693


$

201,607


$

198,682


$

196,104








Less:  Goodwill and other intangible assets



(70,299)



(70,956)



(18,883)



(18,991)



(19,111)








Tangible equity (M)


$

281,565


$

279,737


$

182,724


$

179,691


$

176,993































Shares outstanding (N)



19,843



19,808



11,752



11,752



11,752































Book value per common share (GAAP)  (L)/(N)


$

17.73


$

17.71


$

17.15


$

16.91


$

16.69








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


$

14.19


$

14.12


$

15.55


$

15.29


$

15.06






















































The following reconciles equity to assets and tangible equity
to tangible assets (Note 1):














































Stockholders' equity (O)


$

351,864


$

350,693


$

201,607


$

198,682


$

196,104








Less:  Goodwill and other intangible assets



(70,299)



(70,956)



(18,883)



(18,991)



(19,111)








Tangible equity (P)


$

281,565


$

279,737


$

182,724


$

179,691


$

176,993































Assets (Q)


$

3,494,497


$

3,460,136


$

2,260,774


$

2,120,260


$

2,039,631








Less:  Goodwill and other intangible assets



(70,299)



(70,956)



(18,883)



(18,991)



(19,111)








Tangible assets (R)


$

3,424,198


$

3,389,180


$

2,241,891


$

2,101,269


$

2,020,520































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



10.07

%


10.14

%


8.92

%


9.37

%


9.61

%







Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)



8.22

%


8.25

%


8.15

%


8.55

%


8.76

%

















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.

 

 

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SOURCE Shore Bancshares, Inc.