Shore Bancshares, Inc. Reports 2023 Fourth Quarter and Annual Results
EASTON, Md., Jan. 31, 2024 /PRNewswire/ — Shore Bancshares, Inc. (NASDAQ – SHBI) (the “Company” or “Shore Bancshares”), the holding company for Shore United Bank N.A. (the “Bank” or “SUB”) reported net income for the fourth quarter of 2023 of $10.5 million or $0.32 per diluted common share compared to a net loss of $9.7 million or $0.29 per diluted common share for the third quarter of 2023, and net income of $8.4 million or $0.42 per diluted common share for the fourth quarter of 2022. Net income for the fiscal year of 2023 was $11.2 million or $0.42 per diluted common share, compared to net income for the fiscal year of 2022 of $31.2 million or $1.57 per diluted common share.
Fourth Quarter 2023 Highlights
Net Interest Margin Impacted by Growth in Liquidity – Net interest margin (“NIM”) decreased to 3.09% for the fourth quarter of 2023 from 3.35% for the third quarter of 2023, due to significant deposit growth and less net accretion income when compared to the third quarter of 2023. Excluding net accretion interest income of $3.0 million and $5.4 million for the same time periods, NIM decreased nine basis points to 2.87% for the fourth quarter of 2023 from 2.96% for the third quarter of 2023.
Continued Deposit Growth – During the fourth quarter, total deposits increased 5.43% to $5.4 billion and non-interest bearing (“NIB”) deposits increased 3.8% to $1.3 billion at December 31, 2023 compared to total deposits of $5.1 billion and NIB of $1.2 billion at September 30, 2023. Deposit growth for the quarter was split between core transaction and time deposits. The increased liquidity should help support 2024 loan growth. Current customer interest is indicating that growth could exceed management’s previous guidance of 4%-6% loan growth in 2024. The Bank’s loan to deposit ratio at December 31, 2023 was 86%. Sustained efforts to enhance the Bank’s deposit franchise are expected to attract additional deposits in future quarters.
Stable Funding and Liquidity – Total funding, which includes customer deposits, Federal Home Loan Bank (“FHLB”) advances, and brokered deposits increased $210.4 million from $5.2 billion at September 30, 2023 to $5.4 billion at December 31, 2023. The Bank had no FHLB advances at December 31, 2023 and reduced brokered deposits $67.0 million during the fourth quarter to $44.5 million or 0.8% of total deposits. The Bank’s uninsured deposits at December 31, 2023 were $1.05 billion or 19.49% of total deposits. The Bank’s uninsured deposits, excluding deposits secured with pledged collateral, at December 31, 2023 were $893.5 million or 16.59% of total deposits.
At December 31, 2023, the Bank had approximately $1.4 billion of available liquidity including: $372.4 million in cash, $1.0 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $45.0 million in unsecured lines of credit. At December 31, 2023, available liquidity of approximately $1.4 billion was 159% of uninsured deposits, excluding deposits secured with pledged collateral of $893.5 million.
Continued Solid Asset Quality – Non-accrual loans, OREO and loan modifications to borrowers’ experiencing financial difficulties (“BEFDs”) were $13.3 million or 0.22% of total assets at December 31, 2023 compared to $9.2 million or 0.16% of total assets at September 30, 2023. The modest increase in nonperforming and classified assets was the result of a small increase in late payments in consumer loans and a proactive review of larger commercial relationships in the current interest rate environment.
“Stable interest income was offset by higher interest expenses in the fourth quarter as we added liquidity and continued to see pressure on the cost of deposits,” stated James (“Jimmy”) M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. “We made good progress expanding our market share and adding new customers in the third and fourth quarters and are optimistic that we can build on the deposit growth we experienced in the fourth quarter. Improved liquidity should provide an opportunity to grow loans and stabilize margins. We continue to focus on expenses and have undertaken a number of expense-reduction initiatives, including a 7% reduction in headcount since the close of the transaction in the third quarter. Shore Bancshares, with its considerable scale, diversification, and resources, is well-positioned to enhance shareholder value, effectively manage risks, and deliver outstanding service to customers.”
Merger with The Community Financial Corporation (“TCFC”)
The Company merged with TCFC and its wholly-owned subsidiary Community Bank of the Chesapeake (“CBTC”) on July 1, 2023 (the “merger”). The acquisition method was used to account for the transaction with the Company as the acquirer. The Company recorded the assets and liabilities of TCFC at their respective fair values as of July 1, 2023. The transaction was valued at approximately $153.6 million and expanded the Bank’s footprint into the Southern Maryland Counties of Charles, St. Mary’s and Calvert and the greater Fredericksburg area in Virginia, which includes, Stafford and Spotsylvania Counties. This acquired market area is one of the fastest growing regions in the country and is home to a mix of federal facilities and industrial and high-tech businesses. These areas boast a strong median household income, low unemployment and projected population growth better than national averages. Based on information from the U.S. Bureau of Labor Statistics, unemployment rates in legacy CBTC’s footprint have historically remained well below the national average. At the time of the acquisition, TCFC added $2.4 billion in assets, $454.5 million in investments, $1.8 billion in loans, $2.0 billion in deposits, $150.6 million in brokered deposits, $69.0 million in FHLB advances and $32.0 million in subordinated debt and trust preferred debentures. The excess of the fair value of net TCFC assets acquired over the merger consideration resulted in a $8.8 million bargain purchase gain.
Balance Sheet Review
Total assets were $6.0 billion at December 31, 2023, an increase of $2.5 billion or 72.9%, when compared to $3.5 billion at December 31, 2022. The aggregate increase was primarily due to the merger, with significant increases in loans held for investment of $2.1 billion, or 81.6%, and cash and cash equivalents of $316.9 million, partially offset by an increase in allowance for credit losses of $40.7 million. The ratio of the allowance to total loans increased from 0.65% at December 31, 2022, to 1.24% at December 31, 2023. The increases were due to the adoption of CECL on January 1, 2023 and the merger. Due to a lack of uniformity of historical data between the legacy banks in their respective models, management implemented a new post merger model methodology. The Bank’s provision for credit losses for the twelve months ended December 31, 2023 was $31.0 million and were due primarily to $20.1 million related to the acquisition of TCFC legacy loans and $7.3 million due to the change in ACL methodology on SUB legacy loans.
The Company’s tangible common equity ratio at December 31, 2023 was 6.78%. The Company’s Tier 1 and Total Risk-Based Capital Ratios at December 31, 2023 were 9.31% and 11.48%, respectively. The Bank’s Tier 1 and Total Risk-Based Capital Ratios at December 31, 2023 were 10.02% and 11.27%, respectively. Non-owner occupied commercial real estate (“CRE”) loans as a percentage of the Bank’s Tier 1 Capital + ACL at December 31, 2023 and December 31, 2022 were $2.0 billion or 382.6% and $1.0 billion or 289.4%, respectively. Construction loans as a percentage of the Bank’s Tier 1 Capital + ACL at December 31, 2023 and December 31, 2022 were $299.0 million or 56.7% and $246.3 million or 69.9%, respectively.
The Bank’s office CRE portfolio, which included owner-occupied and non-owner occupied CRE loans, was $521.7 million or 11.2% of total loans of $4.6 billion at December 31, 2023, which included $142.9 million or 27.4% with medical tenants and $74.9 million or 14.4% with government or government contractor tenants. There were 507 loans in the office CRE portfolio with an average and median loan size of $1.0 million and $0.4 million, respectively. Loan to Value (“LTV”) estimates are less than 70% for $398.7 million or 76.4% of the office CRE portfolio.
The Bank had 23 CRE office loans totaling $189.8 million that were greater than $5.0 million at December 31, 2023. For this subset of the office CRE portfolio, at December 31, 2023, the average loan debt-service coverage ratio was 1.8x and average LTV was 53.9%. Most buildings in the Bank’s office CRE portfolio are two stories or less and outside metropolitan areas.
Total borrowings were $72.3 million at December 31, 2023, a decrease of $10.8 million, or 13.0%, when compared to $83.1 million at December 31, 2022. Total borrowings at December 31, 2023 were comprised of $43.1 million of subordinated debt and $29.2 million of trust preferred debentures. The decrease in total borrowings at December 31, 2023 when compared to December 31, 2022 was primarily due to repayment of $40.0 million in FHLB short-term advances, partially offset by an increase of $29.2 million in subordinated debt and trust preferred debentures from the acquisition of TCFC. The Company’s wholesale funding increased $4.5 million, which includes brokered deposits and FHLB advances, from $40.0 million in FHLB advances at December 31, 2022 to $44.5 million in brokered deposits at December 31, 2023. The Bank redeemed callable brokered certificates of $67.0 million during the fourth quarter of 2023.
Total deposits increased $2.4 billion, or 79.0% to $5.4 billion at December 31, 2023 when compared to December 31, 2022. The increase in total deposits was primarily due to the merger, which resulted in an increase in time deposits of $760.3 million, demand deposits of $471.4 million, money market and savings of $748.6 million and noninterest-bearing deposits of $396.0 million. Total deposits increased $277.4 million from $5.1 billion at September 30, 2023 to $5.4 billion at December 31, 2023. The increase in deposits during the fourth quarter was due to increases in non-interest bearing deposits of $46.6 million, and increases in interest bearing deposits of $230.7 million which was comprised of an increase in money market and savings deposits of $227.1 million and time deposits of $48.1 million partially offset by a decrease in demand deposits of $44.5 million.
At December 31, 2023, total deposits consisted of $5.3 billion in customer deposits and $44.5 million in traditional brokered deposits. Traditional brokered deposits decreased from $111.5 million or 2.2% of total deposits at September 30, 2023 to $44.5 million or 0.8% of total deposits at December 31, 2023. Traditional brokered deposits do not include the portion of reciprocal deposits classified as brokered deposits for call reporting purposes. For FDIC call reporting purposes reciprocal deposits are classified as brokered deposits when they exceed 20% of a bank’s liabilities or $5.0 billion. Reciprocal deposits are included in customer deposits and are used to maximize FDIC insurance available to our customers. Reciprocal deposits considered brokered deposits for call reporting purposes were $204.8 million at December 31, 2023.
NIB accounts increased from $862.0 million at December 31, 2022 to $1.3 billion at December 31, 2023, and represent 23.4% of total deposits.
Total stockholders’ equity increased $146.9 million, or 40.3%, when compared to December 31, 2022, primarily due to the $153.1 million increase in paid in capital due to the merger. As of December 31, 2023, the ratio of total equity to total assets was 8.50% and the ratio of total tangible equity to total tangible assets was 6.78% compared to 10.48% and 8.67% at the end of 2022, respectively.
Review of Quarterly Financial Results
Net interest income was $41.5 million for the fourth quarter of 2023, compared to $45.6 million for the third quarter of 2023 and $26.9 million for the fourth quarter of 2022. The decrease in net interest income when compared to the third quarter of 2023 was primarily due to the increase in interest expense of $4.0 million resulting from an increase in the average balance of deposits of $187.8 million. The increase when compared to the fourth quarter of 2022 was primarily due to the increase in interest and fees on loans partially offset by the increase in interest on deposits, both significantly impacted by the merger in the third quarter of 2023.
The Company’s net interest margin decreased to 3.09% for the fourth quarter of 2023 from 3.35% for the third quarter of 2023 due to lower net accretion income and an increase in the overall mix of interest bearing deposits compared to non-interest bearing deposits. Average interest-bearing deposits increased $187.8 million which resulted in an 36 basis point rate increase in interest-bearing deposits. In addition to the change in deposit mix, rates on money market and time deposits also increased, which were partly offset by lower rates on demand deposits. The increase in interest bearing deposits was the result of a strategic focus by the Company to grow deposits during the fourth quarter to support 2024 loan growth.
The Company’s net interest margin decreased to 3.09% for the fourth quarter of 2023 from 3.34% for the fourth quarter of 2022. Comparing the fourth quarter of 2023 to the fourth quarter of 2022, the Company’s interest-earning asset yields increased 129 basis points to 5.29% from 4.00%, while the cost of funds increased at a faster rate of 156 basis points to 2.25% from 0.69% for the same period.
The provision for credit losses was $0.9 million for the three months ended December 31, 2023. The comparable amounts were $28.2 million for the three months ended September 30, 2023, and $0.5 million for the three months ended December 31, 2022. The decrease in the provision for credit losses for the fourth quarter of 2023 compared to the third quarter of 2023 was primarily related to the acquisition of the TCFC legacy loans in the third quarter of 2023 and the change in ACL methodology on SUB legacy loans. The increase in the provision for credit losses when compared to the fourth quarter of 2022 was also impacted by higher reserves required by the Company’s CECL allowance model as compared to the incurred loss model utilized in 2022. Net charge-offs for the fourth quarter of 2023 were $0.5 million compared to net charge-offs of $1.4 million for the third quarter of 2023 and net charge offs of $84,000 for the fourth quarter of 2022. Included in the net charge-offs for the third quarter of 2023 were $1.2 million in charge-offs related to loan sales of $10.7 million that reduced classified assets and CRE concentrations.
At December 31, 2023 and September 30, 2023, nonperforming assets were $13.7 million or 0.23% of total assets and $11.3 million, or 0.20% of total assets, respectively. The balance of nonperforming assets increased primarily due to an increase in nonaccrual loans of $3.8 million, primarily offset by a decrease of $1.4 million in loans 90 days past due and still accruing. The composition of the additional $3.8 million in nonaccrual loans at December 31, 2023 were made up of a few credits and does not signify an overall declining trend in asset quality. When comparing December 31, 2023 to December 31, 2022, nonperforming assets increased $9.8 million, primarily due to increases in nonaccrual loans of $10.9 million and offset primarily by a decrease of $1.1 million in loans 90 days past due and still accruing. The modest increase in nonperforming assets was the result of a proactive review of larger commercial relationships in the current interest rate environment.
Total noninterest income for the fourth quarter of 2023 was $7.5 million, a decrease of $7.4 million from $15.0 million for the third quarter of 2023 and an increase $1.7 million from $5.9 million for the fourth quarter of 2022. The decrease from the third quarter of 2023 was primarily due to the bargain purchase gain of $8.8 million and a decrease of $1.1 million in trust and investment fee income, both the result of the acquisition of TCFC, partially offset by a loss of $2.2 million on the sale of investment securities in the third quarter of 2023. Shortly following the closing of the merger on July 1, 2023, management sold virtually all of CBTC’s available for sale investment securities. The $2.2 million loss relates to the difference in the fair values of the securities on July 1, 2023 compared to actual sales proceeds received from the sales on the settlement date. The increase from the fourth quarter of 2022 was primarily due to other noninterest income which included increases in other loan fee income, gains on life insurance contracts and an increase in credit card income all a result of the merger.
Total noninterest expense of $33.7 million for the fourth quarter of 2023 decreased $13.5 million when compared to the third quarter of 2023 expense of $47.2 million and increased $12.7 million when compared to the fourth quarter of 2022 expense of $21.0 million. Excluding merger costs and core deposit amortization of $3.2 million for the fourth quarter of 2023 and $17.5 million for the third quarter of 2023, noninterest expense for the comparable periods was $30.5 million and $29.7 million, respectively. The increase was primarily due to higher FDIC insurance premium expense as a result of the increased size of the Bank. Based on the Bank’s current size, FDIC insurance premiums are expected to be between $1.0 million and $1.2 million per quarter in 2024. The increase in total noninterest expense, when excluding merger and acquisition costs and core deposit intangibles of $1.4 million for the fourth quarter of 2022, was primarily due to the acquisition of TCFC in the third quarter of 2023, and resulting additional headcount, infrastructure (11 additional branches), processing fees and FDIC insurance premiums.
Review of Twelve Month Financial Results
Net interest income for the first twelve months of 2023 was $135.3 million, an increase of $34.0 million, or 33.6%, when compared to the first twelve months of 2022. The increase in net interest income was primarily due to an increase in total interest income of $100.2 million, or 88.0%, which included an increase in interest and fees on loans of $95.2 million, or 96.1%. The increase of interest and fees on loans was primarily due to the increase in the average balance of loans of $1.3 billion, or 58.7%, and an increase in net accretion income of $7.5 million due to the merger. Increases to net interest income were partially offset by increased total interest expense of $66.2 million, or 528.0%, primarily due to increases in the cost of funds and in the average balance of interest-bearing deposits of $859.9 million, or 40.5%, largely due to the merger.
The Company’s net interest margin decreased to 3.11% for 2023 from 3.15% for 2022, primarily due to costs on interest-bearing liabilities increasing at a faster rate than increasing yields on interest-earning assets. The average balance and rates paid on interest-bearing deposits increased $859.9 million and 183 basis points compared to increased average balance and yields earned on average earning assets of $1.1 billion and 138 basis points. Total net accretion income for 2023 was $9.4 million, compared to $1.9 million for 2022. During 2023, until the balance sheet restructuring in the third quarter of 2023, the net interest margin experienced compression due to the Company’s liability sensitive position, the result of deposit rate pressures and significantly higher FHLB borrowing rates.
The provision for credit losses for the twelve months ended December 31, 2023 and 2022 was $31.0 million and $1.9 million, respectively. The increase in the provision for credit losses for 2023 was impacted by higher levels of reserves required by the Company’s CECL model as compared to the incurred loss methodology utilized in 2022 and higher reserves required for the acquisition of TCFC in the third quarter of 2023 and a change in CECL methodology in the third quarter of 2023 for the legacy SUB loans. Net charge offs for the twelve months ended December 31, 2023 were $2.0 million compared to net recoveries of $0.8 million for the twelve months ended December 31, 2022.
Total noninterest income for the twelve months ended December 31, 2023 increased $10.1 million or 43.6%, when compared to the same period in 2022. The increase in noninterest income was due to the bargain purchase gain of $8.8 million associated with the merger, an increase of $1.8 million in trust and investment fee income and an increase of $0.9 million in interchange credits, partially offset by a $2.2 million loss on sales of investment securities and a decrease of $0.8 million in title company revenue.
Total noninterest expense for the twelve months ended December 31, 2023 increased $43.0 million, or 53.5%, when compared to the same period in 2022. Almost all noninterest expense line items increased as a result of the merger and the expanded operations of the newly combined Company. Merger-related expenses for the twelve months ended December 31, 2023 were $17.4 million, compared to the twelve months ended December 31, 2022 of $2.1 million. As the Company continues its merger integration, a key focus of management will be to streamline processes, unlock operational efficiencies and reduce overall noninterest expenses.
Shore Bancshares Information
Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. 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: the expected cost savings, synergies and other financial benefits from the acquisition of TCFC or any other acquisition the Company has made or may make might not be realized within the expected time frames or at all; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and the Middle East; 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; any failures to adequately manage the transition from USD LIBOR as a reference rate; 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; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget; the impact of recent or future changes in FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; 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; our ability to remediate the material weakness identified in our internal control over financial reporting; the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; 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)
For the Three Months Ended December 31,
For the Twelve Months Ended December 31,
(Dollars in thousands, except per share data)
2023
2022
Change
2023
2022
Change
PROFITABILITY FOR THE PERIOD
Net interest income
$ 41,525
$ 26,943
54.1 %
$ 135,307
$ 101,302
33.6 %
Provision for credit losses
896
450
99.1
30,953
1,925
1,507.9
Noninterest income
7,548
5,862
28.8
33,159
23,086
43.6
Noninterest expense
33,670
21,000
60.3
123,329
80,322
53.5
Income before income taxes
14,507
11,355
27.8
14,184
42,141
(66.3)
Income tax expense
4,017
2,948
36.3
2,956
10,964
(73.0)
Net income
$ 10,490
$ 8,407
24.8
$ 11,228
$ 31,177
(64.0)
Return on average assets
0.72 %
0.97 %
(25) bp
0.24 %
0.90 %
(66) bp
Return on average assets excluding amortization of
intangibles and merger related expenses – Non-GAAP
0.88
1.09
(21)
0.58
0.99
(41)
Return on average equity
8.21
9.22
(101)
2.54
8.76
(622)
Return on average tangible equity – Non-GAAP (1), (2)
12.88
12.83
5
7.74
11.96
(422)
Interest rate spread
2.34
3.04
(70)
2.42
2.96
(54)
Net interest margin
3.09
3.34
(25)
3.11
3.15
(4)
Efficiency ratio – GAAP
68.61
64.01
460
73.21
64.57
864
Efficiency ratio – Non-GAAP (1)
61.99
59.60
239
58.44
61.21
(277)
Non-interest income to avg assets
0.52
0.68
(16)
0.71
0.67
4
Non-interest expense to avg assets
2.33
2.42
(9)
2.64
2.33
31
Net operating expense to avg assets
1.80
1.75
5
1.93
1.66
27
PER SHARE DATA
Basic and diluted net income per common share
$ 0.32
$ 0.42
(23.8) %
$ 0.42
$ 1.57
(73.2) %
Dividends paid per common share
$ 0.12
$ 0.12
— %
$ 0.48
$ 0.48
— %
Book value per common share at period end
15.41
18.34
(16.0)
Tangible book value per common share at period end – Non-GAAP (1)
12.06
14.87
(18.9)
Market value at period end
14.25
17.43
(18.2)
Market range:
High
14.51
20.85
(30.4)
18.15
21.41
(15.2)
Low
9.66
17.04
(43.3)
9.66
17.04
(43.3)
AVERAGE BALANCE SHEET DATA
Loans
$ 4,639,467
$ 2,467,324
88.0 %
$ 3,639,058
$ 2,293,627
58.7 %
Investment securities
619,920
661,968
(6.4)
674,866
589,842
14.4
Earning assets
5,339,833
3,206,591
66.5
4,356,855
3,220,672
35.3
Assets
5,745,440
3,441,079
67.0
4,663,539
3,444,981
35.4
Deposits
5,136,818
3,006,734
70.8
4,029,014
3,014,109
33.7
Short-term and Long Term FHLB advances, Repurchase Agreements
1,141
8,044
(85.8)
111,392
10,247
987.1
Subordinated Debt & TRUPS
72,155
43,031
67.7
57,708
42,917
34.5
Stockholders’ equity
507,040
361,623
40.2
441,790
355,850
24.2
Shore Bancshares, Inc.
Financial Highlights (Unaudited) – Continued
For the Three Months Ended December 31,
For the Twelve Months Ended December 31,
(Dollars in thousands, except per share data)
2023
2022
Change
2023
2022
Change
CREDIT QUALITY DATA
Net charge-offs/(recoveries)
$ 500
$ 84
495.2 %
$ 2,019
$ (774)
360.9 %
Nonaccrual loans
$ 12,784
$ 1,908
570.0 %
Loans 90 days past due and still accruing
738
1,841
(59.9)
Other real estate owned
179
197
(9.1)
Total nonperforming assets
13,701
3,946
247.2
BEFD (2023) TDR (2022)
367
4,405
(91.7)
Total nonperforming assets and BEFD modification
$ 14,068
$ 8,351
68.5
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets
8.50 %
10.48 %
(198) bp
Period-end tangible equity to tangible assets – Non-GAAP (1)
6.78
8.67
(189)
Annualized net charge-offs (recoveries) to average loans
0.04 %
0.01 %
3 bp
0.06 %
(0.03) %
9 bp
Allowance for credit losses as a percent of:
Period-end loans
1.24 %
0.65 %
59 bp
Nonaccrual loans
448.62
872.27
(42,365)
Nonperforming assets
418.59
421.77
(318)
Accruing BEFD modifications
15,626.98
377.82
1,524,916
Nonperforming assets and accruing BEFDs
407.67
199.29
20,838
As a percent of total loans:
Nonaccrual loans
0.28 %
0.07 %
21 bp
As a percent of total loans+other real estate owned:
Nonperforming assets
0.30 %
0.15 %
15 bp
As a percent of total assets:
Nonaccrual loans
0.21 %
0.05 %
16 bp
Nonperforming assets
0.23 %
0.11 %
12
(1)
See the reconciliation table that begins on page 20.
(2)
This ratio excludes merger related expenses (Non-GAAP) on page 20.
Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited)
December 31, 2023
compared to
(In thousands, except per share data)
December 31, 2023
December 31, 2022
December 31, 2022
ASSETS
Cash and due from banks
$ 63,172
$ 37,661
67.7 %
Interest-bearing deposits with other banks
309,241
17,838
1,633.6
Cash and cash equivalents
372,413
55,499
571.0
Investment securities available for sale (at fair value)
110,521
83,587
32.2
Investment securities held to maturity (net of allowance for credit losses of $94 (2023)) at amortized cost)
513,188
559,455
(8.3)
Equity securities, at fair value
5,703
1,233
362.5
Restricted securities
17,900
11,169
60.3
Loans held for sale, at fair value
8,782
4,248
106.7
Loans held for investment
4,641,010
2,556,107
81.6
Less: allowance for credit losses
(57,351)
(16,643)
244.6
Loans, net
4,583,659
2,539,464
80.5
Premises and equipment, net
82,386
51,488
60.0
Goodwill
63,266
63,266
—
Other intangible assets, net
48,090
5,547
767.0
Other real estate owned, net
179
197
(9.1)
Mortgage servicing rights, at fair value
5,926
5,275
12.3
Right of use assets, net
12,487
9,629
29.7
Cash surrender value on life insurance
101,704
59,218
71.7
Other assets
84,714
28,001
202.5
Total assets
$ 6,010,918
$ 3,477,276
72.9
LIABILITIES
Noninterest-bearing deposits
$ 1,258,037
$ 862,015
45.9 %
Interest-bearing deposits
4,128,083
2,147,769
92.2
Total deposits
5,386,120
3,009,784
79.0
Advances from FHLB – short-term
—
40,000
(100.0)
Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”)
29,158
18,398
58.5
Subordinated debt
43,139
24,674
74.8
Total borrowings
72,297
83,072
(13.0)
Lease liabilities
12,857
9,908
29.8
Accrued expenses and other liabilities
28,509
10,227
178.8
Total liabilities
$ 5,499,783
$ 3,112,991
76.7
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares
$ 332
$ 199
66.8
Additional paid in capital
356,007
201,494
76.7
Retained earnings
162,290
171,613
(5.4)
Accumulated other comprehensive loss
(7,494)
(9,021)
16.9
Total stockholders’ equity
511,135
364,285
40.3
Total liabilities and stockholders’ equity
$ 6,010,918
$ 3,477,276
72.9
Period-end common shares outstanding
$ 33,162
$ 19,865
66.9
Book value per common share
$ 15.41
$ 18.34
(16.0)
Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited)
For the Three Months Ended December 31,
For the Twelve Months Ended December 31,
(In thousands, except per share data)
2023
2022
% Change
2023
2022
% Change
INTEREST INCOME
Interest and fees on loans
$ 65,914
$ 27,664
138.3 %
$ 194,339
$ 99,122
96.1 %
Interest on investment securities:
Taxable
3,992
3,945
1.2
16,832
11,507
46.3
Tax-exempt
6
6
—
46
6
666.7
Interest on federal funds sold
—
—
—
92
—
—
Interest on deposits with other banks
1,224
664
84.3
2,770
3,210
(13.7)
Total interest income
$ 71,136
$ 32,279
120.4
$ 214,079
$ 113,845
88.0
INTEREST EXPENSE
Interest on deposits
$ 28,133
$ 4,554
517.8
$ 68,800
$ 9,983
589.2
Interest on short-term borrowings
16
72
(77.8)
5,518
74
7,356.8
Interest on long-term borrowings
1,462
710
105.9
4,454
2,486
79.2
Total interest expense
$ 29,611
$ 5,336
454.9
$ 78,772
$ 12,543
528.0
NET INTEREST INCOME
$ 41,525
$ 26,943
54.1
$ 135,307
$ 101,302
33.6
Provision for credit losses
896
450
99.1
30,953
1,925
1507.9
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
$ 40,629
$ 26,493
53.4
$ 104,354
$ 99,377
5.0
NONINTEREST INCOME
Service charges on deposit accounts
$ 1,519
$ 1,346
12.9
$ 5,501
$ 5,652
(2.7)
Trust and investment fee income
844
401
110.5
3,608
1,784
102.2
Loss on sales and calls of investment securities
—
—
—
(2,166)
—
—
Interchange credits
1,633
1,280
27.6
5,714
4,812
18.7
Mortgage-banking revenue
1,105
1,567
(29.5)
4,513
5,210
(13.4)
Title Company revenue
139
194
(28.4)
551
1,340
(58.9)
Bargain purchase gain
—
—
—
8,816
—
—
Other noninterest income
2,308
1,074
114.9
6,622
4,288
54.4
Total noninterest income
$ 7,548
$ 5,862
28.8
$ 33,159
$ 23,086
43.6
Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited) – Continued
For the Three Months Ended December 31,
For the Twelve Months Ended December 31,
(In thousands, except per share data)
2023
2022
% Change
2023
2022
% Change
NONINTEREST EXPENSE
Salaries and wages
$ 12,823
$ 8,909
43.9 %
$ 44,645
$ 35,931
24.3 %
Employee benefits
3,389
2,786
21.6
12,358
9,908
24.7
Occupancy expense
2,328
1,694
37.4
7,791
6,242
24.8
Furniture and equipment expense
790
648
21.9
2,551
2,018
26.4
Data processing
2,762
1,856
48.8
8,783
6,890
27.5
Directors’ fees
426
222
91.9
1,156
839
37.8
Amortization of intangible assets
2,595
460
464.1
6,105
1,988
207.1
FDIC insurance premium expense
1,733
315
450.2
3,479
1,426
144.0
Other real estate owned, net
—
13
(100.0)
1
65
(98.5)
Legal and professional fees
1,411
636
121.9
4,337
2,840
52.7
Merger related expenses
602
967
(37.7)
17,356
2,098
727.3
Other noninterest expenses
4,811
2,494
92.9
14,767
10,077
46.5
Total noninterest expense
33,670
21,000
60.3
123,329
80,322
53.5
Income before income taxes
14,507
11,355
27.8
14,184
42,141
(66.3)
Income tax expense
4,017
2,948
36.3
2,956
10,964
(73.0)
NET INCOME
$ 10,490
$ 8,407
24.8
$ 11,228
$ 31,177
(64.0)
Weighted average shares outstanding – basic and diluted
33,322
19,862
67.8
26,660
19,847
34.3
Basic and diluted net income per common share
$ 0.32
$ 0.42
(23.8)
$ 0.42
$ 1.57
(73.2)
Dividends paid per common share
$ 0.12
$ 0.12
—
$ 0.48
$ 0.48
—
Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
For the Three Months Ended
For the Three Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
September 30, 2023
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
(Dollars in thousands)
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate
$ 1,331,150
$ 18,653
5.56 %
$ 813,673
$ 7,911
3.86 %
$ 1,331,150
$ 18,653
5.56 %
$ 1,141,707
$ 14,548
5.06 %
Commercial real estate
2,728,094
38,730
5.63
1,246,966
15,114
4.81
2,728,094
38,730
5.63
2,831,569
40,536
5.68
Commercial
221,342
4,295
7.70
149,068
1,966
5.23
221,342
4,295
7.70
233,756
5,315
9.02
Consumer
333,807
3,859
4.59
244,471
2,602
4.22
333,807
3,859
4.59
332,486
4,183
4.99
State and political
1,290
13
4.00
1,084
11
4.03
1,290
13
4.00
929
10
4.27
Credit Cards
6,320
166
10.42
—
—
—
6,320
166
10.42
6,164
149
9.59
Other
17,464
277
6.29
12,062
96
3.16
17,464
277
6.29
16,137
201
4.94
Total Loans
4,639,467
65,993
5.64
2,467,324
27,700
4.45
4,639,467
65,993
5.64
4,562,748
64,942
5.65
Investment securities
Taxable
619,259
3,992
2.58
661,519
3,945
2.39
619,259
3,992
2.58
778,081
5,047
2.59
Tax-exempt (1)
661
8
4.84
449
7
6.24
661
8
4.84
663
34
20.51
Federal funds sold
—
—
—
—
—
—
—
—
—
7,533
92
4.85
Interest-bearing deposits
80,446
1,224
6.04
77,299
664
3.40
80,446
1,224
6.04
55,547
1,213
8.66
Total earning assets
5,339,833
71,217
5.29
3,206,591
32,316
4.00
5,339,833
71,217
5.29
5,404,572
71,328
5.24
Cash and due from banks
63,506
29,358
63,506
51,714
Other assets
399,409
221,599
399,409
359,726
Allowance for credit losses
(57,308)
(16,469)
(57,308)
(46,700)
Total assets
$ 5,745,440
$ 3,441,079
$ 5,745,440
$ 5,769,312
Interest-bearing liabilities
Demand deposits
$ 1,117,117
$ 6,673
2.37 %
$ 670,424
$ 2,217
1.31 %
$ 1,117,117
$ 6,673
2.37 %
$ 1,056,956
$ 6,659
2.50 %
Money market and savings deposits
1,605,930
8,330
2.06
1,043,076
1,581
0.60
1,605,930
8,330
2.06
1,572,920
6,810
1.72
Brokered deposits
92,840
1,347
5.76
—
—
—
92,840
1,347
5.76
98,649
1,225
4.93
Certificates of deposit $100,000 or more
701,051
6,898
3.90
217,051
433
0.79
701,051
6,898
3.90
706,642
6,272
3.52
Other time deposits
391,820
4,885
4.95
205,293
322
0.62
391,820
4,885
4.95
285,743
2,507
3.48
Interest-bearing deposits (4)
3,908,758
28,133
2.86
2,135,844
4,553
0.85
3,908,758
28,133
2.86
3,720,910
23,473
2.50
Advances from FHLB – short-term
1,141
16
5.56
7,391
72
3.86
1,141
16
5.56
70,348
692
3.90
Advances from FHLB – long-term
—
—
—
653
(11)
(6.08)
—
—
—
—
—
—
Subordinated debt and Guaranteed preferred
beneficial interest in junior subordinated debentures
(“TRUPS”) (4)
72,155
1,462
8.04
43,031
720
6.64
72,155
1,462
8.04
71,907
1,461
8.06
Total interest-bearing liabilities
3,982,054
29,611
2.95
2,186,919
5,334
0.96
3,982,054
29,611
2.95
3,863,165
25,626
2.63
Noninterest-bearing deposits
1,228,060
870,890
1,228,060
1,345,976
Accrued expenses and other liabilities
28,286
21,647
28,286
27,057
Stockholders’ equity
507,040
361,623
507,040
533,114
Total liabilities and stockholders’ equity
$ 5,745,440
$ 3,441,079
$ 5,745,440
$ 5,769,312
Net interest income
$ 41,606
$ 26,982
$ 41,606
$ 45,702
Net interest spread
2.34 %
3.04 %
2.34 %
2.61 %
Net interest margin
3.09 %
3.34 %
3.09 %
3.35 %
Cost of Funds
2.25 %
0.69 %
2.25 %
1.95 %
Cost of Deposits
2.17 %
0.60 %
2.17 %
1.84 %
Cost of Debt
8.00 %
6.07 %
8.00 %
6.00 %
(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. There were $4.8 million, $0.6 million and $6.1 million of accretion interest on loans for the three months ended December 31, 2023 and 2022, and September 30, 2023, respectively.
(4)
Interest expense on deposits and borrowing includes amortization of deposit discount and amortization of borrowing fair value adjustments. There were $(1.5) million, $0.2 million and $(0.5) million of amortization of deposits premium, and $(0.2) million, $(47,000), and $(0.2) million of amortization of borrowing fair value adjustments for the three months ended December 31, 2023 and 2022, and September 30, 2023, respectively.
Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
For the Twelve Months Ended December 31,
2023
2022
Average
Yield/
Average
Yield/
(Dollars in thousands)
Balance
Interest
Rate
Balance
Interest
Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate
$ 1,076,713
$ 54,583
5.07 %
$ 699,192
$ 31,401
4.49 %
Commercial real estate
2,039,153
110,058
5.40
1,182,845
51,821
4.38
Commercial
184,214
13,607
7.39
194,785
7,829
4.02
Consumer
322,033
15,298
4.75
195,542
7,560
3.87
State and political
1,025
41
4.00
1,613
64
3.97
Credit Cards
3,147
315
10.01
—
—
—
Other
12,773
678
5.31
19,650
601
3.06
Total Loans
3,639,058
194,580
5.35
2,293,627
99,276
4.33
Investment securities
Taxable
674,203
16,832
2.50
589,729
11,507
1.95
Tax-exempt (1)
663
58
8.75
113
7
6.19
Federal funds sold
1,899
92
4.84
—
—
—
Interest-bearing deposits
41,032
2,770
6.75
337,203
3,210
0.95
Total earning assets
4,356,855
214,332
4.92
3,220,672
114,000
3.54
Cash and due from banks
43,555
18,158
Other assets
303,906
221,592
Allowance for credit losses
(40,777)
(15,441)
Total assets
$ 4,663,539
$ 3,444,981
Interest-bearing liabilities
Demand deposits
$ 883,976
$ 20,134
2.28 %
$ 638,105
$ 3,869
0.61 %
Money market and savings deposits
1,275,088
20,039
1.57
1,043,032
3,609
0.35
Brokered deposits
56,101
2,919
5.20
—
—
—
Certificates of deposit $100,000 or more
492,226
16,583
3.37
239,927
1,364
0.57
Other time deposits
278,144
9,125
3.28
204,536
1,141
0.56
Interest-bearing deposits (4)
2,985,535
68,800
2.30
2,125,600
9,983
0.47
Securities sold under retail repurchase agreements
and federal funds purchased
—
—
—
683
2
0.29
Advances from FHLB – short-term
111,392
5,518
4.95
1,863
72
3.86
Advances from FHLB – long-term
—
—
—
7,701
35
0.45
Subordinated debt and Guaranteed preferred beneficial
interest in junior subordinated debentures (“TRUPS”) (4)
57,708
4,454
7.72
42,917
2,451
5.71
Total interest-bearing liabilities
3,154,635
78,772
2.50
2,178,764
12,543
0.58
Noninterest-bearing deposits
1,043,479
888,509
Accrued expenses and other liabilities
23,635
21,858
Stockholders’ equity
441,790
355,850
Total liabilities and stockholders’ equity
$ 4,663,539
$ 3,444,981
Net interest income
$ 135,560
$ 101,457
Net interest spread
2.42 %
2.96 %
Net interest margin
3.11 %
3.15 %
Cost of Funds
1.88 %
0.41 %
Cost of Deposits
1.71 %
0.33 %
Cost of Debt
5.90 %
4.82 %
(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. There were $11.8 million and $1.5 million of accretion interest on loans for the twelve months ended December 31, 2023 and 2022, respectively.
(4)
Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $(1.8) million of amortization of deposit discounts and $0.6 million of amortization of deposit premium, and $(0.6) million and $(0.2) million of amortization of borrowing fair value adjustment for the twelve months ended December 31, 2023 and 2022, respectively.
Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited)
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
12/31/2023
12/31/2023
2023
2023
2023
2023
2022
compared to
compared to
(Dollars in thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2023
Q4 2022
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income
$ 41,606
$ 45,702
$ 22,545
$ 25,705
$ 26,981
(9.0) %
54.2 %
Less: Taxable-equivalent adjustment
81
80
51
41
38
1.3
113.2
Net interest income
41,525
45,622
22,494
25,664
26,943
(9.0)
54.1
Provision for credit losses
896
28,176
667
1,213
450
(96.8)
99.1
Noninterest income
7,548
14,984
5,294
5,334
5,862
(49.6)
28.8
Noninterest expense
33,670
47,158
21,608
20,893
21,000
(28.6)
60.3
Income/(loss) before income taxes
14,507
(14,728)
5,513
8,892
11,355
198.5
27.8
Income tax expense/ (benefit)
4,017
(4,991)
1,495
2,435
2,948
180.5
36.3
Net income/ (loss)
$ 10,490
$ (9,737)
$ 4,018
$ 6,457
$ 8,407
207.7
24.8
Return on average assets
0.72 %
(0.67) %
0.45 %
0.75 %
0.97 %
139 bp
(25) bp
Return on average assets excluding amortization of intangibles
and merger related expenses – Non-GAAP
0.88
0.01
0.59
0.84
1.09
87
(21)
Return on average equity
8.21
(7.25)
4.49
7.25
9.22
1,546
(101)
Return on average tangible equity – Non-GAAP (1), (2)
12.88
1.74
7.16
10.09
12.83
1,114
5
Net interest margin
3.09
3.35
2.68
3.18
3.35
(26)
(26)
Efficiency ratio – GAAP
68.61
77.81
77.76
67.40
64.01
(920)
460
Efficiency ratio – Non-GAAP (1)
61.99
47.19
71.75
63.67
59.59
1,480
240
PER SHARE DATA
Basic and diluted net income/ (loss) per common share
$ 0.32
$ (0.29)
$ 0.20
$ 0.32
$ 0.42
210.3 %
(23.8) %
Dividends paid per common share
0.12
0.12
0.12
0.12
0.12
—
—
Book value per common share at period end
15.41
15.14
18.24
18.17
18.34
1.8
(16.0)
Tangible book value per common share at period end – Non-GAAP (1)
12.06
11.70
14.83
14.74
14.87
3.1
(18.9)
Market value at period end
14.25
10.52
11.56
14.28
17.43
35.5
(18.2)
Market range:
High
14.51
13.37
14.45
18.15
20.85
8.5
(30.4)
Low
9.66
10.27
10.65
14.00
17.04
(5.9)
(43.3)
Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited) – Continued
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
12/31/2023
12/31/2023
2023
2023
2023
2023
2022
compared to
compared to
(Dollars in thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2023
Q4 2022
AVERAGE BALANCE SHEET DATA
Loans
$ 4,639,467
$ 4,562,748
$ 2,709,944
$ 2,611,644
$ 2,467,324
1.68 %
88.04 %
Investment securities
619,920
778,744
645,842
654,193
661,968
(20.39)
(6.35)
Earning assets
5,339,833
5,404,572
3,369,183
3,279,686
3,206,591
(1.20)
66.53
Assets
5,745,440
5,769,312
3,596,311
3,506,336
3,441,079
(0.41)
66.97
Deposits
5,136,818
5,066,886
2,908,662
2,968,448
3,006,734
1.38
70.84
Short-term and Long Term FHLB advances
1,141
70,348
261,797
113,972
7,391
(98.38)
(84.56)
Subordinated Debt & TRUPS
72,155
71,907
43,185
43,108
43,031
0.34
67.68
Stockholders’ equity
507,040
533,114
363,225
361,174
361,623
(4.89)
40.21
CREDIT QUALITY DATA
Net charge offs
$ 500
$ 1,449
$ 50
$ 20
$ 84
(65.49) %
495.24 %
Nonaccrual loans
$ 12,784
$ 8,982
$ 3,481
$ 1,894
$ 1,908
42.33 %
570.02 %
Loans 90 days past due and still accruing
738
2,149
1,065
611
1,841
(65.66)
(59.91)
Other real estate owned
179
179
179
179
197
—
(9.14)
Total nonperforming assets
$ 13,701
$ 11,310
$ 4,725
$ 2,684
$ 3,946
21.14
247.21
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets
8.50 %
8.79 %
9.97 %
10.18 %
10.48 %
(29) bp
(198) bp
Period-end tangible equity to tangible assets – Non-GAAP (1)
6.78
6.93
8.26
8.41
8.67
(15)
(189)
Annualized net charge-offs to average loans
0.04 %
0.13 %
0.01 %
— %
0.01 %
(9) bp
3 bp
Allowance for credit losses as a percent of:
Period-end loans (3)
1.24 %
1.24 %
1.05 %
1.07 %
0.65 %
— bp
59 bp
Period-end loans (4)
1.24
1.24
1.05
1.07
0.78
—
46
Nonaccrual loans
448.62
635.17
833.50
1502.85
872.27
(18,655)
(42,365)
Nonperforming assets
418.59
504.43
614.05
1060.51
421.77
(8,584)
(318)
As a percent of total loans:
Nonaccrual loans
0.28 %
0.19 %
0.13 %
0.07 %
0.07 %
9 bp
21 bp
As a percent of total loans+other real estate owned:
Nonperforming assets
0.30 %
0.24 %
0.17 %
0.10 %
0.15 %
6 bp
15 bp
As a percent of total assets:
Nonaccrual loans
0.21 %
0.16 %
0.10 %
0.05 %
0.05 %
5 bp
16 bp
Nonperforming assets
0.23
0.20
0.13
0.08
0.11
3
12
(1)
See the reconciliation table that begins on page 20.
(2)
This ratio excludes merger related expenses (Non-GAAP) on page 20.
(3)
Includes all loans held for investment, including PPP loan balances for all periods shown.
(4)
For 2023, this ratio excludes only PPP loans given the Company’s adoption of the CECL standard. For periods in 2022, this ratio excludes PPP loans and loans acquired in the Severn and Northwest acquisitions.
Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited)
12/31/2023
12/31/2023
compared to
compared to
(In thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2023
Q4 2022
INTEREST INCOME
Interest and fees on loans
$ 65,914
$ 64,869
$ 32,729
$ 30,828
$ 27,664
1.6 %
138.3 %
Interest on investment securities:
Taxable
3,992
5,047
3,729
4,064
3,945
(20.9)
1.2
Tax-exempt
6
27
5
7
6
(77.8)
—
Interest on federal funds sold
—
92
—
—
—
(100.0)
—
Interest on deposits with other banks
1,224
1,213
170
163
664
0.9
84.3
Total interest income
71,136
71,248
36,633
35,062
32,279
(0.2)
120.4
INTEREST EXPENSE
Interest on deposits
28,133
23,473
9,914
7,281
4,554
19.9
517.8
Interest on short-term borrowings
16
692
3,449
1,361
72
(97.7)
(77.8)
Interest on long-term borrowings
1,462
1,461
776
756
710
0.1
105.9
Total interest expense
29,611
25,626
14,139
9,398
5,336
15.6
454.9
NET INTEREST INCOME
41,525
45,622
22,494
25,664
26,943
(9.0)
54.1
Provision for credit losses
896
28,176
667
1,213
450
(96.8)
99.1
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
40,629
17,446
21,827
24,451
26,493
132.9
53.4
NONINTEREST INCOME
Service charges on deposit accounts
1,519
1,505
1,264
1,213
1,346
0.9
12.9
Trust and investment fee income
844
1,933
399
432
401
(56.3)
110.5
Loss on sales and calls of investment securities
—
(2,166)
—
—
—
100.0
—
Interchange credits
1,633
1,557
1,311
1,212
1,280
4.9
27.6
Mortgage-banking revenue
1,105
1,377
1,054
977
1,567
(19.8)
(29.5)
Title Company revenue
139
89
186
137
194
56.2
(28.4)
Bargain purchase gain
—
8,816
—
—
—
(100.0)
—
Other noninterest income
2,308
1,873
1,080
1,363
1,074
23.2
114.9
Total noninterest income
7,548
14,984
5,294
5,334
5,862
(49.6)
28.8
Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited) – Continued
12/31/2023
12/31/2023
compared to
compared to
(In thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2023
Q4 2022
NONINTEREST EXPENSE
Salaries and wages
$ 12,823
$ 14,183
$ 8,955
$ 8,684
$ 8,909
(9.6) %
43.9 %
Employee benefits
3,389
3,607
2,440
2,921
2,786
(6.0)
21.6
Occupancy expense
2,328
2,245
1,599
1,619
1,694
3.7
37.4
Furniture and equipment expense
790
750
477
534
648
5.3
21.9
Data processing
2,762
2,485
1,739
1,798
1,856
11.2
48.8
Directors’ fees
426
295
185
250
222
44.4
91.9
Amortization of intangible assets
2,595
2,634
435
441
460
(1.5)
464.1
FDIC insurance premium expense
1,733
618
758
371
315
180.4
450.2
Other real estate owned expenses, net
—
2
—
(1)
13
(100.0)
(100.0)
Legal and professional fees
1,411
1,217
959
750
636
15.9
121.9
Merger related expenses
602
14,866
1,197
691
967
(96.0)
(37.8)
Other noninterest expenses
4,811
4,256
2,864
2,835
2,494
13.0
92.9
Total noninterest expense
33,670
47,158
21,608
20,893
21,000
(28.6)
60.3
(Loss)/Income before income taxes
14,507
(14,728)
5,513
8,892
11,355
198.5
27.8
Income tax (benefit)/expense
4,017
(4,991)
1,495
2,435
2,948
180.5
36.3
NET (LOSS)/INCOME
$ 10,490
$ (9,737)
$ 4,018
$ 6,457
$ 8,407
207.7
24.8
Weighted average shares outstanding – basic and diluted
33,322
33,246
19,903
19,886
19,862
0.2
67.8
Basic and diluted net (loss)/ income per common share
$ 0.32
$ (0.29)
$ 0.20
$ 0.32
$ 0.42
210.3
(23.8)
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)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
(Dollars in thousands)
balance
Interest
rate
balance
Interest
rate
balance
Interest
rate
balance
Interest
rate
balance
Interest
rate
Earning assets
Loans (1), (2), (3)
Consumer real estate
$ 1,331,150
$ 18,653
5.56 %
$ 1,141,707
$ 14,548
5.06 %
$ 946,545
$ 10,876
4.61 %
$ 881,799
$ 10,507
4.83 %
$ 813,673
$ 7,911
3.86 %
Commercial real estate
2,728,094
38,730
5.63
2,831,569
40,536
5.68
1,292,406
15,620
4.85
1,279,923
15,173
4.81
1,246,966
15,114
4.81
Commercial
221,342
4,295
7.70
233,756
5,315
9.02
137,554
2,177
6.35
142,797
1,819
5.17
149,068
1,966
5.23
Consumer
333,807
3,859
4.59
332,486
4,183
4.99
323,798
3,983
4.93
297,528
3,274
4.46
244,471
2,602
4.22
State and political
1,290
13
4.00
929
10
4.27
900
8
3.57
978
9
3.73
1,084
11
4.03
Credit Cards
6,320
166
10.42
6,164
149
9.59
—
—
—
—
—
—
—
—
—
Other
17,464
277
6.29
16,137
201
4.94
8,741
116
5.37
8,619
83
3.91
12,062
96
3.16
Total Loans
4,639,467
65,993
5.64
4,562,748
64,942
5.65
2,709,944
32,780
4.85
2,611,644
30,865
4.79
2,467,324
27,700
4.45
Investment securities
Taxable
619,259
3,992
2.58
778,081
5,047
2.59
645,178
3,729
2.32
653,527
4,064
2.49
661,519
3,945
2.39
Tax-exempt (1)
661
8
4.84
663
34
20.51
664
6
3.62
666
9
5.41
449
7
6.24
Federal funds sold
—
—
—
7,533
92
4.85
—
—
—
—
—
—
—
—
—
Interest-bearing deposits
80,446
1,224
6.04
55,547
1,213
8.66
13,397
170
5.09
13,849
163
4.77
77,299
664
3.40
Total earning assets
5,339,833
71,217
5.29
5,404,572
71,328
5.24
3,369,183
36,685
4.37
3,279,686
35,101
4.34
3,206,591
32,316
4.00
Cash and due from banks
63,506
51,714
29,923
28,602
29,358
Other assets
399,409
359,726
225,935
228,054
221,599
Allowance for credit losses
(57,308)
(46,700)
(28,730)
(30,006)
(16,469)
Total assets
$ 5,745,440
$ 5,769,312
$ 3,596,311
$ 3,506,336
$ 3,441,079
Interest-bearing liabilities
Demand deposits
$ 1,117,117
$ 6,673
2.37 %
$ 1,056,956
$ 6,659
2.50 %
$ 685,674
$ 3,913
2.29 %
$ 694,894
$ 3,236
1.89 %
$ 670,424
$ 2,217
1.31 %
Money market and savings deposits
1,605,930
8,330
2.06
1,572,920
6,810
1.72
907,068
2,526
1.12
1,004,553
2,373
0.96
1,043,076
1,581
0.60
Brokered deposits
92,840
1,347
5.76
98,649
1,225
4.93
—
—
—
—
—
—
—
—
—
Certificates of deposit $100,000 or more
701,051
6,898
3.90
706,642
6,272
3.52
312,367
2,337
3.00
241,436
1,076
1.81
217,051
433
0.79
Other time deposits
391,820
4,885
4.95
285,743
2,507
3.48
225,495
1,138
2.03
207,403
595
1.16
205,293
322
0.62
Interest-bearing deposits (4)
3,908,758
28,133
2.86
3,720,910
23,473
2.50
2,130,604
9,914
1.87
2,148,286
7,280
1.37
2,135,844
4,553
0.85
Advances from FHLB – short-term
1,141
16
5.56
70,348
692
3.90
261,797
3,449
5.28
113,972
1,361
4.84
7,391
72
3.86
Advances from FHLB – long-term
—
—
—
—
—
—
—
—
—
—
—
—
653
(11)
(6.08)
Subordinated debt and Guaranteed preferred
beneficial interest in junior subordinated debentures
(“TRUPS”) (4)
72,155
1,462
8.04
71,907
1,461
8.06
43,185
776
7.21
43,108
756
7.11
43,031
720
6.64
Total interest-bearing liabilities
3,982,054
29,611
2.95
3,863,165
25,626
2.63
2,435,586
14,139
2.33
2,305,366
9,397
1.65
2,186,919
5,334
0.96
Noninterest-bearing deposits
1,228,060
1,345,976
778,058
820,162
870,890
Accrued expenses and other liabilities
28,286
27,057
19,442
19,634
21,647
Stockholders’ equity
507,040
533,114
363,225
361,174
361,623
Total liabilities and stockholders’ equity
$ 5,745,440
$ 5,769,312
$ 3,596,311
$ 3,506,336
$ 3,441,079
Net interest income
$ 41,606
$ 45,702
$ 22,546
$ 25,704
$ 26,982
Net interest spread
2.34 %
2.61 %
2.04 %
2.68 %
3.04 %
Net interest margin
3.09 %
3.35 %
2.68 %
3.18 %
3.34 %
Cost of Funds
2.25 %
1.95 %
1.76 %
1.22 %
0.69 %
Cost of Deposits
2.17 %
1.84 %
1.37 %
0.99 %
0.60 %
Cost of Debt
8.00 %
6.00 %
5.56 %
5.47 %
6.07 %
(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. There were $4.8 million, $6.1 million, $0.3 million, $0.5 million and $0.6 million of accretion interest on loans for the three months ended December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.
(4)
Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $(1.5) million, $(0.5) million, $41,000, $0.1 million and $0.2 million of amortization of deposits premium, and $(0.2) million, $(0.2) million, $(47,000), $(47,000) and $(47,000) of amortization of borrowing fair value adjustment for the three months ended December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.
Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited)
YTD
YTD
(In thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
12/31/2023
12/31/2022
The following reconciles return on average equity
and return on average tangible equity (Note 1):
Net (loss) income
$ 10,490
$ (9,737)
$ 4,018
$ 6,457
$ 8,407
$ 11,228
$ 31,177
Net (loss) income – annualized (A)
$ 41,618
$ (38,632)
$ 16,295
$ 26,187
$ 33,354
$ 11,228
$ 31,177
Net (loss) income
$ 10,490
$ (9,737)
$ 4,018
$ 6,457
$ 8,407
$ 11,228
$ 31,177
Add: Amortization of intangible assets, net of tax
1,876
1,741
317
320
341
4,254
1,471
Add: Merger Expenses, net of tax
435
9,828
872
502
716
11,637
1,553
Net income, excluding net amortization of intangible
assets and merger related expenses
$ 12,801
$ 1,832
$ 5,207
$ 7,279
$ 9,464
$ 27,119
$ 34,201
Net income, excluding net amortization of intangible
assets and merger related expenses – annualized (B)
$ 50,787
$ 7,268
$ 21,121
$ 29,520
$ 37,543
$ 27,119
$ 34,201
Return on average assets excluding net amortization
of intangible assets and merger related expenses – Non-GAAP
0.88 %
0.01 %
0.59 %
0.84 %
1.09 %
0.58 %
1.09 %
Average stockholders’ equity (C)
$ 507,040
$ 533,114
$ 363,225
$ 361,174
$ 361,623
$ 441,790
$ 355,850
Less: Average goodwill and core deposit intangible
(112,752)
(115,604)
(68,172)
(68,607)
(69,077)
(91,471)
(69,845)
Average tangible equity (D)
$ 394,288
$ 417,510
$ 295,053
$ 292,567
$ 292,546
$ 350,319
$ 286,005
Return on average equity (GAAP) (A)/(C)
8.21 %
(7.25) %
4.49 %
7.25 %
9.22 %
2.54 %
8.76 %
Return on average tangible equity (Non-GAAP) (B)/(D)
12.88 %
1.74 %
7.16 %
10.09 %
12.83 %
7.74 %
11.96 %
The following reconciles GAAP efficiency ratio and
non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)
$ 33,670
$ 47,158
$ 21,608
$ 20,893
$ 21,000
$ 123,329
$ 80,322
Less: Amortization of intangible assets
(2,595)
(2,634)
(435)
(441)
(460)
(6,105)
(1,988)
Less: Merger Expenses
(602)
(14,866)
(1,197)
(691)
(967)
(17,356)
(2,098)
Adjusted noninterest expense (F)
$ 30,473
$ 29,658
$ 19,976
$ 19,761
$ 19,573
$ 99,868
$ 76,236
Net interest income (G)
$ 41,525
$ 45,622
$ 22,494
$ 25,664
$ 26,943
$ 135,307
$ 101,302
Add: Taxable-equivalent adjustment
81
80
51
41
38
253
155
Taxable-equivalent net interest income (H)
$ 41,606
$ 45,702
$ 22,545
$ 25,705
$ 26,981
$ 135,560
$ 101,457
Noninterest income (I)
$ 7,548
$ 14,984
$ 5,294
$ 5,334
$ 5,862
$ 33,159
$ 23,086
Investment securities losses (gains)
—
2,166
—
—
—
2,166
—
Adjusted noninterest income (J)
$ 7,548
$ 17,150
$ 5,294
$ 5,334
$ 5,862
$ 35,325
$ 23,086
Efficiency ratio (GAAP) (E)/(G)+(I)
68.61 %
77.81 %
77.76 %
67.40 %
64.01 %
73.21 %
64.57 %
Efficiency ratio (Non-GAAP) (F)/(H)+(J)
61.99 %
47.19 %
71.75 %
63.66 %
59.60 %
58.44 %
61.21 %
Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited) – Continued
(In thousands, except per share data)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders’ equity (K)
$ 511,135
$ 501,578
$ 363,140
$ 361,638
$ 364,285
Less: Goodwill and core deposit intangible
(111,356)
(113,951)
(67,937)
(68,372)
(68,813)
Tangible equity (L)
$ 399,779
$ 387,627
$ 295,203
$ 293,266
$ 295,472
Shares outstanding (M)
33,162
33,136
19,907
19,898
19,865
Book value per common share (GAAP) (K)/(M)
$ 15.41
$ 15.14
$ 18.24
$ 18.17
$ 18.34
Tangible book value per common share (Non-GAAP) (L)/(M)
$ 12.06
$ 11.70
$ 14.83
$ 14.74
$ 14.87
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders’ equity (N)
$ 511,135
$ 501,578
$ 363,140
$ 361,638
$ 364,285
Less: Goodwill and core deposit intangible
(111,356)
(113,951)
(67,937)
(68,372)
(68,813)
Tangible equity (O)
$ 399,779
$ 387,627
$ 295,203
$ 293,266
$ 295,472
Assets (P)
$ 6,010,918
$ 5,705,372
$ 3,641,631
$ 3,553,694
$ 3,477,276
Less: Goodwill and core deposit intangible
(111,356)
(113,951)
(67,937)
(68,372)
(68,813)
Tangible assets (Q)
$ 5,899,562
$ 5,591,421
$ 3,573,694
$ 3,485,322
$ 3,408,463
Period-end equity/assets (GAAP) (N)/(P)
8.50 %
8.79 %
9.97 %
10.18 %
10.48 %
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)
6.78 %
6.93 %
8.26 %
8.41 %
8.67 %
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.
View original content to download multimedia:https://www.prnewswire.com/news-releases/shore-bancshares-inc-reports-2023-fourth-quarter-and-annual-results-302049886.html
SOURCE Shore Bancshares, Inc.
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