Exhibit 99.1

 

 

18 E. Dover Street

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports 2022 Financial Results

 

Easton, Maryland (01/26/2023) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported net income of $8.407 million or $0.42 per diluted common share for the fourth quarter of 2022, compared to net income of $9.658 million or $0.49 per diluted common share for the third quarter of 2022, and net income of $2.723 million or $0.16 per diluted common share for the fourth quarter of 2021. Net income for the fiscal year of 2022 was $31.177 million or $1.57 per diluted common share, compared to net income for the fiscal year of 2021 of $15.368 million or $1.17 per diluted common share. Net income, excluding merger related expenses, for the fourth quarter of 2022 was $9.123 million or $0.46 per diluted common share, compared to net income, excluding merger related expenses, of $9.774 million or $0.49 per diluted common share for the third quarter of 2022 and net income, excluding merger related expenses, of $7.914 million or $0.46 per diluted common share for the fourth quarter 2021. Net income, excluding merger related expenses, for the fiscal year of 2022 was $32.728 million or $1.65 per diluted common share compared to net income for the fiscal year of 2021 of $21.237 million or $1.62 per diluted common share. On December 14, 2022, the Company and The Community Financial Corporation (“TCFC”) announced that they had entered into a merger agreement pursuant to which TCFC will be merged with and into the Company. The Company anticipates additional merger-related expenses due to the pending TCFC acquisition.

 

When comparing net income, excluding merger related expenses, for the fourth quarter of 2022 to the third quarter of 2022, net income decreased $651 thousand due to a decrease in net interest income of $372 thousand and an increase in noninterest expense of $1.3 million partially offset by an increase in noninterest income of $518 thousand and a decrease in provision for credit losses of $225 thousand. When comparing net income, excluding merger related expenses, for the fourth quarter of 2022 to the fourth quarter of 2021, net income increased $1.2 million primarily due to increases in net interest income of $6.3 million and noninterest income of $733 thousand offset by increases in noninterest expense of $4.2 million due to the acquisition of Severn Bank (“Severn”) in November of 2021.

 

“We are pleased to report our fourth quarter earnings and fiscal year 2022 financial results” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer. “In 2022, we experienced significant loan growth of just over 20% and successful integration of Severn. With the recent announcement of our pending merger with TCFC, we expect the future of the combined organizations to be very promising given our ability to help customers with higher loan limits, make greater investments in technology and increased career opportunities for employees.”

 

Balance Sheet Review

Total assets were $3.477 billion at December 31, 2022, a $17.1 million, or less than 1.0%, increase when compared to $3.460 billion at the end of 2021. During 2022, the Company shifted its asset mix by deploying cash and cash equivalents into higher yielding assets which consisted of loans and investment securities. As of December 31, 2022, the Company had 4 Paycheck Protection Program (“PPP’) loans totaling $187 thousand that were outstanding.

 

Total deposits decreased $16.5 million, or less than 1%, when compared to December 31, 2021. The decrease in total deposits was due to decreases in money market and savings accounts of $85.7 million, noninterest-bearing deposits of $65.5 million and time deposits of $35.2 million, partially offset by an increase in interest bearing checking accounts of $170.0 million.

 

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Total stockholders’ equity increased $13.6 million, or 3.9%, when compared to December 31, 2021, primarily due to current year earnings, partially offset by an increase in unrealized losses on available for sale securities of $9.1 million. At December 31, 2022, the ratio of total equity to total assets was 10.48% and the ratio of total tangible equity to total tangible assets was 8.67% compared to 10.14% and 8.25% at the end of 2021, respectively.

 

Review of Quarterly Financial Results

Net interest income was $26.9 million for the fourth quarter of 2022, compared to $27.3 million for the third quarter of 2022 and $20.6 million for the fourth quarter of 2021. The decrease in net interest income when compared to the third quarter of 2022 was primarily due to increases in interest expense on interest-bearing deposits of $2.0 million. In addition, the decrease in the average balance on deposits with other banks of $187.3 million resulted in a decrease in interest income of $802 thousand, partially offset by an increase in interest and fees on loans of $1.7 million and interest on investment securities of $759 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $140.0 million, or 6.0%. The decrease in interest on deposits at other banks was due to the utilization of cash to fund loan growth with higher yields. The increase in interest on taxable investment securities was driven by an increase in the rates of 33bps and an increase in the average balance within these securities of $43.1 million, or 7.0%.

 

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 $7.1 million, interest on taxable investment securities of $2.3 million and interest on deposits with other banks of $495 thousand, partially offset by expense increases in interest-bearing deposits of $3.3 million, short term borrowings of $69 thousand and long-term borrowings of $228 thousand.

 

The Company’s net interest margin decreased to 3.35% for the fourth quarter of 2022 from 3.38% for the third quarter of 2022 and increased compared to 2.87% for the fourth quarter of 2021. The decrease in net interest margin when compared to the third quarter of 2022 was primarily due to higher rates paid on interest bearing deposits and borrowings partially offset by higher yields on earning assets. The increase in net interest margin compared to the fourth quarter of 2021 was due to significantly higher volume as well as improved yields on all earning assets.

 

The provision for credit losses was $450 thousand for the three months ended December 31, 2022. The comparable amounts were $675 thousand and $(1.7) million for the three months ended September 30, 2022, and December 31, 2021, respectively. The decrease in the provision for credit losses during the fourth quarter of 2022 as compared to the prior quarters was primarily a result of eliminating pandemic related qualitative reserves in the fourth quarter of 2022. Net charge offs for the fourth quarter of 2022 were $84 thousand, compared to net recoveries of $119 thousand for the third quarter of 2022 and net recoveries of $142 thousand for the fourth quarter of 2021. The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.78% at December 31, 2022, compared to 0.84% at September 30, 2022, and 0.96% at December 31, 2021. The decline in the percentage of the allowance from the third quarter of 2022 was primarily due to eliminating pandemic related qualitative reserves. The decline in the percentage of the allowance from the fourth quarter of 2021 was primarily the result of lower historical loss experience as well as eliminating pandemic related qualitative reserves.

 

At December 31, 2022 and September 30, 2022, nonperforming assets were $4.0 million and $2.8 million, respectively. The balance of nonperforming assets increased primarily due to an increase in loans 90 days past due still accruing of $1.2 million at December 31, 2022 compared to September 30, 2022. When comparing the fourth quarter of 2022 to the fourth quarter of 2021, nonperforming assets increased $902 thousand, or 29.6%, primarily due to increases in loans 90 days past due and still accruing of $1.3 million, or 262.4% which was a result of growth and timing of matured loans. Accruing TDRs decreased $1.3 million, or 22.3%, compared to the fourth quarter of 2021. The ratio of nonperforming assets and accruing TDRs to total assets at December 31, 2022, and September 30, 2022 was 0.24% and 0.21% respectively, and was 0.25% at December 31, 2021. In addition, the ratio of accruing TDRs to total loans at December 31, 2022 was 0.17% compared to 0.19% at September 30, 2022 and 0.27% at December 31, 2021.

 

Total noninterest income for the fourth quarter of 2022 increased $518 thousand, or 9.7%, when compared to the third quarter of 2022 and increased $733 thousand, or 14.3%, when compared to the fourth quarter of 2021. The increase compared to the third quarter of 2022 was primarily due to increases in revenue associated with the mortgage division of $887 thousand, or 130.4%, partially offset by decreases in other banking fees of $206 thousand, or 6.5% and service charges on deposit accounts of $163 thousand, or 10.8%. The increase in noninterest income when compared to the fourth quarter of 2021 was primarily due to increases in revenue associated with the mortgage division of $619 thousand, or 65.3% and, service charges on deposit accounts of $112 thousand, or 9.1%.

 

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Total noninterest expense, excluding merger related expenses, for the fourth quarter of 2022 increased $1.3 million or 6.9%, when compared to the third quarter of 2022 and increased $4.2 million, or 26.1%, when compared to the fourth quarter of 2021. The increase in noninterest expense when compared to the third quarter of 2022 was primarily due to an increase in accruals on bonuses and group insurance in the fourth quarter. The increase from the fourth quarter 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 and the addition of two new branches in 2022.

 

Review of 2022 Financial Results

Net interest income for 2022 was $101.3 million, an increase of $37.2 million, or 58.0%, when compared to 2021. The increase in net interest income was primarily due to an increase in total interest income of $43.7 million, or 62.2%, specifically interest and fees on loans of $34.3 million, or 53.0%. The improvement in interest and fees on loans was primarily due to the increase in the average balance of $725.2 million, or 46.2%, coupled with accretion income from acquired loans of $3.0 million for 2022. Taxable investment securities and interest on deposits with other banks increased $6.5 million and $2.8 million, respectively, partially offset by an increase in total interest expense of $6.5 million, or 107.7%. The increase in interest expense was primarily the result of an increase in the average balance of interest-bearing deposits of $684.5 million, or 47.5%. Interest on short term and long-term borrowings increased by $988 thousand due to short and long-term advances with the FHLB and junior subordinated debt acquired as part of the Severn acquisition. The long-term advances with the FHLB matured in October of 2022.

 

The provision for credit losses for 2022 and 2021 was $1.9 million and $(358) thousand, respectively. The increase in provision for credit losses was the result of an increase in loans held for investment in 2022 of $436.9 million. The ratio of the allowance to total loans decreased from 0.66% at December 31, 2021, to 0.65% at December 31, 2022. Excluding PPP loans and acquired loans, the ratio of the allowance for credit losses to period-end loans was 0.78% at December 31, 2022, lower than the 0.96% at December 31, 2021, primarily due to lower historical loss experience and the elimination of pandemic related qualitative factors.

 

Total noninterest income for 2022 increased $9.6 million, or 71.0%, when compared to the same period in 2021. The increase in noninterest income primarily consisted of revenue associated with the mortgage division of $4.3 million, service charges on deposit accounts of $2.3 million, revenue from Mid-Maryland Title of $1.1 million and other noninterest income of $1.2 million. The increase in other noninterest income was primarily due to increases in rental fee income of $1.3 million.

 

Total noninterest expense, excluding merger related expenses, for 2022 increased $29.9 million, or 62.0%, when compared to the same period in 2021. The increase was primarily the result of higher salaries, employee benefits, occupancy expense, other intangibles, data processing costs, other noninterest expenses, and FDIC insurance premiums due to significant increases in new and existing customers and the acquisition of Severn and its operations and the addition of two new branches in 2022. In addition, during 2022 the Company recorded merger-related expenses of $1.2 million due to the acquisition of Severn and $935 thousand due to the pending merger with TCFC.

 

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.

 

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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 potential resurgence 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.

 

For further information contact: Vance Adkins, Executive Vice President, and Chief Financial Officer, 410-763-7800

 

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Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)

 

 

   For the Three Months Ended   For the Year Ended 
   December 31,   December 31, 
   2022   2021   Change   2022   2021   Change 
PROFITABILITY FOR THE PERIOD                              
Net interest income  $26,943   $20,639    30.5%  $101,302   $64,130    58.0%
Provision for credit losses   450    (1,723)   126.1    1,925    (358)   637.7 
Noninterest income   5,862    5,129    14.3    23,086    13,498    71.0 
Noninterest expense   21,000    23,497    (10.6)   80,322    56,806    41.4 
Income before income taxes   11,355    3,994    184.3    42,141    21,180    99.0 
Income tax expense   2,948    1,271    131.9    10,964    5,812    88.6 
Net income  $8,407   $2,723    208.7   $31,177   $15,368    102.9 
                               
Return on average assets   0.97%   0.36%   61bp   0.90%   0.66%   24bp
Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)   1.09    1.07    2    0.99    0.95    4 
Return on average equity   9.22    3.59    563    8.76    6.86    190 
Return on average tangible equity - Non-GAAP (1), (2)   12.83    13.06    (23)   11.96    11.34    62 
Net interest margin   3.35    2.87    48    3.15    2.94    21 
Efficiency ratio - GAAP   64.01    91.19    (2,718)   64.57    73.18    (861)
Efficiency ratio - Non-GAAP (1), (2)   59.59    60.13    (54)   61.21    61.15    6 
                               
PER SHARE DATA                              
Basic and diluted net income per common share  $0.42   $0.16    167.1%  $1.57   $1.17    34.1%
                               
Dividends paid per common share  $0.12   $0.12       $0.48   $0.48     
Book value per common share at period end   18.34    17.71    3.6                
Tangible book value per common share at period end - Non-GAAP (1)   14.87    14.12    5.3                
Market value at period end   17.43    20.85    (16.4)               
Market range:                              
High   20.85    23.19    (10.1)   21.41    23.19    (7.7)
Low   17.04    17.50    (2.6)   17.04    12.99    31.2 
                               
AVERAGE BALANCE SHEET DATA                              
Loans  $2,467,324   $1,887,126    30.7%  $2,293,627   $1,568,468    46.2%
Investment securities   661,968    468,724    41.2    589,842    329,890    78.8 
Earning assets   3,206,591    2,842,097    12.8    3,220,672    2,185,123    47.4 
Assets   3,441,079    3,037,262    13.3    3,444,981    2,317,597    48.6 
Deposits   3,006,734    2,547,151    18.0    3,014,109    2,015,624    49.5 
Stockholders' equity   361,623    301,095    20.1    355,850    224,055    58.8 

 

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CREDIT QUALITY DATA                              
Net (recoveries) /chargeoffs  $84   $(142)   159.2%  $(774)  $(414)   (87.0)%
                               
Nonaccrual loans  $1,908   $2,004    (4.8)               
Loans 90 days past due and still accruing   1,841    508    262.4                
Other real estate owned   197    532    (63.0)               
Total nonperforming assets   3,946    3,044    29.6                
Accruing troubled debt restructurings (TDRs)   4,405    5,667    (22.3)               
Total nonperforming assets and accruing TDRs  $8,351   $8,711    (4.1)               
                               
                               
CAPITAL AND CREDIT QUALITY RATIOS                              
Period-end equity to assets   10.48%   10.14%   34bp               
Period-end tangible equity to tangible assets - Non-GAAP (1)   8.67    8.25    42                
                               
Annualized net (recoveries) to average loans   0.01    (0.03)   4    (0.03)%   (0.03)%    —bp
                               
Allowance for credit losses as a percent of:                              
Period-end loans (3)   0.65    0.66    (1)               
Period-end loans (4)   0.78    0.96    (18)               
Nonaccrual loans   872.27    695.81    17,646                
Nonperforming assets   421.77    458.08    (3,631)               
Accruing TDRs   377.82    246.06    13,176                
Nonperforming assets and accruing TDRs   199.29    160.07    3,922                
                               
As a percent of total loans:                              
Nonaccrual loans   0.07    0.09    (2)               
Accruing TDRs   0.17    0.27    (10)               
Nonaccrual loans and accruing TDRs   0.25    0.36    (11)               
                               
As a percent of total loans+other real estate owned:                              
Nonperforming assets   0.15    0.14    1                
Nonperforming assets and accruing TDRs   0.33    0.41    (8)               
                               
As a percent of total assets:                              
Nonaccrual loans   0.05    0.06    (1)               
Nonperforming assets   0.11    0.09    2                
Accruing TDRs   0.13    0.16    (3)               
Nonperforming assets and accruing TDRs   0.24    0.25    (1)               

 

 

(1)See the reconciliation table that begins on page 14 of 15.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 5.
(3)As of December 31, 2022 and December 31, 2021, these ratios include all loans held for investment, including PPP loans of $187 thousand and $27.6 million, respectively.
(4)As of December 31, 2022 and December 31, 2021, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

 

           December 31, 2022 
   December 31,   December 31,   compared to 
   2022   2021   December 31, 2021 
ASSETS               
Cash and due from banks  $37,661   $16,919    122.6 
Interest-bearing deposits with other banks   17,838    566,694    (96.9)
Cash and cash equivalents   55,499    583,613    (90.5)
                
Investment securities available for sale (at fair value)   83,587    116,982    (28.5)
Investment securities held to maturity (at amortized cost)   559,455    404,594    38.3 
Equity securities, at fair value   1,233    1,372    (10.1)
Restricted securities   11,169    4,159    168.6 
                
Loans held for sale, at fair value   4,248    37,749    (88.7)
                
Loans held for investment   2,556,107    2,119,175    20.6 
Less: allowance for credit losses   (16,643)   (13,944)   19.4 
Loans, net   2,539,464    2,105,231    20.6 
                
Premises and equipment, net   51,488    51,624    (0.3)
Goodwill   63,266    63,421    (0.2)
Other intangible assets, net   5,547    7,535    (26.4)
Other real estate owned, net   197    532    (63.0)
Mortgage servicing rights, at fair value   5,275    4,087    29.1 
Right of use assets, net   9,629    11,370    (15.3)
Cash surrender value on life insurance   59,218    47,935    23.5 
Other assets   28,001    19,932    40.5 
Total assets  $3,477,276   $3,460,136    0.5 
                
LIABILITIES               
Noninterest-bearing deposits  $862,015   $927,497    (7.1)
Interest-bearing deposits   2,147,769    2,098,739    2.3 
Total deposits   3,009,784    3,026,236    (0.5)
                
Securities sold under retail repurchase agreements       4,143    (100.0)
Advances from FHLB - short-term   40,000         
Advances from FHLB - long-term       10,135    (100.0)
Subordinated debt   43,072    42,762    0.7 
Total borrowings   83,072    57,040      
                
Lease liabilities   9,908    11,567    (14.3)
Accrued expenses and other liabilities   10,227    14,600    (30.0)
Total liabilities   3,112,991    3,109,443    0.1 
                
COMMITMENTS AND CONTINGENCIES               
                
STOCKHOLDERS' EQUITY               
Common stock, par value $0.01; authorized 35,000,000 shares   199    198    0.5 
Additional paid in capital   201,494    200,473    0.5 
Retained earnings   171,613    149,966    14.4 
Accumulated other comprehensive (loss) income   (9,021)   56    (16,208.9)
Total stockholders' equity   364,285    350,693    3.9 
Total liabilities and stockholders' equity  $3,477,276   $3,460,136    0.5 
                
Period-end common shares outstanding   19,865    19,808    0.3 
Book value per common share  $18.34   $17.71    3.6 

 

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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

   For the Three Months Ended   For the Year Ended 
   December 31,   December 31, 
   2022   2021   % Change   2022   2021   % Change 
INTEREST INCOME                              
Interest and fees on loans  $27,664   $20,564    34.5%  $99,122   $64,795    53.0%
Interest on investment securities:                              
Taxable   3,945    1,663    137.2    11,507    5,006    129.9 
Tax-exempt   6        100.0    6        100.0 
Interest on deposits with other banks   664    169    292.9    3,210    368    772.3 
Total interest income   32,279    22,396    44.1    113,845    70,169    62.2 
                               
INTEREST EXPENSE                              
Interest on deposits   4,554    1,272    258.0    9,983    4,461    123.8 
Interest on short-term borrowings   72    3    2,300.0    74    8    825.0 
Interest on long-term borrowings   710    482    47.3    2,486    1,570    58.3 
Total interest expense   5,336    1,757    203.7    12,543    6,039    107.7 
                               
NET INTEREST INCOME   26,943    20,639    30.5    101,302    64,130    58.0 
Provision for credit losses   450    (1,723)   126.1    1,925    (358)   637.7 
                               
NET INTEREST INCOME AFTER PROVISION                              
FOR CREDIT LOSSES   26,493    22,362    18.5    99,377    64,488    54.1 
                               
NONINTEREST INCOME                              
Service charges on deposit accounts   1,346    1,234    9.1    5,652    3,396    66.4 
Trust and investment fee income   401    522    (23.2)   1,784    1,881    (5.2)
Gains on sales and calls of investment securities                   2     
Interchange credits   1,280    1,043    22.7    4,812    3,964    21.4 
Mortgage-banking revenue   1,567    948    65.3    5,210    948    449.6 
Title Company revenue   194    247    (21.5)   1,340    247    442.5 
Other noninterest income   1,074    1,135    (5.4)   4,288    3,060    40.1 
Total noninterest income   5,862    5,129    14.3    23,086    13,498    71.0 
                               
NONINTEREST EXPENSE                              
Salaries and wages   8,909    7,727    15.3    35,931    21,222    69.3 
Employee benefits   2,786    2,271    22.7    9,908    7,262    36.4 
Occupancy expense   1,694    1,263    34.1    6,242    3,690    69.2 
Furniture and equipment expense   648    385    68.3    2,018    1,553    29.9 
Data processing   1,856    1,487    24.8    6,890    5,001    37.8 
Directors' fees   222    170    30.6    839    620    35.3 
Amortization of intangible assets   460    381    20.7    1,988    734    170.8 
FDIC insurance premium expense   315    362    (13.0)   1,426    1,015    40.5 
Other real estate owned, net   13    (2)   750.0    65    4    1,525.0 
Legal and professional fees   636    150    324.0    2,840    1,742    63.0 
Merger related expenses   967    7,615    (87.3)   2,098    8,530    (75.4)
Other noninterest expenses   2,494    1,688    47.7    10,077    5,433    85.5 
Total noninterest expense   21,000    23,497    (10.6)   80,322    56,806    41.4 
                               
Income before income taxes   11,355    3,994    184.3    42,141    21,180    99.0 
Income tax expense   2,948    1,271    131.9    10,964    5,812    88.6 
                               
NET INCOME  $8,407   $2,723    208.7   $31,177   $15,368    102.9 
                               
Weighted average shares outstanding - basic   19,862    17,180    15.6    19,847    13,119    51.3 
Weighted average shares outstanding - diluted   19,862    17,180    15.6    19,847    13,119    51.3 
                               
Basic and diluted net income per common share  $0.42   $0.16    167.1   $1.57   $1.17    34.1 
                               
Dividends paid per common share   0.12    0.12        0.48    0.48     

 

Page 9 of 15

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

 

   For the Three Months Ended   For the Year Ended 
   December 31,   December 31, 
   2022   2021   2022   2021 
   Average   Yield/   Average   Yield/   Average   Yield/   Average   Yield/ 
   balance   rate   balance   rate   balance   rate   balance   rate 
Earning assets                                        
Loans (1), (2), (3)  $2,467,324    4.45%  $1,887,126    4.33%  $2,293,627    4.33%  $1,568,468    4.14%
Investment securities                                        
Taxable   661,519    2.39    468,724    1.42    589,729    1.95    329,890    1.52 
Tax-exempt (1)   449    6.24            113    6.19         
Interest-bearing deposits   77,299    3.40    486,247    0.14    337,203    0.95    286,765    0.13 
Total earning assets   3,206,591    4.00%   2,842,097    3.11%   3,220,672    3.54%   2,185,123    3.21%
Cash and due from banks   29,358         22,625         18,158         19,838      
Other assets   221,599         188,399         221,592         127,704      
Allowance for credit losses   (16,469)        (15,859)        (15,441)        (15,068)     
Total assets  $3,441,079        $3,037,262        $3,444,981        $2,317,597      
                                         
Interest-bearing liabilities                                        
Demand deposits  $670,424    1.31%  $494,081    0.14%  $638,105    0.61%  $450,399    0.14%
Money market and savings deposits   1,043,076    0.60    1,001,115    0.26    1,043,032    0.35    695,056    0.21 
Certificates of deposit $100,000 or more   217,051    0.79    174,268    0.49    239,927    0.57    144,209    0.84 
Other time deposits   205,293    0.62    173,975    0.50    204,536    0.56    151,429    0.78 
Interest-bearing deposits   2,135,844    0.85    1,843,439    0.27    2,125,600    0.47    1,441,093    0.31 
Securities sold under retail repurchase                                        
   agreements and federal funds purchased           3,972    0.30    683    0.29    3,017    0.27 
Advances from FHLB - short-term   7,391    3.86            1,863    3.86         
Advances from FHLB - long-term   653    (6.08)   6,630    2.21    7,701    0.45    1,671    0.60 
Subordinated debt   43,031    6.64    36,589    5.12    42,917    5.71    27,528    5.67 
Total interest-bearing liabilities   2,186,919    0.96%   1,890,630    0.37%   2,178,764    0.57%   1,473,309    0.41%
Noninterest-bearing deposits   870,890         703,712         888,509         574,531      
Accrued expenses and other liabilities   21,647         141,825         21,858         45,702      
Stockholders' equity   361,623         301,095         355,850         224,055      
Total liabilities and stockholders' equity  $3,441,079        $3,037,262        $3,444,981        $2,317,597      
                                         
Net interest spread        3.04%        2.74%        2.97%        2.80%
Net interest margin        3.35%        2.87%        3.15%        2.94%

 

 

(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.

 

Page 10 of 15

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

 

   4th Quarter   3rd Quarter   2nd Quarter   1st Quarter   4th Quarter   Q4 2022   Q4 2022 
   2022   2022   2022   2022   2021   compared to   compared to 
   Q4 2022   Q3 2022   Q2 2022   Q1 2022   Q4 2021   Q3 2022   Q4 2021 
PROFITABILITY FOR THE PERIOD                                   
Taxable-equivalent net interest income  $26,981   $27,350   $24,656   $22,469   $20,652    (1.3)%   30.6%
Less: Taxable-equivalent adjustment   40    35    38    39    13    14.3    207.7 
Net interest income   26,943    27,315    24,618    22,430    20,639    (1.4)   30.5 
Provision for credit losses   450    675    200    600    (1,723)   (33.3)   126.1 
Noninterest income   5,862    5,344    5,833    6,046    5,129    9.7    14.3 
Noninterest expense   21,000    18,899    20,094    20,332    23,497    11.1    (10.6)
Income before income taxes   11,355    13,085    10,157    7,544    3,994    (13.2)   184.3 
Income tax expense   2,948    3,427    2,658    1,931    1,271    (14.0)   131.9 
Net income  $8,407   $9,658   $7,499   $5,613   $2,723    (13.0)   208.7 
                                    
Return on average assets   0.97%   1.11%   0.88%   0.65%   0.36%   (14)bp   61bp
Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)   1.09    1.17    0.94    0.76    1.07    (8)   2 
Return on average equity   9.22    10.72    8.52    6.45    3.59    (150)   563 
Return on average tangible equity - Non-GAAP (1)   12.83    13.98    11.41    9.40    13.06    (115)   (23)
Net interest margin   3.35    3.38    3.10    2.78    2.87    (3)   48 
Efficiency ratio - GAAP   64.01    57.87    65.99    71.40    91.19    614    (2,718)
Efficiency ratio - Non-GAAP (1), (2)   59.59    55.79    63.44    66.93    60.13    380    (54)
                                    
PER SHARE DATA                                   
Basic and diluted net income per common share  $0.42   $0.49   $0.38   $0.28   $0.16    (13.6)%   164.5%
                                    
Dividends paid per common share   0.12    0.12    0.12    0.12    0.12         
Book value per common share at period end   18.34    17.99    17.77    17.73    17.71    1.9    3.6 
Tangible book value per common share at period end - Non-GAAP (1)   14.87    14.50    14.26    14.19    14.12    2.6    5.3 
Market value at period end   17.43    17.32    18.50    20.48    20.85    0.6    (16.4)
Market range:                                   
High   20.85    20.50    21.21    21.41    23.19    1.7    (10.1)
Low   17.04    17.29    17.91    19.34    17.50    (1.4)   (2.6)

 

Page 11 of 15

 

AVERAGE BALANCE SHEET DATA                                   
Loans  $2,467,324   $2,327,279   $2,217,139   $2,135,734   $1,887,126    6.0%   30.7%
Investment securities   661,968    618,378    546,252    531,017    468,724    7.0    41.2 
Earning assets   3,206,591    3,210,233    3,189,926    3,253,549    2,842,097    (0.1)   12.8 
Assets   3,441,079    3,444,365    3,419,168    3,477,481    3,037,262    (0.1)   13.3 
Deposits   3,006,734    3,012,658    2,993,098    3,044,213    2,547,151    (0.2)   18.0 
Stockholders' equity   361,623    357,383    353,192    353,011    301,095    1.2    20.1 
                                    
CREDIT QUALITY DATA                                   
Net (recoveries) / chargeoffs  $84   $(119)  $(573)  $(166)  $(142)   170.6%   159.2%
                                    
Nonaccrual loans  $1,908   $1,949   $2,693   $2,848   $2,004    (2.1)   (4.8)
Loans 90 days past due and still accruing   1,841    644    803    459    508    185.9    262.4 
Other real estate owned   197    197    197    561    532        (63.0)
Total nonperforming assets  $3,946   $2,790   $3,693   $3,868   $3,044    41.4    29.6 
                                    
Accruing troubled debt restructurings (TDRs)  $4,405   $4,458   $4,894   $5,004   $5,667    (1.2)   (22.3)
                                    
Total nonperforming assets and accruing TDRs  $8,351   $7,248   $8,587   $8,872   $8,711    15.2    (4.1)
                                    
CAPITAL AND CREDIT QUALITY RATIOS                                   
Period-end equity to assets   10.48%   10.36%   10.25%   10.07%   10.14%   12bp   34bp
Period-end tangible equity to tangible assets - Non-GAAP (1)   8.67    8.52    8.39    8.22    8.25    15    42 
                                    
Annualized net (recoveries)  to average loans   0.01    (0.02)   (0.10)   (0.03)   (0.03)   3    4 
                                    
Allowance for credit losses as a percent of:                                   
Period-end loans (3)   0.65    0.68    0.68    0.67    0.66    (3)   (1)
Period-end loans (4)   0.78    0.84    0.89    0.92    0.96    (6)   (18)
Nonaccrual loans   872.27    835.15    574.94    516.50    695.81    3,712    17,646 
Nonperforming assets   421.77    583.41    419.25    380.30    458.08    (16,164)   (3,631)
Accruing TDRs   377.82    365.12    316.37    293.96    246.06    1,270    13,176 
Nonperforming assets and accruing TDRs   199.29    224.57    180.31    165.80    160.07    (2,528)   3,922 
                                    
As a percent of total loans:                                   
Nonaccrual loans   0.07    0.08    0.12    0.13    0.09    (1)   (2)
Accruing TDRs   0.17    0.19    0.22    0.23    0.27    (2)   (10)
Nonaccrual loans and accruing TDRs   0.25    0.27    0.34    0.36    0.36    (2)   (11)
                                    
As a percent of total loans+other real estate owned:                                   
Nonperforming assets   0.15    0.12    0.16    0.18    0.14    3    1 
Nonperforming assets and accruing TDRs   0.33    0.30    0.38    0.41    0.41    3    (8)
                                    
As a percent of total assets:                                   
Nonaccrual loans   0.05    0.06    0.08    0.08    0.06    (1)   (1)
Nonperforming assets   0.11    0.08    0.11    0.11    0.09    3    2 
Accruing TDRs   0.13    0.13    0.14    0.14    0.16        (3)
Nonperforming assets and accruing TDRs   0.24    0.21    0.25    0.25    0.25    3    (1)

 

 

(1)See the reconciliation table that begins on page 14.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 10.
(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.

 

Page 12 of 15

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)

 

                       Q4 2022   Q4 2022 
                       compared to   compared to 
   Q4 2022   Q3 2022   Q2 2022   Q1 2022   Q4 2021   Q3 2022   Q4 2021 
INTEREST INCOME                                   
Interest and fees on loans  $27,664   $25,924   $23,452   $22,085   $20,564    6.7%   34.5%
Interest on investment securities:                                   
Taxable   3,945    3,186    2,392    1,985    1,663    23.8    137.2 
           Tax-exempt   6                    100.0    100.0 
Interest on deposits with other banks   664    1,466    826    254    169    (54.7)   292.9 
Total interest income   32,279    30,576    26,670    24,324    22,396    5.6    44.1 
                                    
INTEREST EXPENSE                                   
Interest on deposits   4,554    2,561    1,511    1,358    1,272    77.8    258.0 
Interest on short-term borrowings   72            2    3    100.0    2,300.0 
Interest on long-term borrowings   710    700    541    534    482    1.4    47.3 
Total interest expense   5,336    3,261    2,052    1,894    1,757    63.6    203.7 
                                    
NET INTEREST INCOME   26,943    27,315    24,618    22,430    20,639    (1.4)   30.5 
Provision for credit losses   450    675    200    600    (1,723)   (33.3)   126.1 
                                    
NET INTEREST INCOME AFTER PROVISION                                   
FOR CREDIT LOSSES   26,493    26,640    24,418    21,830    22,362    (0.6)   18.5 
                                    
NONINTEREST INCOME                                   
Service charges on deposit accounts   1,346    1,509    1,438    1,359    1,234    (10.8)   9.1 
Trust and investment fee income   401    421    447    514    522    (4.8)   (23.2)
Interchange credits   1,280    1,241    1,253    1,038    1,043    3.1    22.7 
Mortgage-banking revenue   1,567    680    1,096    1,867    948    130.4    65.3 
Title Company revenue   194    397    426    323    247    (51.1)   (21.5)
Other noninterest income   1,074    1,096    1,173    945    1,135    (2.0)   (5.4)
Total noninterest income   5,862    5,344    5,833    6,046    5,129    9.7    14.3 
                                    
NONINTEREST EXPENSE                                   
Salaries and wages   8,909    8,562    8,898    9,562    7,727    4.1    15.3 
Employee benefits   2,786    2,191    2,269    2,662    2,271    27.2    22.7 
Occupancy expense   1,694    1,496    1,485    1,567    1,263    13.2    34.1 
Furniture and equipment expense   648    533    411    429    385    21.6    68.3 
Data processing   1,856    1,759    1,668    1,607    1,487    5.5    24.8 
Directors' fees   222    217    210    190    170    2.3    30.6 
Amortization of intangible assets   460    499    511    517    381    (7.8)   20.7 
FDIC insurance premium expense   315    339    429    343    362    (7.1)   (13.0)
Other real estate owned expenses, net   13    1    57    (6)   (2)   1,200.0    750.0 
Legal and professional fees   636    756    811    637    150    (15.9)   324.0 
Merger related expenses   967    159    241    730    7,615    508.2    (87.3)
Other noninterest expenses   2,494    2,387    3,104    2,094    1,688    4.5    47.7 
Total noninterest expense   21,000    18,899    20,094    20,332    23,497    11.1    (10.6)
                                    
Income before income taxes   11,355    13,085    10,157    7,544    3,994    (13.2)   184.3 
Income tax expense   2,948    3,427    2,658    1,931    1,271    (14.0)   131.9 
                                    
NET INCOME  $8,407   $9,658   $7,499   $5,613   $2,723    (13.0)   208.7 
                                    
Weighted average shares outstanding - basic   19,862    19,852    19,847    19,828    17,180    0.1    15.6 
Weighted average shares outstanding - diluted   19,862    19,852    19,847    19,828    17,180    0.1    15.6 
                                    
Basic and diluted net income per common share  $0.42   $0.49   $0.38   $0.28   $0.16    (13.6)   164.5 
                                    
Dividends paid per common share   0.12    0.12    0.12    0.12    0.12         

 

Page 13 of 15

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)

 

                                           Average balance 
                                           Q4 2022   Q4 2022 
                                           compared to   compared to 
   Q4 2022   Q3 2022   Q2 2022   Q1 2022   Q4 2021   Q3 2022   Q4 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)  $2,467,324    4.45%  $2,327,279    4.43%  $2,217,139    4.25%  $2,135,734    4.20%  $1,887,126    4.33%   6.0%   30.7%
Investment securities                                                            
Taxable   661,519    2.39    618,378    2.06    546,252    1.75    531,017    1.49    468,724    1.42    7.0    41.1 
Tax-exempt (1)   449    6.24                                    100.0    100.0 
Interest-bearing deposits   77,299    3.40    264,576    2.20    426,535    0.78    586,798    0.18    486,247    0.14    (70.8)   (84.1)
Total earning assets   3,206,591    4.00%   3,210,233    3.78%   3,189,926    3.36%   3,253,549    3.01%   2,842,097    3.11%   (0.1)   12.8 
Cash and due from banks   29,358         31,724         26,162         (15,253)        22,625         (7.5)   29.8 
Other assets   221,599         218,163         218,353         253,424         188,399         1.6    17.6 
Allowance for credit losses   (16,469)        (15,755)        (15,273)        (14,239)        (15,859)        4.5    3.8 
Total assets  $3,441,079        $3,444,365        $3,419,168        $3,477,481        $3,037,262         (0.1)   13.3 
                                                             
Interest-bearing liabilities                                                            
Demand deposits  $670,424    1.31%  $646,399    0.66%  $644,881    0.22%  $589,737    0.16%  $494,081    0.14%   3.7    35.7 
Money market and savings deposits   1,043,076    0.60    1,034,580    0.35    1,019,295    0.21    1,075,791    0.23    1,001,115    0.26    0.8    4.2 
Certificates of deposit $100,000 or more   217,051    0.79    222,697    0.55    234,325    0.58    286,587    0.40    174,268    0.49    (2.5)   24.6 
Other time deposits   205,293    0.62    215,014    0.51    221,714    0.54    175,683    0.57    173,975    0.50    (4.5)   18.0 
Interest-bearing deposits   2,135,844    0.85    2,118,690    0.48    2,120,215    0.29    2,127,798    0.26    1,843,439    0.27    0.8    15.9 
Securities sold under retail repurchase agreements                                                            
    and federal funds purchased                           2,770    0.29    3,972    0.30        (100.0)
Advances from FHLB - short-term   7,391    3.86                                    100.0    100.0 
Advances from FHLB - long-term   653    (6.08)   10,035    0.63    10,075    0.60    10,116    0.57    6,630    2.21    (93.5)   (90.2)
Subordinated debt   43,031    6.64    42,953    6.33    42,876    4.93    42,804    4.93    36,589    5.12    0.2    17.6 
Total interest-bearing liabilities   2,186,919    0.96%   2,171,678    0.60%   2,173,166    0.38%   2,183,488    0.35%   1,890,630    0.37%   0.7    15.7 
Noninterest-bearing deposits   870,890         893,968         872,883         916,415         703,712         (2.6)   23.8 
Accrued expenses and other liabilities   21,647         21,336         19,927         24,567         141,825         1.5    (84.7)
Stockholders' equity   361,623         357,383         353,192         353,011         301,095         1.2    20.1 
Total liabilities and stockholders' equity  $3,441,079        $3,444,365        $3,419,168        $3,477,481        $3,037,262         (0.1)   13.3 
                                                             
Net interest spread        3.04%        3.18%        2.98%        2.66%        2.74%          
Net interest margin        3.35%        3.38%        3.10%        2.78%        2.87%          

 

 

(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.

 

Page 14 of 15

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)

 

                             
                       YTD   YTD 
   Q4 2022   Q3 2022   Q2 2022   Q1 2022   Q4 2021   12/31/2022   12/31/2021 
The following reconciles return on average equity and return on average tangible equity (Note 1):                                   
                                    
Net Income  $8,407   $9,658   $7,499   $5,613   $2,723   $31,177   $15,368 
Net Income - annualized (A)  $33,354   $38,317   $30,078   $22,764   $10,803   $31,177   $15,368 
                                    
Net income, excluding net amortization of intangible assets and merger related expenses  $9,463   $10,144   $8,054   $6,541   $8,176   $34,201   $22,279 
Net income, excluding net amortization of intangible assets and merger related expenses - annualized (B)  $37,543   $40,245   $32,305   $26,527   $32,437   $34,201   $22,279 
                                    
Return on average assets excluding net amortization of intangible assets and merger related expenses - Non-GAAP   1.09%   1.17%   0.94%   0.76%   1.07%   0.99%   0.95%
                                    
Average stockholders' equity (C)  $361,623   $357,383   $353,192   $353,011   $301,095   $355,850   $224,055 
Less:  Average goodwill and other intangible assets   (69,077)   (69,558)   (70,057)   (70,711)   (52,692)   (69,845)   (27,535)
Average tangible equity (D)  $292,546   $287,825   $283,135   $282,300   $248,403   $286,005   $196,520 
                                    
Return on average equity (GAAP)  (A)/(C)   9.22%   10.72%   8.52%   6.45%   3.59%   8.76%   6.86%
Return on average tangible equity (Non-GAAP)  (B)/(D)   12.83%   13.98%   11.41%   9.40%   13.06%   11.96%   11.34%
                                    
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):                                   
                                    
Noninterest expense (E)  $21,000   $18,899   $20,094   $20,332   $23,497   $80,322   $56,806 
Less:  Amortization of intangible assets   (460)   (499)   (511)   (517)   (381)   (1,988)   (734)
           Merger Expenses   (967)   (159)   (241)   (730)   (7,615)   (2,098)   (8,530)
Adjusted noninterest expense (F)  $19,573   $18,241   $19,342   $19,085   $15,501   $76,236   $47,542 
                                    
Net interest income (G)   26,943    27,315    24,618    22,430    20,639    101,302    64,130 
Add:  Taxable-equivalent adjustment   40    35    38    39    13    155    121 
Taxable-equivalent net interest income (H)  $26,983   $27,350   $24,656   $22,469   $20,652   $101,457   $64,251 
                                    
Noninterest income (I)  $5,862   $5,344   $5,833   $6,046   $5,129   $23,086    13,498 
Less:  Investment securities (gains)                           (2)
Adjusted noninterest income (J)  $5,862   $5,344   $5,833   $6,046   $5,129   $23,086   $13,496 
                                    
Efficiency ratio (GAAP)  (E)/(G)+(I)   64.01%   57.87%   65.99%   71.40%   91.19%   64.57%   73.18%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)   59.59%   55.79%   63.44%   66.93%   60.13%   61.21%   61.15%

 

Page 15 of 15

 

The following reconciles book value per common share and tangible book value per common share (Note 1):                         
                          
Stockholders' equity (L)  $364,285   $357,221   $352,777   $351,864   $350,693 
Less:  Goodwill and other intangible assets   (68,813)   (69,288)   (69,787)   (70,299)   (70,956)
Tangible equity (M)  $295,472   $287,933   $282,990   $281,565   $279,737 
                          
Shares outstanding (N)   19,865    19,858    19,850    19,843    19,808 
                          
Book value per common share (GAAP)  (L)/(N)  $18.34   $17.99   $17.77   $17.73   $17.71 
Tangible book value per common share (Non-GAAP) (M)/(N)  $14.87   $14.50   $14.26   $14.19   $14.12 
                          
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):                         
                          
Stockholders' equity (O)  $364,285   $357,221   $352,777   $351,864   $350,693 
Less:  Goodwill and other intangible assets   (68,813)   (69,288)   (69,787)   (70,299)   (70,956)
Tangible equity (P)  $295,472   $287,933   $282,990   $281,565   $279,737 
                          
Assets (Q)  $3,477,276   $3,446,804   $3,442,550   $3,494,497   $3,460,136 
Less:  Goodwill and other intangible assets   (68,813)   (69,288)   (69,787)   (70,299)   (70,956)
Tangible assets (R)  $3,408,463   $3,377,516   $3,372,763   $3,424,198   $3,389,180 
                          
Period-end equity/assets (GAAP)  (O)/(Q)   10.48%   10.36%   10.25%   10.07%   10.14%
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)   8.67%   8.52%   8.39%   8.22%   8.25%

 

 

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.