Exhibit 99.1
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-763-7800
PRESS RELEASE
Shore Bancshares Reports Second Quarter and First-Half Results
Easton, Maryland (07/24/2012) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income of $293 thousand or $0.03 per diluted common share for the second quarter of 2012, compared to a net loss of $3.0 million or $(0.36) per diluted common share for the first quarter of 2012, and a net loss of $233 thousand or $(0.03) per diluted common share for the second quarter of 2011. The Company reported a net loss of $2.7 million or $(0.32) per diluted common share for the first half of 2012, compared to a net loss of $1.3 million or $(0.16) per diluted common share for the first half of 2011.
When comparing the second quarter of 2012 to the first quarter of 2012, the primary reasons for the improved results were a decrease in the provision for credit losses of $4.8 million and a decrease in noninterest expense of $835 thousand. When comparing the second quarter of 2012 to the second quarter of 2011, the main reasons for the improved results were a decrease in the provision for credit losses of $1.9 million, which was partially offset by a decline in net interest income of $909 thousand. When comparing the first half of 2012 to the first half of 2011, the principal factors driving the difference were a decline in net interest income of $1.6 million and an increase in noninterest expense of $1.1 million.
“The operating environment remains tough as we are not yet seeing a meaningful upturn in the real estate related activities that drive the Delmarva economy. We continued to work diligently to resolve and dispose of problem loans, as reflected in a higher level of troubled debt restructurings this quarter,” said W. Moorhead Vermilye, chief executive officer. “The Company’s capital base remains strong and substantially above the regulatory levels to be considered well-capitalized. Our institution is both patient and resilient as we continue to ride out this unprecedented credit cycle.”
The Company’s return on average assets for the second quarter of 2012 was 0.10%, compared to (1.05)% and (0.08)% for the quarters ended March 31, 2012 and June 30, 2011, respectively. The return on average stockholders’ equity was 0.99% for the second quarter of 2012, compared to (10.04)% for the first quarter of 2012 and (0.77)% for the second quarter of 2011. The return on average tangible equity was 1.38% for the second quarter of 2012, compared to (11.33)% for the first quarter of 2012 and (0.60)% for the second quarter of 2011.
The Company’s return on average assets for the first six months of 2012 was (0.47)%, compared to (0.24)% for the first six months of 2011. The return on average stockholders’ equity was (4.59)% and (2.18)% for the first half of 2012 and 2011, respectively, while the return on average tangible equity was (5.06)% and (2.26)% for the first half of 2012 and 2011, respectively.
Total assets were $1.175 billion at June 30, 2012, a $17.1 million, or 1.5%, increase when compared to the $1.158 billion at the end of 2011. Total loans decreased 3.7% to $810.0 million while total earning assets increased 1.2% to $1.095 billion when compared to December 31, 2011. Total deposits increased 2.3 % to $1.033 billion while total stockholders’ equity decreased 1.5% from the end of 2011. The ratio of average equity to average assets was 10.35% and 10.80% for the first six months of 2012 and 2011, respectively, while the ratio of average tangible equity to average tangible assets was 9.05% and 9.32% for the first six months of 2012 and 2011, respectively. Capital levels remain well above regulatory minimums to be considered well-capitalized.
Review of Quarterly Financial Results
Net interest income for the second quarter of 2012 was $9.0 million, a 1.8% decrease from the first quarter of 2012 and a 9.1% decrease from the same period last year. The decrease in net interest income when compared to the first quarter of 2012 and the second quarter of 2011 was primarily due to lower yields earned on average earning assets and a decline in higher-yielding average loan balances. The Company’s net interest margin was 3.36% for the second quarter of 2012, 3.42% for the first quarter of 2012 and 3.80% for the second quarter of 2011.
Page 2 of 11
The provision for credit losses was $3.5 million for the three months ended June 30, 2012. The comparable amounts were $8.4 million and $5.4 million for the three months ended March 31, 2012 and June 30, 2011, respectively. The ratio of the allowance for credit losses to period-end loans was 1.60% at June 30, 2012, compared to 1.65% at March 31, 2012 and 1.86% at June 30, 2011. Management believes that the provision for credit losses and the resulting allowance were adequate to provide for probable losses in our loan portfolio at June 30, 2012.
The lower level of provision for credit losses for the second quarter of 2012 when compared to the first quarter of 2012 and the second quarter of 2011 was primarily in response to loan charge-offs. Net charge-offs were $4.1 million for the second quarter of 2012, which was $5.0 million and $2.4 million less than the comparable amounts for the first quarter of 2012 and second quarter of 2011, respectively. A large portion of the loan charge-offs during the first quarter of 2012 was from one real estate loan relationship. The ratio of quarter-to-date annualized net charge-offs to average loans was 2.01% for the second quarter of 2012, 4.40% for the first quarter of 2012 and 2.96% for the second quarter of 2011. Nonperforming assets at June 30, 2012 increased $5.6 million when compared to March 31, 2012, whichincluded a $7.2 million increase in accruing troubled debt restructurings net of a $1.4 million decline in nonaccrual loans. The change in the components of nonperforming assets reflected our continued effort to either develop concessionary workouts relating to problem loans or remove problem loans from our portfolio. Nonperforming assets at June 30, 2012 increased $20.2 million when compared to June 30, 2011, primarily due to an increase in troubled debt restructurings. The ratio of nonperforming assets to total assets was 8.53% at June 30, 2012, compared to 8.09% at March 31, 2012 and 7.12% at June 30, 2011.
Total noninterest income for the second quarter of 2012 remained relatively unchanged when compared to the first quarter of 2012 and increased $196 thousand, or 4.5%, when compared to the second quarter of 2011. The slightly higher amount when compared to the first quarter of 2012 was primarily the result of an increase in other noninterest income which included a $217 thousand gain on the sale of a bank branch building. The increase in other noninterest income was mainly offset by a decrease in insurance agency commissions due to the fact that contingency payments are typically received in the first quarter of the year. The increase in noninterest income during the second quarter of 2012 when compared to the second quarter of 2011 was primarily due to the $217 thousand gain on the sale of a bank branch building. This increase was partially offset by a decline in insurance agency commissions and service charges on deposit accounts which were impacted by a decrease in customer use of overdraft protection programs.
Total noninterest expense for the second quarter of 2012 decreased $835 thousand, or 8.0%, when compared to the first quarter of 2012, primarily due to lower employee benefits and other noninterest expenses. Other employee benefits decreased $214 thousand, mainly due to lower payroll taxes. Other noninterest expenses decreased $539 thousand mostly due to lower expenses related to other real estate owned activities ($323 thousand) and employee training ($96 thousand), primarily on the use of upgraded insurance software during the first quarter of 2012. When compared to the second quarter of 2011, total noninterest expense for the second quarter of 2012 increased $469 thousand, or 5.1%, primarily due to higher salaries and wages and other noninterest expenses. Salaries and wages increased $272 thousand, mainly due to the hiring of a new executive vice president at The Talbot Bank of Easton, Maryland during the second quarter of last year as part of that bank’s succession plan, and a new lender at CNB for the Delaware region during the third quarter of last year. Other noninterest expenses increased $212 thousand, primarily due to higher expenses related to other real estate owned activities.
Review of Six-Month Financial Results
Net interest income for the first six months of 2012 was $18.2 million, a decrease of 8.0% when compared to the first six months of 2011. As with the quarterly results, the decrease was primarily due to lower yields earned on average earning assets and a decline in higher-yielding average loan balances.The net interest margin was 3.39% for the first half of 2012 and 3.79% for the first half of 2011.
Page 3 of 11
The provisions for credit losses for the six months ended June 30, 2012 and 2011 were $11.9 million and $11.8 million, respectively. Net charge-offs were $13.1 million and $9.7 million for the six months ended June 30, 2012 and 2011, respectively. The ratio of year-to-date annualized net charge-offs to average loans was 3.22% for the first half of 2012 and 2.20% for the first half of 2011.
Total noninterest income for the six months ended June 30, 2012 increased $375 thousand, or 4.3%, when compared to the same period in 2011, primarily due to higher insurance agency commissions ($110 thousand) and other noninterest income ($449 thousand). Other noninterest income includedthe $217 thousand gain on the sale of a bank branch building and a $96 thousand increase in rental income from other real estated owned properties. Partially offsetting the increase in noninterest income was a decline in service charges on deposit accounts.
Total noninterest expense for the six months ended June 30, 2012 increased $1.1 million, or 5.6%, when compared to the same period in 2011. The increase was primarily due to higher salaries and wages and other noninterest expenses which included larger expenses relating to other real estate owned activities and employee training. These expenses were partially offset by lower FDIC insurance premiums and data processing charges due to the merger of The Felton Bank into CNB during the first quarter of 2011.
Shore Bancshares Information
Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore. It is the parent company of two banks, The Talbot Bank of Easton, Maryland, and CNB; three insurance producer firms, The Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and Associates, Inc; a wholesale insurance company, TSGIA, Inc; two insurance premium finance companies, Mubell Finance, LLC and ESFS, Inc; and a registered investment adviser firm, Wye Financial Services, LLC. Shore Bancshares, Inc. engages in the mortgage broker business under the name “Wye Mortgage Group” through a minority series investment in an unrelated Delaware limited liability company. Additional information is available atwww.shbi.com.
Forward-Looking Statements
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts, but statements about management’s beliefs, plans and objectives. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed byShore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.
For further information contact: W. Moorhead Vermilye, Chief Executive Officer, 410-763-7800
| Shore Bancshares, Inc. | Page 4 of 11 | |
| Financial Highlights | ||
| (Dollars in thousands, except per share data) |
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||
| PROFITABILITY FOR THE PERIOD | ||||||||||||||||||||||||
| Net interest income | $ | 9,033 | $ | 9,942 | (9.1 | )% | $ | 18,228 | $ | 19,804 | (8.0 | )% | ||||||||||||
| Provision for credit losses | 3,525 | 5,395 | (34.7 | ) | 11,895 | 11,785 | 0.9 | |||||||||||||||||
| Noninterest income | 4,577 | 4,381 | 4.5 | 9,151 | 8,776 | 4.3 | ||||||||||||||||||
| Noninterest expense | 9,663 | 9,194 | 5.1 | 20,161 | 19,085 | 5.6 | ||||||||||||||||||
| Income (loss) before income taxes | 422 | (266 | ) | 258.6 | (4,677 | ) | (2,290 | ) | (104.2 | ) | ||||||||||||||
| Income tax expense (benefit) | 129 | (33 | ) | 490.9 | (1,934 | ) | (974 | ) | (98.6 | ) | ||||||||||||||
| Net income (loss) | $ | 293 | $ | (233 | ) | 225.8 | $ | (2,743 | ) | $ | (1,316 | ) | (108.4 | ) | ||||||||||
| Return on average assets | 0.10 | % | (0.08 | )% | 18 | bp | (0.47 | )% | (0.24 | )% | (23 | )bp | ||||||||||||
| Return on average equity | 0.99 | (0.77 | ) | 176 | (4.59 | ) | (2.18 | ) | (241 | ) | ||||||||||||||
| Return on average tangible equity (1) | 1.38 | (0.60 | ) | 198 | (5.06 | ) | (2.26 | ) | (280 | ) | ||||||||||||||
| Net interest margin | 3.36 | 3.80 | (44 | ) | 3.39 | 3.79 | (40 | ) | ||||||||||||||||
| Efficiency ratio - GAAP | 70.77 | 63.93 | 684 | 73.39 | 66.50 | 689 | ||||||||||||||||||
| Efficiency ratio - Non-GAAP (1) | 71.20 | 63.05 | 815 | 73.16 | 65.79 | 737 | ||||||||||||||||||
| PER SHARE DATA | ||||||||||||||||||||||||
| Basic net income (loss) per common share | $ | 0.03 | $ | (0.03 | ) | 200.0 | % | $ | (0.32 | ) | $ | (0.16 | ) | (100.0 | )% | |||||||||
| Diluted net income (loss) per common share | 0.03 | (0.03 | ) | 200.0 | (0.32 | ) | (0.16 | ) | (100.0 | ) | ||||||||||||||
| Dividends paid per common share | - | 0.01 | (100.0 | ) | 0.01 | 0.07 | (85.7 | ) | ||||||||||||||||
| Book value per common share at period end | 14.13 | 14.30 | (1.2 | ) | ||||||||||||||||||||
| Tangible book value per common share at period end (1) | 12.18 | 12.14 | 0.3 | |||||||||||||||||||||
| Market value at period end | 5.98 | 6.98 | (14.3 | ) | ||||||||||||||||||||
| Market range: | ||||||||||||||||||||||||
| High | 7.45 | 10.21 | (27.0 | ) | 7.45 | 11.11 | (32.9 | ) | ||||||||||||||||
| Low | 5.51 | 6.51 | (15.4 | ) | 4.91 | 6.51 | (24.6 | ) | ||||||||||||||||
| AVERAGE BALANCE SHEET DATA | ||||||||||||||||||||||||
| Loans | $ | 816,553 | $ | 881,976 | (7.4 | )% | $ | 824,569 | $ | 884,738 | (6.8 | )% | ||||||||||||
| Securities | 134,299 | 111,190 | 20.8 | 134,168 | 108,727 | 23.4 | ||||||||||||||||||
| Earning assets | 1,086,223 | 1,056,658 | 2.8 | 1,087,165 | 1,059,396 | 2.6 | ||||||||||||||||||
| Assets | 1,163,598 | 1,125,213 | 3.4 | 1,161,582 | 1,128,115 | 3.0 | ||||||||||||||||||
| Deposits | 1,021,130 | 976,840 | 4.5 | 1,016,149 | 979,531 | 3.7 | ||||||||||||||||||
| Stockholders' equity | 118,774 | 121,187 | (2.0 | ) | 120,216 | 121,823 | (1.3 | ) | ||||||||||||||||
| CREDIT QUALITY DATA AT PERIOD END | ||||||||||||||||||||||||
| Net charge-offs | $ | 4,079 | $ | 6,508 | (37.3 | )% | $ | 13,193 | $ | 9,654 | 36.7 | % | ||||||||||||
| Nonaccrual loans | $ | 47,958 | $ | 48,476 | (1.1 | ) | ||||||||||||||||||
| Loans 90 days past due and still accruing | 3,519 | 990 | 255.5 | |||||||||||||||||||||
| Accruing troubled debt restructurings | 37,231 | 22,659 | 64.3 | |||||||||||||||||||||
| Total nonperforming loans | 88,708 | 72,125 | 23.0 | |||||||||||||||||||||
| Other real estate and other assets owned, net | 11,499 | 7,877 | 46.0 | |||||||||||||||||||||
| Total nonperforming assets | $ | 100,207 | $ | 80,002 | 25.3 | |||||||||||||||||||
| CAPITAL AND CREDIT QUALITY RATIOS | ||||||||||||||||||||||||
| Average equity to average assets | 10.21 | % | 10.77 | % | (56 | )bp | 10.35 | % | 10.80 | % | (45 | )bp | ||||||||||||
| Average tangible equity to average tangible assets (1) | 8.92 | 9.29 | (37 | ) | 9.05 | 9.32 | (27 | ) | ||||||||||||||||
| Annualized net charge-offs to average loans | 2.01 | 2.96 | (95 | ) | 3.22 | 2.20 | 102 | |||||||||||||||||
| Allowance for credit losses to period-end loans | 1.60 | 1.86 | (26 | ) | ||||||||||||||||||||
| Allowance for credit losses to nonaccrual loans | 27.09 | 33.74 | (665 | ) | ||||||||||||||||||||
| Allowance for credit losses to nonperforming loans | 14.64 | 22.68 | (804 | ) | ||||||||||||||||||||
| Nonaccrual loans to total loans | 5.92 | 5.53 | 39 | |||||||||||||||||||||
| Nonaccrual loans to total assets | 4.08 | 4.31 | (23 | ) | ||||||||||||||||||||
| Nonperforming assets to total loans+other real estate and | ||||||||||||||||||||||||
| other assets owned | 12.20 | 9.04 | 316 | |||||||||||||||||||||
| Nonperforming assets to total assets | 8.53 | 7.12 | 141 | |||||||||||||||||||||
| (1) See the reconciliation table on page 11 of 11. | ||||||||||||||||||||||||
| Shore Bancshares, Inc. | Page 5 of 11 | ||||||||
| Consolidated Balance Sheets | |||||||||
| (In thousands, except per share data) |
| June 30, 2012 | June 30, 2012 | |||||||||||||||||||
| June 30, | December 31, | June 30, | compared to | compared to | ||||||||||||||||
| 2012 | 2011 | 2011 | December 31, 2011 | June 30, 2011 | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Cash and due from banks | $ | 23,037 | $ | 22,986 | $ | 21,234 | 0.2 | % | 8.5 | % | ||||||||||
| Interest-bearing deposits with other banks | 137,267 | 99,776 | 45,598 | 37.6 | 201.0 | |||||||||||||||
| Federal funds sold | 9,269 | 4,980 | 13,881 | 86.1 | (33.2 | ) | ||||||||||||||
| Investments available for sale (at fair value) | 133,244 | 129,780 | 106,742 | 2.7 | 24.8 | |||||||||||||||
| Investments held to maturity | 5,168 | 6,480 | 6,529 | (20.2 | ) | (20.8 | ) | |||||||||||||
| Loans | 809,958 | 841,050 | 877,331 | (3.7 | ) | (7.7 | ) | |||||||||||||
| Less: allowance for credit losses | (12,990 | ) | (14,288 | ) | (16,358 | ) | (9.1 | ) | (20.6 | ) | ||||||||||
| Loans, net | 796,968 | 826,762 | 860,973 | (3.6 | ) | (7.4 | ) | |||||||||||||
| Premises and equipment, net | 15,398 | 14,662 | 14,377 | 5.0 | 7.1 | |||||||||||||||
| Goodwill | 12,454 | 12,454 | 13,678 | - | (8.9 | ) | ||||||||||||||
| Other intangible assets, net | 3,986 | 4,208 | 4,583 | (5.3 | ) | (13.0 | ) | |||||||||||||
| Other real estate and other assets owned, net | 11,499 | 9,385 | 7,877 | 22.5 | 46.0 | |||||||||||||||
| Other assets | 27,043 | 26,720 | 28,719 | 1.2 | (5.8 | ) | ||||||||||||||
| Total assets | $ | 1,175,333 | $ | 1,158,193 | $ | 1,124,191 | 1.5 | 4.5 | ||||||||||||
| LIABILITIES | ||||||||||||||||||||
| Noninterest-bearing deposits | $ | 149,472 | $ | 133,801 | $ | 130,789 | 11.7 | 14.3 | ||||||||||||
| Interest-bearing deposits | 883,231 | 876,118 | 842,653 | 0.8 | 4.8 | |||||||||||||||
| Total deposits | 1,032,703 | 1,009,919 | 973,442 | 2.3 | 6.1 | |||||||||||||||
| Short-term borrowings | 13,826 | 17,817 | 18,251 | (22.4 | ) | (24.2 | ) | |||||||||||||
| Accrued expenses and other liabilities | 8,882 | 8,753 | 10,625 | 1.5 | (16.4 | ) | ||||||||||||||
| Long-term debt | 455 | 455 | 932 | - | (51.2 | ) | ||||||||||||||
| Total liabilities | 1,055,866 | 1,036,944 | 1,003,250 | 1.8 | 5.2 | |||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||||||||
| Common stock, par value $0.01; authorized | ||||||||||||||||||||
| 35,000,000 shares | 85 | 85 | 85 | - | - | |||||||||||||||
| Warrant | - | - | 1,543 | - | (100.0 | ) | ||||||||||||||
| Additional paid in capital | 32,087 | 32,052 | 30,334 | 0.1 | 5.8 | |||||||||||||||
| Retained earnings | 87,973 | 90,801 | 90,551 | (3.1 | ) | (2.8 | ) | |||||||||||||
| Accumulated other comprehensive loss | (678 | ) | (1,689 | ) | (1,572 | ) | 59.9 | 56.9 | ||||||||||||
| Total stockholders' equity | 119,467 | 121,249 | 120,941 | (1.5 | ) | (1.2 | ) | |||||||||||||
| Total liabilities and stockholders' equity | $ | 1,175,333 | $ | 1,158,193 | $ | 1,124,191 | 1.5 | 4.5 | ||||||||||||
| Period-end common shares outstanding | 8,457 | 8,457 | 8,457 | - | - | |||||||||||||||
| Book value per common share | $ | 14.13 | $ | 14.34 | $ | 14.30 | (1.5 | ) | �� | (1.2 | ) | |||||||||
| Shore Bancshares, Inc. | Page 6 of 11 | ||||||||
| Consolidated Statements of Income | |||||||||
| (In thousands, except per share data) | |||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| 2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||||||||||||||
| INTEREST INCOME | ||||||||||||||||||||||||
| Interest and fees on loans | $ | 10,890 | $ | 11,896 | (8.5 | )% | $ | 21,901 | $ | 23,897 | (8.4 | )% | ||||||||||||
| Interest and dividends on investment securities: | ||||||||||||||||||||||||
| Taxable | 707 | 782 | (9.6 | ) | 1,464 | 1,439 | 1.7 | |||||||||||||||||
| Tax-exempt | 32 | 40 | (20.0 | ) | 70 | 78 | (10.3 | ) | ||||||||||||||||
| Interest on federal funds sold | 2 | 5 | (60.0 | ) | 4 | 21 | (81.0 | ) | ||||||||||||||||
| Interest on deposits with other banks | 61 | 12 | 408.3 | 109 | 18 | 505.6 | ||||||||||||||||||
| Total interest income | 11,692 | 12,735 | (8.2 | ) | 23,548 | 25,453 | (7.5 | ) | ||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||
| Interest on deposits | 2,643 | 2,769 | (4.6 | ) | 5,284 | 5,602 | (5.7 | ) | ||||||||||||||||
| Interest on short-term borrowings | 11 | 13 | (15.4 | ) | 26 | 26 | - | |||||||||||||||||
| Interest on long-term debt | 5 | 11 | (54.5 | ) | 10 | 21 | (52.4 | ) | ||||||||||||||||
| Total interest expense | 2,659 | 2,793 | (4.8 | ) | 5,320 | 5,649 | (5.8 | ) | ||||||||||||||||
| NET INTEREST INCOME | 9,033 | 9,942 | (9.1 | ) | 18,228 | 19,804 | (8.0 | ) | ||||||||||||||||
| Provision for credit losses | 3,525 | 5,395 | (34.7 | ) | 11,895 | 11,785 | 0.9 | |||||||||||||||||
| NET INTEREST INCOME AFTER PROVISION | ||||||||||||||||||||||||
| FOR CREDIT LOSSES | 5,508 | 4,547 | 21.1 | 6,333 | 8,019 | (21.0 | ) | |||||||||||||||||
| NONINTEREST INCOME | ||||||||||||||||||||||||
| Service charges on deposit accounts | 622 | 744 | (16.4 | ) | 1,270 | 1,448 | (12.3 | ) | ||||||||||||||||
| Trust and investment fee income | 446 | 418 | 6.7 | 869 | 794 | 9.4 | ||||||||||||||||||
| Investment securities gains | - | 2 | (100.0 | ) | - | 81 | (100.0 | ) | ||||||||||||||||
| Insurance agency commissions | 2,406 | 2,475 | (2.8 | ) | 5,095 | 4,985 | 2.2 | |||||||||||||||||
| Other noninterest income | 1,103 | 742 | 48.7 | 1,917 | 1,468 | 30.6 | ||||||||||||||||||
| Total noninterest income | 4,577 | 4,381 | 4.5 | 9,151 | 8,776 | 4.3 | ||||||||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||||||||
| Salaries and wages | 4,376 | 4,104 | 6.6 | 8,792 | 8,350 | 5.3 | ||||||||||||||||||
| Employee benefits | 956 | 886 | 7.9 | 2,126 | 2,039 | 4.3 | ||||||||||||||||||
| Occupancy expense | 638 | 568 | 12.3 | 1,325 | 1,164 | 13.8 | ||||||||||||||||||
| Furniture and equipment expense | 212 | 291 | (27.1 | ) | 463 | 563 | (17.8 | ) | ||||||||||||||||
| Data processing | 694 | 680 | 2.1 | 1,360 | 1,531 | (11.2 | ) | |||||||||||||||||
| Directors' fees | 127 | 112 | 13.4 | 236 | 219 | 7.8 | ||||||||||||||||||
| Amortization of intangible assets | 96 | 128 | (25.0 | ) | 222 | 257 | (13.6 | ) | ||||||||||||||||
| Insurance agency commissions expense | 344 | 357 | (3.6 | ) | 729 | 732 | (0.4 | ) | ||||||||||||||||
| FDIC insurance premium expense | 344 | 404 | (14.9 | ) | 617 | 864 | (28.6 | ) | ||||||||||||||||
| Other noninterest expenses | 1,876 | 1,664 | 12.7 | 4,291 | 3,366 | 27.5 | ||||||||||||||||||
| Total noninterest expense | 9,663 | 9,194 | 5.1 | 20,161 | 19,085 | 5.6 | ||||||||||||||||||
| Income (loss) before income taxes | 422 | (266 | ) | 258.6 | (4,677 | ) | (2,290 | ) | (104.2 | ) | ||||||||||||||
| Income tax expense (benefit) | 129 | (33 | ) | 490.9 | (1,934 | ) | (974 | ) | (98.6 | ) | ||||||||||||||
| NET INCOME (LOSS) | $ | 293 | $ | (233 | ) | 225.8 | $ | (2,743 | ) | $ | (1,316 | ) | (108.4 | ) | ||||||||||
| Weighted average shares outstanding - basic | 8,457 | 8,446 | 0.1 | 8,457 | 8,445 | 0.1 | ||||||||||||||||||
| Weighted average shares outstanding - diluted | 8,457 | 8,446 | 0.1 | 8,457 | 8,445 | 0.1 | ||||||||||||||||||
| Basic net income (loss) per common share | $ | 0.03 | $ | (0.03 | ) | 200.0 | $ | (0.32 | ) | $ | (0.16 | ) | (100.0 | ) | ||||||||||
| Diluted net income (loss) per common share | 0.03 | (0.03 | ) | 200.0 | (0.32 | ) | (0.16 | ) | (100.0 | ) | ||||||||||||||
| Dividends paid per common share | - | 0.01 | (100.0 | ) | 0.01 | 0.07 | (85.7 | ) | ||||||||||||||||
| Shore Bancshares, Inc. | Page 7 of 11 | ||||||||||||||
| Consolidated Average Balance Sheets | |||||||||||||||
| (Dollars in thousands) |
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||
| balance | rate | balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||
| Earning assets | ||||||||||||||||||||||||||||||||
| Loans | $ | 816,553 | 5.38 | % | $ | 881,976 | 5.43 | % | $ | 824,569 | 5.35 | % | $ | 884,738 | 5.46 | % | ||||||||||||||||
| Investment securities | ||||||||||||||||||||||||||||||||
| Taxable | 130,528 | 2.18 | 106,609 | 2.94 | 130,148 | 2.26 | 104,131 | 2.79 | ||||||||||||||||||||||||
| Tax-exempt | 3,771 | 5.32 | 4,581 | 5.27 | 4,020 | 5.34 | 4,596 | 5.18 | ||||||||||||||||||||||||
| Federal funds sold | 11,200 | 0.10 | 24,310 | 0.09 | 10,497 | 0.08 | 35,499 | 0.12 | ||||||||||||||||||||||||
| Interest-bearing deposits | 124,171 | 0.20 | 39,182 | 0.12 | 117,931 | 0.19 | 30,432 | 0.12 | ||||||||||||||||||||||||
| Total earning assets | 1,086,223 | 4.35 | % | 1,056,658 | 4.86 | % | 1,087,165 | 4.37 | % | 1,059,396 | 4.87 | % | ||||||||||||||||||||
| Cash and due from banks | 21,424 | 18,327 | 19,799 | 18,819 | ||||||||||||||||||||||||||||
| Other assets | 70,458 | 68,190 | 69,310 | 66,711 | ||||||||||||||||||||||||||||
| Allowance for credit losses | (14,507 | ) | (17,962 | ) | (14,692 | ) | (16,811 | ) | ||||||||||||||||||||||||
| Total assets | $ | 1,163,598 | $ | 1,125,213 | $ | 1,161,582 | $ | 1,128,115 | ||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||
| Demand deposits | $ | 152,685 | 0.18 | % | $ | 137,775 | 0.22 | % | $ | 152,988 | 0.19 | % | $ | 134,719 | 0.22 | % | ||||||||||||||||
| Money market and savings deposits (1) | 276,527 | 1.18 | 261,869 | 0.97 | 277,941 | 1.15 | 261,358 | 0.95 | ||||||||||||||||||||||||
| Certificates of deposit $100,000 or more | 242,662 | 1.46 | 244,805 | 1.67 | 241,591 | 1.46 | 251,953 | 1.69 | ||||||||||||||||||||||||
| Other time deposits | 205,046 | 1.73 | 206,310 | 2.02 | 203,394 | 1.78 | 207,300 | 2.06 | ||||||||||||||||||||||||
| Interest-bearing deposits | 876,920 | 1.21 | 850,759 | 1.31 | 875,914 | 1.21 | 855,330 | 1.32 | ||||||||||||||||||||||||
| Short-term borrowings | 13,818 | 0.31 | 15,020 | 0.36 | 15,720 | 0.33 | 14,595 | 0.36 | ||||||||||||||||||||||||
| Long-term debt | 455 | 4.63 | 932 | 4.51 | 455 | 4.63 | 932 | 4.53 | ||||||||||||||||||||||||
| Total interest-bearing liabilities | 891,193 | 1.20 | % | 866,711 | 1.29 | % | 892,089 | 1.20 | % | 870,857 | 1.31 | % | ||||||||||||||||||||
| Noninterest-bearing deposits | 144,210 | 126,081 | 140,235 | 124,201 | ||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 9,421 | 11,234 | 9,042 | 11,234 | ||||||||||||||||||||||||||||
| Stockholders' equity | 118,774 | 121,187 | 120,216 | 121,823 | ||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 1,163,598 | $ | 1,125,213 | $ | 1,161,582 | $ | 1,128,115 | ||||||||||||||||||||||||
| Net interest spread | 3.15 | % | 3.57 | % | 3.17 | % | 3.56 | % | ||||||||||||||||||||||||
| Net interest margin | 3.36 | % | 3.80 | % | 3.39 | % | 3.79 | % | ||||||||||||||||||||||||
| (1) | Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense $502 thousand and $299 thousand for the second quarter of 2012 and 2011, respectively, and $962 thousand and $559 thousand for the first six months of 2012 and 2011, respectively. |
| Shore Bancshares, Inc. | Page 8 of 11 | ||||||||||||
| Financial Highlights By Quarter | |||||||||||||
| (Dollars in thousands, except per share data) |
| 2nd quarter | 1st quarter | 4th quarter | 3rd quarter | 2nd quarter | 2Q 12 | 2Q 12 | ||||||||||||||||||||||
| 2012 | 2012 | 2011 | 2011 | 2011 | compared to | compared to | ||||||||||||||||||||||
| (2Q 12) | (1Q 12) | (4Q 11) | (3Q 11) | (2Q 11) | 1Q 12 | 2Q 11 | ||||||||||||||||||||||
| PROFITABILITY FOR THE PERIOD | ||||||||||||||||||||||||||||
| Taxable-equivalent net interest income | $ | 9,077 | $ | 9,243 | $ | 9,889 | $ | 10,172 | $ | 10,001 | (1.8 | )% | (9.2 | )% | ||||||||||||||
| Less: Taxable-equivalent adjustment | 44 | 48 | 52 | 49 | 59 | (8.3 | ) | (25.4 | ) | |||||||||||||||||||
| Net interest income | 9,033 | 9,195 | 9,837 | 10,123 | 9,942 | (1.8 | ) | (9.1 | ) | |||||||||||||||||||
| Provision for credit losses | 3,525 | 8,370 | 4,035 | 3,650 | 5,395 | (57.9 | ) | (34.7 | ) | |||||||||||||||||||
| Noninterest income | 4,577 | 4,574 | 4,019 | 4,523 | 4,381 | 0.1 | 4.5 | |||||||||||||||||||||
| Noninterest expense | 9,663 | 10,498 | 9,405 | 10,677 | 9,194 | (8.0 | ) | 5.1 | ||||||||||||||||||||
| Income (loss) before income taxes | 422 | (5,099 | ) | 416 | 319 | (266 | ) | 108.3 | 258.6 | |||||||||||||||||||
| Income tax expense (benefit) | 129 | (2,063 | ) | 91 | 225 | (33 | ) | 106.3 | 490.9 | |||||||||||||||||||
| Net income (loss) | $ | 293 | $ | (3,036 | ) | $ | 325 | $ | 94 | $ | (233 | ) | 109.7 | 225.8 | ||||||||||||||
| Return on average assets | 0.10 | % | (1.05 | )% | 0.11 | % | 0.03 | % | (0.08 | )% | 115 | bp | 18 | bp | ||||||||||||||
| Return on average equity | 0.99 | (10.04 | ) | 1.07 | 0.31 | (0.77 | ) | 1,103 | 176 | |||||||||||||||||||
| Return on average tangible equity (1) | 1.38 | (11.33 | ) | 1.53 | 4.21 | (0.60 | ) | 1,271 | 198 | |||||||||||||||||||
| Net interest margin | 3.36 | 3.42 | 3.60 | 3.77 | 3.80 | (6 | ) | (44 | ) | |||||||||||||||||||
| Efficiency ratio - GAAP | 70.77 | 75.98 | 67.62 | 72.66 | 63.93 | (521 | ) | 684 | ||||||||||||||||||||
| Efficiency ratio - Non-GAAP (1) | 71.20 | 75.07 | 67.61 | 64.18 | 63.05 | (387 | ) | 815 | ||||||||||||||||||||
| PER SHARE DATA | ||||||||||||||||||||||||||||
| Basic net income (loss) per common share | $ | 0.03 | $ | (0.36 | ) | $ | 0.04 | $ | 0.01 | $ | (0.03 | ) | 108.3 | % | 200.0 | % | ||||||||||||
| Diluted net income (loss) per common share | 0.03 | (0.36 | ) | 0.04 | 0.01 | (0.03 | ) | 108.3 | 200.0 | |||||||||||||||||||
| Dividends paid per common share | - | 0.01 | 0.01 | 0.01 | 0.01 | (100.0 | ) | (100.0 | ) | |||||||||||||||||||
| Book value per common share at period end | 14.13 | 14.02 | 14.34 | 14.31 | 14.30 | 0.8 | (1.2 | ) | ||||||||||||||||||||
| Tangible book value per common share at period end (1) | 12.18 | 12.07 | 12.37 | 12.32 | 12.14 | 0.9 | 0.3 | |||||||||||||||||||||
| Market value at period end | 5.98 | 7.09 | 5.15 | 4.36 | 6.98 | (15.7 | ) | (14.3 | ) | |||||||||||||||||||
| Market range: | ||||||||||||||||||||||||||||
| High | 7.45 | 7.40 | 6.13 | 7.06 | 10.21 | 0.7 | (27.0 | ) | ||||||||||||||||||||
| Low | 5.51 | 4.91 | 4.20 | 3.95 | 6.51 | 12.2 | (15.4 | ) | ||||||||||||||||||||
| AVERAGE BALANCE SHEET DATA | ||||||||||||||||||||||||||||
| Loans | $ | 816,553 | $ | 832,585 | $ | 854,302 | $ | 869,221 | $ | 881,976 | (1.9 | )% | (7.4 | )% | ||||||||||||||
| Securities | 134,299 | 134,037 | 122,725 | 113,938 | 111,190 | 0.2 | 20.8 | |||||||||||||||||||||
| Earning assets | 1,086,223 | 1,088,106 | 1,089,078 | 1,069,636 | 1,056,658 | (0.2 | ) | 2.8 | ||||||||||||||||||||
| Assets | 1,163,598 | 1,159,566 | 1,160,652 | 1,142,588 | 1,125,213 | 0.3 | 3.4 | |||||||||||||||||||||
| Deposits | 1,021,130 | 1,011,170 | 1,013,848 | 994,968 | 976,840 | 1.0 | 4.5 | |||||||||||||||||||||
| Stockholders' equity | 118,774 | 121,658 | 121,020 | 121,327 | 121,187 | (2.4 | ) | (2.0 | ) | |||||||||||||||||||
| CREDIT QUALITY DATA AT PERIOD END | ||||||||||||||||||||||||||||
| Net charge-offs | $ | 4,079 | $ | 9,114 | $ | 3,287 | $ | 6,468 | $ | 6,508 | (55.2 | )% | (37.3 | )% | ||||||||||||||
| Nonaccrual loans | $ | 47,958 | $ | 49,405 | $ | 51,370 | $ | 49,581 | $ | 48,476 | (2.9 | ) | (1.1 | ) | ||||||||||||||
| Loans 90 days past due and still accruing | 3,519 | 3,796 | 2,723 | 10,516 | 990 | (7.3 | ) | 255.5 | ||||||||||||||||||||
| Accruing troubled debt restructurings | 37,231 | 30,010 | 25,208 | 22,929 | 22,659 | 24.1 | 64.3 | |||||||||||||||||||||
| Total nonperforming loans | 88,708 | 83,211 | 79,301 | 83,026 | 72,125 | 6.6 | 23.0 | |||||||||||||||||||||
| Other real estate and other assets owned, net | 11,499 | 11,418 | 9,385 | 9,865 | 7,877 | 0.7 | 46.0 | |||||||||||||||||||||
| Total nonperforming assets | $ | 100,207 | $ | 94,629 | $ | 88,686 | $ | 92,891 | $ | 80,002 | 5.9 | 25.3 | ||||||||||||||||
| CAPITAL AND CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||||
| Average equity to average assets | 10.21 | % | 10.49 | % | 10.43 | % | 10.62 | % | 10.77 | % | (28 | )bp | (56 | )bp | ||||||||||||||
| Average tangible equity to average tangible assets (1) | 8.92 | 9.19 | 9.12 | 9.17 | 9.29 | (27 | ) | (37 | ) | |||||||||||||||||||
| Annualized net charge-offs to average loans | 2.01 | 4.40 | 1.53 | 2.95 | 2.96 | �� | (239 | ) | (95 | ) | ||||||||||||||||||
| Allowance for credit losses to period-end loans | 1.60 | 1.65 | 1.70 | 1.57 | 1.86 | (5 | ) | (26 | ) | |||||||||||||||||||
| Allowance for credit losses to nonaccrual loans | 27.09 | 27.41 | 27.81 | 27.31 | 33.74 | (32 | ) | (665 | ) | |||||||||||||||||||
| Allowance for credit losses to nonperforming loans | 14.64 | 16.28 | 18.02 | 16.31 | 22.68 | (164 | ) | (804 | ) | |||||||||||||||||||
| Nonaccrual loans to total loans | 5.92 | 6.03 | 6.11 | 5.75 | 5.53 | (11 | ) | 39 | ||||||||||||||||||||
| Nonaccrual loans to total assets | 4.08 | 4.22 | 4.44 | 4.28 | 4.31 | (14 | ) | (23 | ) | |||||||||||||||||||
| Nonperforming assets to total loans+other real estate and | ||||||||||||||||||||||||||||
| other assets owned | 12.20 | 11.40 | 10.43 | 10.65 | 9.04 | 80 | 316 | |||||||||||||||||||||
| Nonperforming assets to total assets | 8.53 | 8.09 | 7.66 | 8.02 | 7.12 | 44 | 141 | |||||||||||||||||||||
(1) See the reconciliation table on page 11 of 11.
| Shore Bancshares, Inc. | Page 9 of 11 | |||||||||||||
| Consolidated Statements of Income By Quarter | ||||||||||||||
| (In thousands, except per share data) |
| 2Q 12 | 2Q 12 | |||||||||||||||||||||||||||
| compared to | compared to | |||||||||||||||||||||||||||
| 2Q 12 | 1Q 12 | 4Q 11 | 3Q 11 | 2Q 11 | 1Q 12 | 2Q 11 | ||||||||||||||||||||||
| INTEREST INCOME | ||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 10,890 | $ | 11,011 | $ | 11,649 | $ | 12,003 | $ | 11,896 | (1.1 | )% | (8.5 | )% | ||||||||||||||
| Interest and dividends on investment securities: | ||||||||||||||||||||||||||||
| Taxable | 707 | 757 | 797 | 795 | 782 | (6.6 | ) | (9.6 | ) | |||||||||||||||||||
| Tax-exempt | 32 | 38 | 38 | 38 | 40 | (15.8 | ) | (20.0 | ) | |||||||||||||||||||
| Interest on federal funds sold | 2 | 2 | 1 | 3 | 5 | - | (60.0 | ) | ||||||||||||||||||||
| Interest on deposits with other banks | 61 | 48 | 46 | 29 | 12 | 27.1 | 408.3 | |||||||||||||||||||||
| Total interest income | 11,692 | 11,856 | 12,531 | 12,868 | 12,735 | (1.4 | ) | (8.2 | ) | |||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||||
| Interest on deposits | 2,643 | 2,641 | 2,673 | 2,720 | 2,769 | 0.1 | (4.6 | ) | ||||||||||||||||||||
| Interest on short-term borrowings | 11 | 15 | 15 | 15 | 13 | (26.7 | ) | (15.4 | ) | |||||||||||||||||||
| Interest on long-term debt | 5 | 5 | 6 | 10 | 11 | - | (54.5 | ) | ||||||||||||||||||||
| Total interest expense | 2,659 | 2,661 | 2,694 | 2,745 | 2,793 | (0.1 | ) | (4.8 | ) | |||||||||||||||||||
| NET INTEREST INCOME | 9,033 | 9,195 | 9,837 | 10,123 | 9,942 | (1.8 | ) | (9.1 | ) | |||||||||||||||||||
| Provision for credit losses | 3,525 | 8,370 | 4,035 | 3,650 | 5,395 | (57.9 | ) | (34.7 | ) | |||||||||||||||||||
| NET INTEREST INCOME AFTER PROVISION | ||||||||||||||||||||||||||||
| FOR CREDIT LOSSES | 5,508 | 825 | 5,802 | 6,473 | 4,547 | 567.6 | 21.1 | |||||||||||||||||||||
| NONINTEREST INCOME | ||||||||||||||||||||||||||||
| Service charges on deposit accounts | 622 | 648 | 700 | 697 | 744 | (4.0 | ) | (16.4 | ) | |||||||||||||||||||
| Trust and investment fee income | 446 | 423 | 380 | 389 | 418 | 5.4 | 6.7 | |||||||||||||||||||||
| Investment securities gains | - | - | 128 | 354 | 2 | - | (100.0 | ) | ||||||||||||||||||||
| Insurance agency commissions | 2,406 | 2,689 | 2,061 | 2,312 | 2,475 | (10.5 | ) | (2.8 | ) | |||||||||||||||||||
| Other noninterest income | 1,103 | 814 | 750 | 771 | 742 | 35.5 | 48.7 | |||||||||||||||||||||
| Total noninterest income | 4,577 | 4,574 | 4,019 | 4,523 | 4,381 | 0.1 | 4.5 | |||||||||||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||||||||||||
| Salaries and wages | 4,376 | 4,416 | 4,378 | 4,097 | 4,104 | (0.9 | ) | 6.6 | ||||||||||||||||||||
| Employee benefits | 956 | 1,170 | 923 | 878 | 886 | (18.3 | ) | 7.9 | ||||||||||||||||||||
| Occupancy expense | 638 | 687 | 563 | 585 | 568 | (7.1 | ) | 12.3 | ||||||||||||||||||||
| Furniture and equipment expense | 212 | 251 | 234 | 262 | 291 | (15.5 | ) | (27.1 | ) | |||||||||||||||||||
| Data processing | 694 | 666 | 660 | 661 | 680 | 4.2 | 2.1 | |||||||||||||||||||||
| Directors' fees | 127 | 109 | 83 | 198 | 112 | 16.5 | 13.4 | |||||||||||||||||||||
| Goodwill and other intangible assets impairment | - | - | - | 1,344 | - | - | - | |||||||||||||||||||||
| Amortization of intangible assets | 96 | 126 | 126 | 129 | 128 | (23.8 | ) | (25.0 | ) | |||||||||||||||||||
| Insurance agency commissions expense | 344 | 385 | 285 | 250 | 357 | (10.6 | ) | (3.6 | ) | |||||||||||||||||||
| FDIC insurance premium expense | 344 | 273 | 254 | 180 | 404 | 26.0 | (14.9 | ) | ||||||||||||||||||||
| Other noninterest expenses | 1,876 | 2,415 | 1,899 | 2,093 | 1,664 | (22.3 | ) | 12.7 | ||||||||||||||||||||
| Total noninterest expense | 9,663 | 10,498 | 9,405 | 10,677 | 9,194 | (8.0 | ) | 5.1 | ||||||||||||||||||||
| Income (loss) before income taxes | 422 | (5,099 | ) | 416 | 319 | (266 | ) | 108.3 | 258.6 | |||||||||||||||||||
| Income tax expense (benefit) | 129 | (2,063 | ) | 91 | 225 | (33 | ) | 106.3 | 490.9 | |||||||||||||||||||
| NET INCOME (LOSS) | $ | 293 | $ | (3,036 | ) | $ | 325 | $ | 94 | $ | (233 | ) | 109.7 | 225.8 | ||||||||||||||
| Weighted average shares outstanding - basic | 8,457 | 8,457 | 8,457 | 8,457 | 8,446 | - | 0.1 | |||||||||||||||||||||
| Weighted average shares outstanding - diluted | 8,457 | 8,457 | 8,457 | 8,457 | 8,446 | - | 0.1 | |||||||||||||||||||||
| Basic net income (loss) per common share | $ | 0.03 | $ | (0.36 | ) | $ | 0.04 | $ | 0.01 | $ | (0.03 | ) | 108.3 | 200.0 | ||||||||||||||
| Diluted net income (loss) per common share | 0.03 | (0.36 | ) | 0.04 | 0.01 | (0.03 | ) | 108.3 | 200.0 | |||||||||||||||||||
| Dividends paid per common share | - | 0.01 | 0.01 | 0.01 | 0.01 | (100.0 | ) | (100.0 | ) | |||||||||||||||||||
| Shore Bancshares, Inc. | Page 10 of 11 | ||||||||||||||||||
| Consolidated Average Balance Sheets By Quarter | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Average balance | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2Q 12 | 2Q 12 | |||||||||||||||||||||||||||||||||||||||||||||||
| compared to | compared to | |||||||||||||||||||||||||||||||||||||||||||||||
| 2Q 12 | 1Q 12 | 4Q 11 | 3Q 11 | 2Q 11 | 1Q 12 | 2Q 11 | ||||||||||||||||||||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||||||||||||
| balance | rate | balance | rate | balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||||||||||||||||
| Earning assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | $ | 816,553 | 5.38 | % | $ | 832,585 | 5.33 | % | $ | 854,302 | 5.42 | % | $ | 869,221 | 5.49 | % | $ | 881,976 | 5.43 | % | (1.9 | )% | (7.4 | )% | ||||||||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||||||||||||||||||||||||||
| Taxable | 130,528 | 2.18 | 129,767 | 2.35 | 118,315 | 2.67 | 109,498 | 2.88 | 106,609 | 2.94 | 0.6 | 22.4 | ||||||||||||||||||||||||||||||||||||
| Tax-exempt | 3,771 | 5.32 | 4,270 | 5.36 | 4,410 | 5.27 | 4,440 | �� | 5.12 | 4,581 | 5.27 | (11.7 | ) | (17.7 | ) | |||||||||||||||||||||||||||||||||
| Federal funds sold | 11,200 | 0.10 | 9,794 | 0.06 | 8,709 | 0.05 | 15,905 | 0.07 | 24,310 | 0.09 | 14.4 | (53.9 | ) | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 124,171 | 0.20 | 111,690 | 0.17 | 103,342 | 0.18 | 70,572 | 0.16 | 39,182 | 0.12 | 11.2 | 216.9 | ||||||||||||||||||||||||||||||||||||
| Total earning assets | 1,086,223 | 4.35 | % | 1,088,106 | 4.40 | % | 1,089,078 | 4.58 | % | 1,069,636 | 4.79 | % | 1,056,658 | 4.86 | % | (0.2 | ) | 2.8 | ||||||||||||||||||||||||||||||
| Cash and due from banks | 21,424 | 18,174 | 18,728 | 20,414 | 18,327 | 17.9 | 16.9 | |||||||||||||||||||||||||||||||||||||||||
| Other assets | 70,458 | 68,163 | 68,014 | 69,394 | 68,190 | 3.4 | 3.3 | |||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (14,507 | ) | (14,877 | ) | (15,168 | ) | (16,856 | ) | (17,962 | ) | (2.5 | ) | (19.2 | ) | ||||||||||||||||||||||||||||||||||
| Total assets | $ | 1,163,598 | $ | 1,159,566 | $ | 1,160,652 | $ | 1,142,588 | $ | 1,125,213 | 0.3 | 3.4 | ||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 152,685 | 0.18 | % | $ | 153,291 | 0.19 | % | $ | 157,657 | 0.19 | % | $ | 154,685 | 0.20 | % | $ | 137,775 | 0.22 | % | (0.4 | ) | 10.8 | |||||||||||||||||||||||||
| Money market and savings deposits (1) | 276,527 | 1.18 | 279,355 | 1.12 | 273,906 | 1.07 | 266,871 | 1.03 | 261,869 | 0.97 | (1.0 | ) | 5.6 | |||||||||||||||||||||||||||||||||||
| Certificates of deposit $100,000 or more | 242,662 | 1.46 | 240,521 | 1.46 | 241,810 | 1.46 | 235,362 | 1.63 | 244,805 | 1.67 | 0.9 | (0.9 | ) | |||||||||||||||||||||||||||||||||||
| Other time deposits | 205,046 | 1.73 | 201,743 | 1.83 | 201,249 | 1.91 | 204,836 | 1.91 | 206,310 | 2.02 | 1.6 | (0.6 | ) | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 876,920 | 1.21 | 874,910 | 1.21 | 874,622 | 1.21 | 861,754 | 1.25 | 850,759 | 1.31 | 0.2 | 3.1 | ||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 13,818 | 0.31 | 17,621 | 0.35 | 16,421 | 0.37 | 15,640 | 0.37 | 15,020 | 0.36 | (21.6 | ) | (8.0 | ) | ||||||||||||||||||||||||||||||||||
| Long-term debt | 455 | 4.63 | 455 | 4.63 | 466 | 4.46 | 932 | 4.46 | 932 | 4.51 | - | (51.2 | ) | |||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 891,193 | 1.20 | % | 892,986 | 1.20 | % | 891,509 | 1.20 | % | 878,326 | 1.24 | % | 866,711 | 1.29 | % | (0.2 | ) | 2.8 | ||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 144,210 | 136,260 | 139,226 | 133,214 | 126,081 | 5.8 | 14.4 | |||||||||||||||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 9,421 | 8,662 | 8,897 | 9,721 | 11,234 | 8.8 | (16.1 | ) | ||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 118,774 | 121,658 | 121,020 | 121,327 | 121,187 | (2.4 | ) | (2.0 | ) | |||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 1,163,598 | $ | 1,159,566 | $ | 1,160,652 | $ | 1,142,588 | $ | 1,125,213 | 0.3 | 3.4 | ||||||||||||||||||||||||||||||||||||
| Net interest spread | 3.15 | % | 3.20 | % | 3.38 | % | 3.55 | % | 3.57 | % | ||||||||||||||||||||||||||||||||||||||
| Net interest margin | 3.36 | % | 3.42 | % | 3.60 | % | 3.77 | % | 3.80 | % | ||||||||||||||||||||||||||||||||||||||
| (1) | Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense $502 thousand for the second quarter of 2012, $460 thousand for the first quarter of 2012, $405 thousand for the fourth quarter of 2011, $348 thousand for the third quarter of 2011 and $299 thousand for the second quarter of 2011. |
| Shore Bancshares, Inc. | Page 11 of 11 | ||||||||||||
| Reconciliation of Generally Accepted Accounting Principles (GAAP) | |||||||||||||
| and Non-GAAP Measures | |||||||||||||
| (In thousands, except per share data) | |||||||||||||
| YTD | YTD | |||||||||||||||||||||||||||
| 2Q 12 | 1Q 12 | 4Q 11 | 3Q 11 | 2Q 11 | 6/30/2012 | 6/30/2011 | ||||||||||||||||||||||
| The following reconciles return on average equity and return on | ||||||||||||||||||||||||||||
| average tangible equity (Note 1): | ||||||||||||||||||||||||||||
| Net income (loss) | $ | 293 | $ | (3,036 | ) | $ | 325 | $ | 94 | $ | (233 | ) | $ | (2,743 | ) | $ | (1,316 | ) | ||||||||||
| Net income (loss) - annualized (A) | $ | 1,178 | $ | (12,211 | ) | $ | 1,289 | $ | 373 | $ | (935 | ) | $ | (5,516 | ) | $ | (2,654 | ) | ||||||||||
| Net income (loss), excluding net amortization and | ||||||||||||||||||||||||||||
| impairment charges of intangible assets | $ | 351 | $ | (2,960 | ) | $ | 401 | $ | 1,094 | $ | (155 | ) | $ | (2,609 | ) | $ | (1,160 | ) | ||||||||||
| Net income (loss), excluding net amortization and | ||||||||||||||||||||||||||||
| impairment charges of intangible assets - annualized (B) | $ | 1,412 | $ | (11,905 | ) | $ | 1,591 | $ | 4,340 | $ | (622 | ) | $ | (5,247 | ) | $ | (2,339 | ) | ||||||||||
| Average stockholders' equity (C) | $ | 118,774 | $ | 121,658 | $ | 121,020 | $ | 121,327 | $ | 121,187 | $ | 120,216 | $ | 121,823 | ||||||||||||||
| Less: Average goodwill and other intangible assets | (16,497 | ) | (16,606 | ) | (16,732 | ) | (18,190 | ) | (18,334 | ) | (16,551 | ) | (18,399 | ) | ||||||||||||||
| Average tangible equity (D) | $ | 102,277 | $ | 105,052 | $ | 104,288 | $ | 103,137 | $ | 102,853 | $ | 103,665 | $ | 103,424 | ||||||||||||||
| Return on average equity (GAAP) (A)/(C) | 0.99 | % | (10.04 | )% | 1.07 | % | 0.31 | % | (0.77 | )% | (4.59 | )% | (2.18 | )% | ||||||||||||||
| Return on average tangible equity (Non-GAAP) (B)/(D) | 1.38 | % | (11.33 | )% | 1.53 | % | 4.21 | % | (0.60 | )% | (5.06 | )% | (2.26 | )% | ||||||||||||||
| The following reconciles GAAP efficiency ratio and non-GAAP | ||||||||||||||||||||||||||||
| efficiency ratio (Note 2): | ||||||||||||||||||||||||||||
| Noninterest expense (E) | $ | 9,663 | $ | 10,498 | $ | 9,405 | $ | 10,677 | $ | 9,194 | $ | 20,161 | $ | 19,085 | ||||||||||||||
| Less: Amortization of intangible assets | (96 | ) | (126 | ) | (126 | ) | (129 | ) | (128 | ) | (222 | ) | (257 | ) | ||||||||||||||
| Impairment charges | - | - | - | (1,344 | ) | - | - | - | ||||||||||||||||||||
| Adjusted noninterest expense (F) | $ | 9,567 | $ | 10,372 | $ | 9,279 | $ | 9,204 | $ | 9,066 | $ | 19,939 | $ | 18,828 | ||||||||||||||
| Taxable-equivalent net interest income (G) | $ | 9,077 | $ | 9,243 | $ | 9,889 | $ | 10,172 | $ | 10,001 | $ | 18,320 | $ | 19,922 | ||||||||||||||
| Noninterest income (H) | $ | 4,577 | $ | 4,574 | $ | 4,019 | $ | 4,523 | $ | 4,381 | $ | 9,151 | $ | 8,776 | ||||||||||||||
| Less: Investment securities (gains)/losses | - | - | (128 | ) | (354 | ) | (2 | ) | - | (81 | ) | |||||||||||||||||
| Other nonrecurring (gains)/losses | (217 | ) | - | (56 | ) | - | - | (217 | ) | - | ||||||||||||||||||
| Adjusted noninterest income (I) | $ | 4,360 | $ | 4,574 | $ | 3,835 | $ | 4,169 | $ | 4,379 | $ | 8,934 | $ | 8,695 | ||||||||||||||
| Efficiency ratio (GAAP) (E)/(G)+(H) | 70.77 | % | 75.98 | % | 67.62 | % | 72.66 | % | 63.93 | % | 73.39 | % | 66.50 | % | ||||||||||||||
| Efficiency ratio (Non-GAAP) (F)/(G)+(I) | 71.20 | % | 75.07 | % | 67.61 | % | 64.18 | % | 63.05 | % | 73.16 | % | 65.79 | % | ||||||||||||||
| The following reconciles book value per common share and tangible | ||||||||||||||||||||||||||||
| book value per common share (Note 1): | ||||||||||||||||||||||||||||
| Stockholders' equity (J) | $ | 119,467 | $ | 118,584 | $ | 121,249 | $ | 120,986 | $ | 120,941 | ||||||||||||||||||
| Less: Goodwill and other intangible assets | (16,440 | ) | (16,536 | ) | (16,662 | ) | (16,788 | ) | (18,261 | ) | ||||||||||||||||||
| Tangible equity (K) | $ | 103,027 | $ | 102,048 | $ | 104,587 | $ | 104,198 | $ | 102,680 | ||||||||||||||||||
| Shares outstanding (L) | 8,457 | 8,457 | 8,457 | 8,457 | 8,457 | |||||||||||||||||||||||
| Book value per common share (GAAP) (J)/(L) | $ | 14.13 | $ | 14.02 | $ | 14.34 | $ | 14.31 | $ | 14.30 | ||||||||||||||||||
| Tangible book value per common share (Non-GAAP) (K)/(L) | $ | 12.18 | $ | 12.07 | $ | 12.37 | $ | 12.32 | $ | 12.14 | ||||||||||||||||||
| The following reconciles average equity to average assets and | ||||||||||||||||||||||||||||
| average tangible equity to average tangible assets (Note 1): | ||||||||||||||||||||||||||||
| Average stockholders' equity (M) | $ | 118,774 | $ | 121,658 | $ | 121,020 | $ | 121,327 | $ | 121,187 | $ | 120,216 | $ | 121,823 | ||||||||||||||
| Less: Average goodwill and other intangible assets | (16,497 | ) | (16,606 | ) | (16,732 | ) | (18,190 | ) | (18,334 | ) | (16,551 | ) | (18,399 | ) | ||||||||||||||
| Average tangible equity (N) | $ | 102,277 | $ | 105,052 | $ | 104,288 | $ | 103,137 | $ | 102,853 | $ | 103,665 | $ | 103,424 | ||||||||||||||
| Average assets (O) | $ | 1,163,598 | $ | 1,159,566 | $ | 1,160,652 | $ | 1,142,588 | $ | 1,125,213 | $ | 1,161,582 | $ | 1,128,115 | ||||||||||||||
| Less: Average goodwill and other intangible assets | (16,497 | ) | (16,606 | ) | (16,732 | ) | (18,190 | ) | (18,334 | ) | (16,551 | ) | (18,399 | ) | ||||||||||||||
| Average tangible assets (P) | $ | 1,147,101 | $ | 1,142,960 | $ | 1,143,920 | $ | 1,124,398 | $ | 1,106,879 | $ | 1,145,031 | $ | 1,109,716 | ||||||||||||||
| Average equity/average assets (GAAP) (M)/(O) | 10.21 | % | 10.49 | % | 10.43 | % | 10.62 | % | 10.77 | % | 10.35 | % | 10.80 | % | ||||||||||||||
| Average tangible equity/average tangible assets (Non-GAAP) (N)/(P) | 8.92 | % | 9.19 | % | 9.12 | % | 9.17 | % | 9.29 | % | 9.05 | % | 9.32 | % | ||||||||||||||
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.