Exhibit 99.1
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
Phone 410-763-7800
PRESS RELEASE
Shore Bancshares Reports 2012 Results
Easton, Maryland (1/29/2013) - Shore Bancshares, Inc. (NASDAQ - SHBI) today reported a net loss of $5.1 million or $(0.60) per diluted common share for the fourth quarter of 2012, compared to a net loss of $1.8 million or $(0.22) per diluted common share for the third quarter of 2012, and net income of $325 thousand or $0.04 per diluted common share for the fourth quarter of 2011. The Company reported a net loss of $9.6 million or $(1.14) per diluted common share for fiscal year 2012, compared to a net loss of $897 thousand or $(0.11) per diluted common share for fiscal year 2011.
When comparing the fourth quarter of 2012 to both the third quarter of 2012 and the fourth quarter of 2011, theprimary reasons for the difference in results were an increase in the provision for credit losses and a $1.3 million loss incurred during the fourth quarter of 2012 to terminate a portion of an interest rate cap instrument. The decline in net interest income was another primary reason for the difference in results when comparing the fourth quarter of 2012 with the fourth quarter of 2011. When comparing fiscal year 2012 to fiscal year 2011,the principal factors driving the difference were the same as those for the quarterly results.
“We continued to make very difficult but prudent decisions during the fourth quarter that should enable us to improve our overall credit quality and permanently reduce problem loans. In order to continue charging off nonperforming assets as rapidly as possible, we again incurred a substantial quarterly provision for credit losses. For the three months ended December 31, 2012, the provision was $9.7 million, compared to $6.2 million and $4.0 million for the three months ended September 30, 2012 and December 31, 2011, respectively. The fourth quarter provision is consistent with our intention to be as aggressive as possible in restoring the Company to profitability – that is our foremost priority,” said W. Moorhead Vermilye, chief executive officer.
“Further, as discussed in the ‘Review of Quarterly Financial Results’ below, we made another tough but prudent decision to incur the cost of terminating a portion of an interest rate cap instrument. This should produce a meaningful ongoing improvement in the net interest margin beginning in the first quarter of 2013 and continuing thereafter.”
“As we have noted over the past several quarters, in our view the real estate driven economy on the Delmarva peninsula is one of a handful of the most persistently slow geographic markets in the entire country to turn around and show clear, definitive signs of recovery. Fortunately, we have the underlying capital strength to support our efforts to work our way through many challenges which have proven insurmountable for some of our local peers and other community banks in similar suffering markets. At year end, our total capital amounted to $114 million. For 2012, the ratio of average equity to average assets was 10.18% while the ratio of average tangible equity to average tangible assets was 8.90%. As evidenced by these percentages, the Company’s capital levels are well above the regulatory minimums to be considered well-capitalized,” said Vermilye.
Balance Sheet Review
Total assets were $1.186 billion at December 31, 2012, a 2.4% increase when compared to the $1.158 billion at the end of 2011. Total loans decreased 6.7% to $785.1 million while total earning assets increased 2.3%to $1.107 billion when compared to December 31, 2011. Total deposits increased 3.9% to $1.049 billion while total stockholders’ equity decreased 6.0% from the end of 2011.
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Review of Quarterly Financial Results
Net interest income for the fourth quarter of 2012 was $8.4 million, a 4.0% decrease from the third quarter of 2012 and a 14.8% decrease from the same period last year. The decrease in net interest income when compared to the third quarter of 2012 was primarily due to lower yields earned on average earning assets. The decrease in net interest income when compared to the fourth 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 3.02% for the fourth quarter of 2012, 3.15% for the third quarter of 2012 and 3.60% for the fourth quarter of 2011.
The provision for credit losses was $9.7 million for the three months ended December 31, 2012. The comparable amounts were $6.2 million and $4.0 million for the three months ended September 30, 2012 and December 31, 2011, respectively. The ratio of the allowance for credit losses to period-end loans increased to 2.04% at December 31, 2012, compared to 1.60% at September 30, 2012 and 1.70% at December 31, 2011.
The level of provision for credit losses for the fourth quarter of 2012 when compared to the third quarter of 2012 and the fourth quarter of 2011 was primarily in response to loan charge-offs. Net charge-offs were $6.6 million for the fourth quarter of 2012, $6.2 million for the third quarter of 2012 and $3.3 million for the fourth quarter of 2011. The charge offs in all three quarters were mainly real estate related loans. The ratio of quarter-to-date annualized net charge-offs to average loans was 3.29% for the fourth quarter of 2012, 3.07% for the third quarter of 2012 and 1.53% for the fourth quarter of 2011. Total nonperforming assets at December 31, 2012 decreased $6.4 million when compared to September 30, 2012. This decreaseincluded a $7.2 million decline in nonaccrual and 90 days past due and still accruing loans, and a $759 thousand decline in other real estate owned, net of a $1.6 million increase in accruing troubled debt restructurings. The change in the components of nonperforming assets reflected our continued effort either to develop concessionary workouts relating to problem loans or remove problem loans from our portfolio. Nonperforming assets at December 31, 2012 increased $8.3 million when compared to December 31, 2011, primarily due to a $27.1 million increase in troubled debt restructurings net of an $18.8 million decrease in the other components of nonperforming assets. The ratio of nonperforming assets to total assets was 8.18% at December 31, 2012, compared to 8.77% at September 30, 2012 and 7.66% at December 31, 2011.
Total noninterest income for the fourth quarter of 2012 decreased $1.4 million, or 34.9%, when compared to the third quarter of 2012. The decrease was primarily due to a decline in both gains on sales of investment securities ($278 thousand) and other noninterest income ($962 thousand). Included in other noninterest income for the fourth quarter of 2012 was the previously mentioned $1.3 million loss to terminate a portion of an interest rate cap instrument. During the second quarter of 2009, the Company purchased interest rate caps for $7.1 million to effectively fix the interest rate at 2.97% for five years on $70 million of the Company’s money market deposit accounts related to our participation in the Promontory Insured Network Deposits Program (“IND Program”). Deposits under the IND Program had increased to $90 million as of December 31, 2012. In December 2012, the Company decided to partially exit the IND Program and expects that during the first quarter of 2013, the Company will reduce its deposits by approximately $50 million as a way to decrease its excess liquidity. As such, a portion of the interest rate cap instrument used to hedge the position was terminated. Because the interest rate caps qualified for hedge accounting, this ineffective portion of the hedge was recognized as a loss at the end of 2012. By partially exiting the IND Program and terminating a portion of the cap instrument, the hedged money market deposit account balances associated with the interest rate caps and related interest expense are expected to decline. The lower money market deposit account balances will reduce our excess liquidity and the lower related interest expense will benefit the net interest margin going forward. The effects of these transactions are expected to impact the Company’s financial results beginning in the first quarter of 2013.
Total noninterest income for the fourth quarter of 2012 decreased $1.4 million, or 35.2%, when compared to the fourth quarter of 2011. The decrease was primarily due to declines in gains on sales of investment securities ($128 thousand) and other noninterest income ($1.5 million), partially offset by an increase in insurance agency commissions ($231 thousand). The decrease in other noninterest income was mainly from the loss on the interest rate cap instrument.
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Total noninterest expense for the fourth quarter of 2012 remained relatively flat when compared to the third quarter of 2012. When compared to the fourth quarter of 2011, total noninterest expense for the fourth quarter of 2012 increased $280 thousand, or 3.0%, primarily due to higher expenses related to recruiting and provision for off balance sheet credit losses included in other noninterest expenses, and FDIC insurance.
Review of 2012 Financial Results
Net interest income for 2012 was $35.3 million, a decrease of 11.1% when compared to 2011. This 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 3.23% for 2012 and 3.74% for 2011.
The provisions for credit losses for 2012 and 2011 were $27.7 million and $19.5 million, respectively, while net charge-offs were $26.0 million and $19.4 million for 2012 and 2011, respectively. The ratio of year-to-date annualized net charge-offs to average loans was 3.20% for 2012 and 2.22% for 2011.
Total noninterest income for 2012 decreased $1.6 million, or 9.0%, when compared to 2011.The decrease was primarily due to declines in gains on sales of investment securities ($285 thousand), service charges on deposit accounts ($294 thousand) and other noninterest income ($1.5 million), partially offset by an increase in insurance agency commissions ($456 thousand). The decrease in other noninterest income was mainly from the loss on the interest rate cap instrument discussed above.
Total noninterest expense for 2012 increased $388 thousand, or 1.0%, when compared to 2011. The increase was primarily due to higher salaries and wages ($593 thousand) and other noninterest expenses ($909 thousand) which was largely offset by a $1.3 million decline in goodwill impairment. Salaries and wages included amounts relating 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 included higher amounts relating to other real estate owned activities ($154 thousand), collection expense for loans ($286 thousand) and provision for off balance sheet credit losses ($216 thousand).
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. 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 Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| PROFITABILITY FOR THE PERIOD | | | | | | | | | | | | | | | | | | |
| Net interest income | | $ | 8,381 | | | $ | 9,837 | | | | (14.8 | )% | | $ | 35,339 | | | $ | 39,764 | | | | (11.1 | )% |
| Provision for credit losses | | | 9,650 | | | | 4,035 | | | | 139.2 | | | | 27,745 | | | | 19,470 | | | | 42.5 | |
| Noninterest income | | | 2,606 | | | | 4,019 | | | | (35.2 | ) | | | 15,758 | | | | 17,318 | | | | (9.0 | ) |
| Noninterest expense | | | 9,685 | | | | 9,405 | | | | 3.0 | | | | 39,555 | | | | 39,167 | | | | 1.0 | |
| (Loss) income before income taxes | | | (8,348 | ) | | | 416 | | | | (2,106.7 | ) | | | (16,203 | ) | | | (1,555 | ) | | | (942.0 | ) |
| Income tax (benefit) expense | | | (3,274 | ) | | | 91 | | | | (3,697.8 | ) | | | (6,565 | ) | | | (658 | ) | | | (897.7 | ) |
| Net (loss) income | | $ | (5,074 | ) | | $ | 325 | | | | (1,661.2 | ) | | $ | (9,638 | ) | | $ | (897 | ) | | | (974.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | (1.71 | )% | | | 0.11 | % | | | (182) | bp | | | (0.82 | )% | | | (0.08 | )% | | | (74) | bp |
| Return on average equity | | | (17.15 | ) | | | 1.07 | | | | (1,822 | ) | | | (8.07 | ) | | | (0.74 | ) | | | (733 | ) |
| Return on average tangible equity (1) | | | (19.73 | ) | | | 1.53 | | | | (2,126 | ) | | | (9.14 | ) | | | 0.32 | | | | (946 | ) |
| Net interest margin | | | 3.02 | | | | 3.60 | | | | (58 | ) | | | 3.23 | | | | 3.74 | | | | (51 | ) |
| Efficiency ratio - GAAP | | | 87.89 | | | | 67.62 | | | | 2,027 | | | | 77.17 | | | | 68.35 | | | | 882 | |
| Efficiency ratio - Non-GAAP (1) | | | 77.77 | | | | 67.61 | | | | 1,016 | | | | 75.16 | | | | 65.83 | | | | 933 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| PER SHARE DATA | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic net (loss) income per common share | | $ | (0.60 | ) | | $ | 0.04 | | | | (1,600.0 | )% | | $ | (1.14 | ) | | $ | (0.11 | ) | | | (936.4 | )% |
| Diluted net (loss) income per common share | | | (0.60 | ) | | | 0.04 | | | | (1,600.0 | ) | | | (1.14 | ) | | | (0.11 | ) | | | (936.4 | ) |
| Dividends paid per common share | | | - | | | | 0.01 | | | | (100.0 | ) | | | 0.01 | | | | 0.09 | | | | (88.9 | ) |
| Book value per common share at period end | | | 13.48 | | | | 14.34 | | | | (6.0 | ) | | | | | | | | | | | | |
| Tangible book value per common share at period end (1) | | | 11.56 | | | | 12.37 | | | | (6.5 | ) | | | | | | | | | | | | |
| Market value at period end | | | 5.39 | | | | 5.15 | | | | 4.7 | | | | | | | | | | | | | |
| Market range: | | | | | | | | | | | | | | | | | | | | | | | | |
| High | | | 6.98 | | | | 6.13 | | | | 13.9 | | | | 7.45 | | | | 11.11 | | | | (32.9 | ) |
| Low | | | 4.65 | | | | 4.20 | | | | 10.7 | | | | 4.65 | | | | 3.95 | | | | 17.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCE SHEET DATA | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 799,512 | | | $ | 854,302 | | | | (6.4 | )% | | $ | 814,167 | | | $ | 873,155 | | | | (6.8 | )% |
| Securities | | | 144,459 | | | | 122,725 | | | | 17.7 | | | | 137,686 | | | | 113,568 | | | | 21.2 | |
| Earning assets | | | 1,108,585 | | | | 1,089,078 | | | | 1.8 | | | | 1,097,851 | | | | 1,069,458 | | | | 2.7 | |
| Assets | | | 1,183,135 | | | | 1,160,652 | | | | 1.9 | | | | 1,172,452 | | | | 1,139,943 | | | | 2.9 | |
| Deposits | | | 1,042,842 | | | | 1,013,848 | | | | 2.9 | | | | 1,028,809 | | | | 992,071 | | | | 3.7 | |
| Stockholders' equity | | | 117,700 | | | | 121,020 | | | | (2.7 | ) | | | 119,359 | | | | 121,496 | | | | (1.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| CREDIT QUALITY DATA AT PERIOD END | | | | | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | $ | 6,614 | | | $ | 3,287 | | | | 101.2 | % | | $ | 26,042 | | | $ | 19,409 | | | | 34.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 36,474 | | | $ | 51,370 | | | | (29.0 | ) | | | | | | | | | | | | |
| Loans 90 days past due and still accruing | | | 460 | | | | 2,723 | | | | (83.1 | ) | | | | | | | | | | | | |
| Accruing troubled debt restructurings | | | 52,353 | | | | 25,208 | | | | 107.7 | | | | | | | | | | | | | |
| Total nonperforming loans | | | 89,287 | | | | 79,301 | | | | 12.6 | | | | | | | | | | | | | |
| Other real estate and other assets owned, net | | | 7,659 | | | | 9,385 | | | | (18.4 | ) | | | | | | | | | | | | |
| Total nonperforming assets | | $ | 96,946 | | | $ | 88,686 | | | | 9.3 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| CAPITAL AND CREDIT QUALITY RATIOS | | | | | | | | | | | | | | | | | | | | | | | | |
| Average equity to average assets | | | 9.95 | % | | | 10.43 | % | | | (48) | bp | | | 10.18 | % | | | 10.66 | % | | | (48) | bp |
| Average tangible equity to average tangible assets (1) | | | 8.69 | | | | 9.12 | | | | (43 | ) | | | 8.90 | | | | 9.23 | | | | (33 | ) |
| Annualized net charge-offs to average loans | | | 3.29 | | | | 1.53 | | | | 176 | | | | 3.20 | | | | 2.22 | | | | 98 | |
| Allowance for credit losses to period-end loans | | | 2.04 | | | | 1.70 | | | | 34 | | | | | | | | | | | | | |
| Allowance for credit losses to nonaccrual loans | | | 43.84 | | | | 27.81 | | | | 1,603 | | | | | | | | | | | | | |
| Allowance for credit losses to nonperforming loans | | | 17.91 | | | | 18.02 | | | | (11 | ) | | | | | | | | | | | | |
| Nonaccrual loans to total loans | | | 4.65 | | | | 6.11 | | | | (146 | ) | | | | | | | | | | | | |
| Nonaccrual loans to total assets | | | 3.08 | | | | 4.44 | | | | (136 | ) | | | | | | | | | | | | |
| Nonperforming assets to total loans+other real estate and other assets owned | | | 12.23 | | | | 10.43 | | | | 180 | | | | | | | | | | | | | |
| Nonperforming assets to total assets | | | 8.18 | | | | 7.66 | | | | 52 | | | | | | | | | | | | | |
| (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) | |
| | | | | | | | | December 31, 2012 | |
| | | December 31, | | | December 31, | | | compared to | |
| | | 2012 | | | 2011 | | | December 31, 2011 | |
| ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 26,579 | | | $ | 22,986 | | | | 15.6 | % |
| Interest-bearing deposits with other banks | | | 164,864 | | | | 99,776 | | | | 65.2 | |
| Federal funds sold | | | 8,750 | | | | 4,980 | | | | 75.7 | |
| Investments available for sale (at fair value) | | | 145,508 | | | | 129,780 | | | | 12.1 | |
| Investments held to maturity | | | 2,657 | | | | 6,480 | | | | (59.0 | ) |
| | | | | | | | | | | | | |
| Loans | | | 785,082 | | | | 841,050 | | | | (6.7 | ) |
| Less: allowance for credit losses | | | (15,991 | ) | | | (14,288 | ) | | | 11.9 | |
| Loans, net | | | 769,091 | | | | 826,762 | | | | (7.0 | ) |
| | | | | | | | | | | | | |
| Premises and equipment, net | | | 15,593 | | | | 14,662 | | | | 6.3 | |
| Goodwill | | | 12,454 | | | | 12,454 | | | | - | |
| Other intangible assets, net | | | 3,816 | | | | 4,208 | | | | (9.3 | ) |
| Other real estate and other assets owned, net | | | 7,659 | | | | 9,385 | | | | (18.4 | ) |
| Other assets | | | 28,836 | | | | 26,720 | | | | 7.9 | |
| | | | | | | | | | | | | |
| Total assets | | $ | 1,185,807 | | | $ | 1,158,193 | | | | 2.4 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Noninterest-bearing deposits | | $ | 153,992 | | | $ | 133,801 | | | | 15.1 | |
| Interest-bearing deposits | | | 895,281 | | | | 876,118 | | | | 2.2 | |
| Total deposits | | | 1,049,273 | | | | 1,009,919 | | | | 3.9 | |
| | | | | | | | | | | | | |
| Short-term borrowings | | | 13,761 | | | | 17,817 | | | | (22.8 | ) |
| Accrued expenses and other liabilities | | | 8,747 | | | | 8,753 | | | | (0.1 | ) |
| Long-term debt | | | - | | | | 455 | | | | (100.0 | ) |
| Total liabilities | | | 1,071,781 | | | | 1,036,944 | | | | 3.4 | |
| | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
| Common stock, par value $0.01; authorized 35,000,000 shares | | | 85 | | | | 85 | | | | - | |
| Additional paid in capital | | | 32,155 | | | | 32,052 | | | | 0.3 | |
| Retained earnings | | | 81,078 | | | | 90,801 | | | | (10.7 | ) |
| Accumulated other comprehensive income (loss) | | | 708 | | | | (1,689 | ) | | | 141.9 | |
| Total stockholders' equity | | | 114,026 | | | | 121,249 | | | | (6.0 | ) |
| | | | | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,185,807 | | | $ | 1,158,193 | | | | 2.4 | |
| | | | | | | | | | | | | |
| Period-end common shares outstanding | | | 8,457 | | | | 8,457 | | | | - | |
| Book value per common share | | $ | 13.48 | | | $ | 14.34 | | | | (6.0 | ) |
| Shore Bancshares, Inc. | Page 6 of 11 |
| Consolidated Statements of Income | |
| (In thousands, except per share data) | |
| | | For the Three Months Ended | | | For the Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2012 | | | 2011 | | | % Change | | | 2012 | | | 2011 | | | % Change | |
| INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 10,193 | | | $ | 11,649 | | | | (12.5 | )% | | $ | 42,698 | | | $ | 47,549 | | | | (10.2 | )% |
| Interest and dividends on investment securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 666 | | | | 797 | | | | (16.4 | ) | | | 2,815 | | | | 3,031 | | | | (7.1 | ) |
| Tax-exempt | | | 12 | | | | 38 | | | | (68.4 | ) | | | 104 | | | | 154 | | | | (32.5 | ) |
| Interest on federal funds sold | | | 3 | | | | 1 | | | | 200.0 | | | | 10 | | | | 25 | | | | (60.0 | ) |
| Interest on deposits with other banks | | | 86 | | | | 46 | | | | 87.0 | | | | 274 | | | | 93 | | | | 194.6 | |
| Total interest income | | | 10,960 | | | | 12,531 | | | | (12.5 | ) | | | 45,901 | | | | 50,852 | | | | (9.7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 2,570 | | | | 2,673 | | | | (3.9 | ) | | | 10,501 | | | | 10,995 | | | | (4.5 | ) |
| Interest on short-term borrowings | | | 9 | | | | 15 | | | | (40.0 | ) | | | 45 | | | | 56 | | | | (19.6 | ) |
| Interest on long-term debt | | | - | | | | 6 | | | | (100.0 | ) | | | 16 | | | | 37 | | | | (56.8 | ) |
| Total interest expense | | | 2,579 | | | | 2,694 | | | | (4.3 | ) | | | 10,562 | | | | 11,088 | | | | (4.7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NET INTEREST INCOME | | | 8,381 | | | | 9,837 | | | | (14.8 | ) | | | 35,339 | | | | 39,764 | | | | (11.1 | ) |
| Provision for credit losses | | | 9,650 | | | | 4,035 | | | | 139.2 | | | | 27,745 | | | | 19,470 | | | | 42.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | | | (1,269 | ) | | | 5,802 | | | | (121.9 | ) | | | 7,594 | | | | 20,294 | | | | (62.6 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NONINTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 653 | | | | 700 | | | | (6.7 | ) | | | 2,551 | | | | 2,845 | | | | (10.3 | ) |
| Trust and investment fee income | | | 365 | | | | 380 | | | | (3.9 | ) | | | 1,644 | | | | 1,563 | | | | 5.2 | |
| Investment securities gains | | | - | | | | 128 | | | | (100.0 | ) | | | 278 | | | | 563 | | | | (50.6 | ) |
| Insurance agency commissions | | | 2,292 | | | | 2,061 | | | | 11.2 | | | | 9,814 | | | | 9,358 | | | | 4.9 | |
| Other noninterest income | | | (704 | ) | | | 750 | | | | (193.9 | ) | | | 1,471 | | | | 2,989 | | | | (50.8 | ) |
| Total noninterest income | | | 2,606 | | | | 4,019 | | | | (35.2 | ) | | | 15,758 | | | | 17,318 | | | | (9.0 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NONINTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and wages | | | 4,240 | | | | 4,378 | | | | (3.2 | ) | | | 17,418 | | | | 16,825 | | | | 3.5 | |
| Employee benefits | | | 923 | | | | 923 | | | | - | | | | 3,994 | | | | 3,840 | | | | 4.0 | |
| Occupancy expense | | | 609 | | | | 563 | | | | 8.2 | | | | 2,559 | | | | 2,312 | | | | 10.7 | |
| Furniture and equipment expense | | | 235 | | | | 234 | | | | 0.4 | | | | 963 | | | | 1,059 | | | | (9.1 | ) |
| Data processing | | | 654 | | | | 660 | | | | (0.9 | ) | | | 2,717 | | | | 2,852 | | | | (4.7 | ) |
| Directors' fees | | | 107 | | | | 83 | | | | 28.9 | | | | 474 | | | | 500 | | | | (5.2 | ) |
| Goodwill and other intangible assets impairment | | | - | | | | - | | | | - | | | | - | | | | 1,344 | | | | (100.0 | ) |
| Amortization of intangible assets | | | 74 | | | | 126 | | | | (41.3 | ) | | | 392 | | | | 512 | | | | (23.4 | ) |
| Insurance agency commissions expense | | | 387 | | | | 285 | | | | 35.8 | | | | 1,391 | | | | 1,267 | | | | 9.8 | |
| FDIC insurance premium expense | | | 387 | | | | 254 | | | | 52.4 | | | | 1,380 | | | | 1,298 | | | | 6.3 | |
| Other noninterest expenses | | | 2,069 | | | | 1,899 | | | | 9.0 | | | | 8,267 | | | | 7,358 | | | | 12.4 | |
| Total noninterest expense | | | 9,685 | | | | 9,405 | | | | 3.0 | | | | 39,555 | | | | 39,167 | | | | 1.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) income before income taxes | | | (8,348 | ) | | | 416 | | | | (2,106.7 | ) | | | (16,203 | ) | | | (1,555 | ) | | | (942.0 | ) |
| Income tax (benefit) expense | | | (3,274 | ) | | | 91 | | | | (3,697.8 | ) | | | (6,565 | ) | | | (658 | ) | | | (897.7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NET (LOSS) INCOME | | $ | (5,074 | ) | | $ | 325 | | | | (1,661.2 | ) | | $ | (9,638 | ) | | $ | (897 | ) | | | (974.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding - basic | | | 8,457 | | | | 8,457 | | | | - | | | | 8,457 | | | | 8,451 | | | | 0.1 | |
| Weighted average shares outstanding - diluted | | | 8,457 | | | | 8,457 | | | | - | | | | 8,457 | | | | 8,451 | | | | 0.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic net (loss) income per common share | | $ | (0.60 | ) | | $ | 0.04 | | | | (1,600.0 | ) | | $ | (1.14 | ) | | $ | (0.11 | ) | | | (936.4 | ) |
| Diluted net (loss) income per common share | | | (0.60 | ) | | | 0.04 | | | | (1,600.0 | ) | | | (1.14 | ) | | | (0.11 | ) | | | (936.4 | ) |
| Dividends paid per common share | | | - | | | | 0.01 | | | | (100.0 | ) | | | 0.01 | | | | 0.09 | | | | (88.9 | ) |
| Shore Bancshares, Inc. | Page 7 of 11 |
| Consolidated Average Balance Sheets | |
| (Dollars in thousands) | |
| | | For the Three Months Ended | | | For the Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | Average | | | Yield/ | | | Average | | | Yield/ | | | Average | | | Yield/ | | | Average | | | Yield/ | |
| | | balance | | | rate | | | balance | | | rate | | | balance | | | rate | | | balance | | | rate | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 799,512 | | | | 5.09 | % | | $ | 854,302 | | | | 5.42 | % | | $ | 814,167 | | | | 5.26 | % | | $ | 873,155 | | | | 5.46 | % |
| Investment securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 143,137 | | | | 1.85 | | | | 118,315 | | | | 2.67 | | | | 134,697 | | | | 2.09 | | | | 109,059 | | | | 2.78 | |
| Tax-exempt | | | 1,322 | | | | 5.05 | | | | 4,410 | | | | 5.27 | | | | 2,989 | | | | 5.25 | | | | 4,509 | | | | 5.19 | |
| Federal funds sold | | | 7,782 | | | | 0.12 | | | | 8,709 | | | | 0.05 | | | | 10,185 | | | | 0.10 | | | | 23,808 | | | | 0.10 | |
| Interest-bearing deposits | | | 156,832 | | | | 0.22 | | | | 103,342 | | | | 0.18 | | | | 135,813 | | | | 0.20 | | | | 58,927 | | | | 0.16 | |
| Total earning assets | | | 1,108,585 | | | | 3.94 | % | | | 1,089,078 | | | | 4.58 | % | | | 1,097,851 | | | | 4.20 | % | | | 1,069,458 | | | | 4.78 | % |
| Cash and due from banks | | | 21,258 | | | | | | | | 18,728 | | | | | | | | 20,256 | | | | | | | | 19,198 | | | | | |
| Other assets | | | 67,596 | | | | | | | | 68,014 | | | | | | | | 68,813 | | | | | | | | 67,695 | | | | | |
| Allowance for credit losses | | | (14,304 | ) | | | | | | | (15,168 | ) | | | | | | | (14,468 | ) | | | | | | | (16,408 | ) | | | | |
| Total assets | | $ | 1,183,135 | | | | | | | $ | 1,160,652 | | | | | | | $ | 1,172,452 | | | | | | | $ | 1,139,943 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | $ | 169,398 | | | | 0.18 | % | | $ | 157,657 | | | | 0.19 | % | | $ | 160,741 | | | | 0.18 | % | | $ | 145,533 | | | | 0.21 | % |
| Money market and savings deposits (1) | | | 281,593 | | | | 1.21 | | | | 273,906 | | | | 1.07 | | | | 279,126 | | | | 1.17 | | | | 265,910 | | | | 1.00 | |
| Certificates of deposit $100,000 or more | | | 231,232 | | | | 1.40 | | | | 241,810 | | | | 1.46 | | | | 238,241 | | | | 1.44 | | | | 245,214 | | | | 1.62 | |
| Other time deposits | | | 204,213 | | | | 1.59 | | | | 201,249 | | | | 1.91 | | | | 204,644 | | | | 1.70 | | | | 205,154 | | | | 1.99 | |
| Interest-bearing deposits | | | 886,436 | | | | 1.15 | | | | 874,622 | | | | 1.21 | | | | 882,752 | | | | 1.19 | | | | 861,811 | | | | 1.28 | |
| Short-term borrowings | | | 13,573 | | | | 0.27 | | | | 16,421 | | | | 0.37 | | | | 14,976 | | | | 0.30 | | | | 15,319 | | | | 0.37 | |
| Long-term debt | | | - | | | | - | | | | 466 | | | | 4.46 | | | | 341 | | | | 4.61 | | | | 814 | | | | 4.50 | |
| Total interest-bearing liabilities | | | 900,009 | | | | 1.14 | % | | | 891,509 | | | | 1.20 | % | | | 898,069 | | | | 1.18 | % | | | 877,944 | | | | 1.26 | % |
| Noninterest-bearing deposits | | | 156,406 | | | | | | | | 139,226 | | | | | | | | 146,057 | | | | | | | | 130,260 | | | | | |
| Accrued expenses and other liabilities | | | 9,020 | | | | | | | | 8,897 | | | | | | | | 8,967 | | | | | | | | 10,243 | | | | | |
| Stockholders' equity | | | 117,700 | | | | | | | | 121,020 | | | | | | | | 119,359 | | | | | | | | 121,496 | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,183,135 | | | | | | | $ | 1,160,652 | | | | | | | $ | 1,172,452 | | | | | | | $ | 1,139,943 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest spread | | | | | | | 2.80 | % | | | | | | | 3.38 | % | | | | | | | 3.02 | % | | | | | | | 3.52 | % |
| Net interest margin | | | | | | | 3.02 | % | | | | | | | 3.60 | % | | | | | | | 3.23 | % | | | | | | | 3.74 | % |
| (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 $552 thousand and $405 thousand for the fourth quarter of 2012 and 2011, respectively, and $2.0 million and $1.3 million for 2012 and 2011, respectively. |
| Shore Bancshares, Inc. | Page 8 of 11 |
| Financial Highlights By Quarter | |
| (Dollars in thousands, except per share data) | |
| | | 4th quarter | | | 3rd quarter | | | 2nd quarter | | | 1st quarter | | | 4th quarter | | | 4Q 12 | | | 4Q 12 | |
| | | 2012 | | | 2012 | | | 2012 | | | 2012 | | | 2011 | | | compared to | | | compared to | |
| | | (4Q 12) | | | (3Q 12) | | | (2Q 12) | | | (1Q 12) | | | (4Q 11) | | | 3Q 12 | | | 4Q 11 | |
| PROFITABILITY FOR THE PERIOD | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable-equivalent net interest income | | $ | 8,413 | | | $ | 8,769 | | | $ | 9,077 | | | $ | 9,243 | | | $ | 9,889 | | | | (4.1 | )% | | | (14.9 | )% |
| Less: Taxable-equivalent adjustment | | | 32 | | | | 39 | | | | 44 | | | | 48 | | | | 52 | | | | (17.9 | ) | | | (38.5 | ) |
| Net interest income | | | 8,381 | | | | 8,730 | | | | 9,033 | | | | 9,195 | | | | 9,837 | | | | (4.0 | ) | | | (14.8 | ) |
| Provision for credit losses | | | 9,650 | | | | 6,200 | | | | 3,525 | | | | 8,370 | | | | 4,035 | | | | 55.6 | | | | 139.2 | |
| Noninterest income | | | 2,606 | | | | 4,001 | | | | 4,577 | | | | 4,574 | | | | 4,019 | | | | (34.9 | ) | | | (35.2 | ) |
| Noninterest expense | | | 9,685 | | | | 9,709 | | | | 9,663 | | | | 10,498 | | | | 9,405 | | | | (0.2 | ) | | | 3.0 | |
| (Loss) income before income taxes | | | (8,348 | ) | | | (3,178 | ) | | | 422 | | | | (5,099 | ) | | | 416 | | | | (162.7 | ) | | | (2,106.7 | ) |
| Income tax (benefit) expense | | | (3,274 | ) | | | (1,357 | ) | | | 129 | | | | (2,063 | ) | | | 91 | | | | (141.3 | ) | | | (3,697.8 | ) |
| Net (loss) income | | $ | (5,074 | ) | | $ | (1,821 | ) | | $ | 293 | | | $ | (3,036 | ) | | $ | 325 | | | | (178.6 | ) | | | (1,661.2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | (1.71 | )% | | | (0.61 | )% | | | 0.10 | % | | | (1.05 | )% | | | 0.11 | % | | | (110 | ) bp | | | (182 | ) bp |
| Return on average equity | | | (17.15 | ) | | | (6.07 | ) | | | 0.99 | | | | (10.04 | ) | | | 1.07 | | | | (1,108 | ) | | | (1,822 | ) |
| Return on average tangible equity (1) | | | (19.73 | ) | | | (6.82 | ) | | | 1.38 | | | | (11.33 | ) | | | 1.53 | | | | (1,291 | ) | | | (2,126 | ) |
| Net interest margin | | | 3.02 | | | | 3.15 | | | | 3.36 | | | | 3.42 | | | | 3.60 | | | | (13 | ) | | | (58 | ) |
| Efficiency ratio - GAAP | | | 87.89 | | | | 76.03 | | | | 70.77 | | | | 75.98 | | | | 67.62 | | | | 1,186 | | | | 2,027 | |
| Efficiency ratio - Non-GAAP (1) | | | 77.77 | | | | 76.95 | | | | 71.20 | | | | 75.07 | | | | 67.61 | | | | 82 | | | | 1,016 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PER SHARE DATA | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic net (loss) income per common share | | $ | (0.60 | ) | | $ | (0.22 | ) | | $ | 0.03 | | | $ | (0.36 | ) | | $ | 0.04 | | | | (172.7 | )% | | | (1,600.0 | )% |
| Diluted net (loss) income per common share | | | (0.60 | ) | | | (0.22 | ) | | | 0.03 | | | | (0.36 | ) | | | 0.04 | | | | (172.7 | ) | | | (1,600.0 | ) |
| Dividends paid per common share | | | - | | | | - | | | | - | | | | 0.01 | | | | 0.01 | | | | - | | | | (100.0 | ) |
| Book value per common share at period end | | | 13.48 | | | | 13.97 | | | | 14.13 | | | | 14.02 | | | | 14.34 | | | | (3.5 | ) | | | (6.0 | ) |
| Tangible book value per common share at period end (1) | | | 11.56 | | | | 12.04 | | | | 12.18 | | | | 12.07 | | | | 12.37 | | | | (4.0 | ) | | | (6.5 | ) |
| Market value at period end | | | 5.39 | | | | 6.02 | | | | 5.98 | | | | 7.09 | | | | 5.15 | | | | (10.5 | ) | | | 4.7 | |
| Market range: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| High | | | 6.98 | | | | 6.33 | | | | 7.45 | | | | 7.40 | | | | 6.13 | | | | 10.3 | | | | 13.9 | |
| Low | | | 4.65 | | | | 4.98 | | | | 5.51 | | | | 4.91 | | | | 4.20 | | | | (6.6 | ) | | | 10.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCE SHEET DATA | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 799,512 | | | $ | 808,244 | | | $ | 816,553 | | | $ | 832,585 | | | $ | 854,302 | | | | (1.1 | )% | | | (6.4 | )% |
| Securities | | | 144,459 | | | | 137,871 | | | | 134,299 | | | | 134,037 | | | | 122,725 | | | | 4.8 | | | | 17.7 | |
| Earning assets | | | 1,108,585 | | | | 1,108,256 | | | | 1,086,223 | | | | 1,088,106 | | | | 1,089,078 | | | | - | | | | 1.8 | |
| Assets | | | 1,183,135 | | | | 1,184,146 | | | | 1,163,598 | | | | 1,159,566 | | | | 1,160,652 | | | | (0.1 | ) | | | 1.9 | |
| Deposits | | | 1,042,842 | | | | 1,040,693 | | | | 1,021,130 | | | | 1,011,170 | | | | 1,013,848 | | | | 0.2 | | | | 2.9 | |
| Stockholders' equity | | | 117,700 | | | | 119,321 | | | | 118,774 | | | | 121,658 | | | | 121,020 | | | | (1.4 | ) | | | (2.7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CREDIT QUALITY DATA AT PERIOD END | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | $ | 6,614 | | | $ | 6,235 | | | $ | 4,079 | | | $ | 9,114 | | | $ | 3,287 | | | | 6.1 | % | | | 101.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 36,474 | | | $ | 39,442 | | | $ | 47,958 | | | $ | 49,405 | | | $ | 51,370 | | | | (7.5 | ) | | | (29.0 | ) |
| Loans 90 days past due and still accruing | | | 460 | | | | 4,675 | | | | 3,519 | | | | 3,796 | | | | 2,723 | | | | (90.2 | ) | | | (83.1 | ) |
| Accruing troubled debt restructurings | | | 52,353 | | | | 50,785 | | | | 37,231 | | | | 30,010 | | | | 25,208 | | | | 3.1 | | | | 107.7 | |
| Total nonperforming loans | | | 89,287 | | | | 94,902 | | | | 88,708 | | | | 83,211 | | | | 79,301 | | | | (5.9 | ) | | | 12.6 | |
| Other real estate and other assets owned, net | | | 7,659 | | | | 8,418 | | | | 11,499 | | | | 11,418 | | | | 9,385 | | | | (9.0 | ) | | | (18.4 | ) |
| Total nonperforming assets | | $ | 96,946 | | | $ | 103,320 | | | $ | 100,207 | | | $ | 94,629 | | | $ | 88,686 | | | | (6.2 | ) | | | 9.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CAPITAL AND CREDIT QUALITY RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average equity to average assets | | | 9.95 | % | | | 10.08 | % | | | 10.21 | % | | | 10.49 | % | | | 10.43 | % | | | (13 | ) bp | | | (48 | ) bp |
| Average tangible equity to average tangible assets (1) | | | 8.69 | | | | 8.81 | | | | 8.92 | | | | 9.19 | | | | 9.12 | | | | (12 | ) | | | (43 | ) |
| Annualized net charge-offs to average loans | | | 3.29 | | | | 3.07 | | | | 2.01 | | | | 4.40 | | | | 1.53 | | | | 22 | | | | 176 | |
| Allowance for credit losses to period-end loans | | | 2.04 | | | | 1.60 | | | | 1.60 | | | | 1.65 | | | | 1.70 | | | | 44 | | | | 34 | |
| Allowance for credit losses to nonaccrual loans | | | 43.84 | | | | 32.85 | | | | 27.09 | | | | 27.41 | | | | 27.81 | | | | 1,099 | | | | 1,603 | |
| Allowance for credit losses to nonperforming loans | | | 17.91 | | | | 13.65 | | | | 14.64 | | | | 16.28 | | | | 18.02 | | | | 426 | | | | (11 | ) |
| Nonaccrual loans to total loans | | | 4.65 | | | | 4.88 | | | | 5.92 | | | | 6.03 | | | | 6.11 | | | | (23 | ) | | | (146 | ) |
| Nonaccrual loans to total assets | | | 3.08 | | | | 3.35 | | | | 4.08 | | | | 4.22 | | | | 4.44 | | | | (27 | ) | | | (136 | ) |
| Nonperforming assets to total loans+other real estate and other assets owned | | | 12.23 | | | | 12.65 | | | | 12.20 | | | | 11.40 | | | | 10.43 | | | | (42 | ) | | | 180 | |
| Nonperforming assets to total assets | | | 8.18 | | | | 8.77 | | | | 8.53 | | | | 8.09 | | | | 7.66 | | | | (59 | ) | | | 52 | |
(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) | |
| | | | | | | | | | | | | | | | | | 4Q 12 | | | 4Q 12 | |
| | | | | | | | | | | | | | | | | | compared to | | | compared to | |
| | | 4Q 12 | | | 3Q 12 | | | 2Q 12 | | | 1Q 12 | | | 4Q 11 | | | 3Q 12 | | | 4Q 11 | |
| INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 10,193 | | | $ | 10,604 | | | $ | 10,890 | | | $ | 11,011 | | | $ | 11,649 | | | | (3.9 | )% | | | (12.5 | )% |
| Interest and dividends on investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 666 | | | | 685 | | | | 707 | | | | 757 | | | | 797 | | | | (2.8 | ) | | | (16.4 | ) |
| Tax-exempt | | | 12 | | | | 22 | | | | 32 | | | | 38 | | | | 38 | | | | (45.5 | ) | | | (68.4 | ) |
| Interest on federal funds sold | | | 3 | | | | 3 | | | | 2 | | | | 2 | | | | 1 | | | | - | | | | 200.0 | |
| Interest on deposits with other banks | | | 86 | | | | 79 | | | | 61 | | | | 48 | | | | 46 | | | | 8.9 | | | | 87.0 | |
| Total interest income | | | 10,960 | | | | 11,393 | | | | 11,692 | | | | 11,856 | | | | 12,531 | | | | (3.8 | ) | | | (12.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 2,570 | | | | 2,647 | | | | 2,643 | | | | 2,641 | | | | 2,673 | | | | (2.9 | ) | | | (3.9 | ) |
| Interest on short-term borrowings | | | 9 | | | | 10 | | | | 11 | | | | 15 | | | | 15 | | | | (10.0 | ) | | | (40.0 | ) |
| Interest on long-term debt | | | - | | | | 6 | | | | 5 | | | | 5 | | | | 6 | | | | (100.0 | ) | | | (100.0 | ) |
| Total interest expense | | | 2,579 | | | | 2,663 | | | | 2,659 | | | | 2,661 | | | | 2,694 | | | | (3.2 | ) | | | (4.3 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NET INTEREST INCOME | | | 8,381 | | | | 8,730 | | | | 9,033 | | | | 9,195 | | | | 9,837 | | | | (4.0 | ) | | | (14.8 | ) |
| Provision for credit losses | | | 9,650 | | | | 6,200 | | | | 3,525 | | | | 8,370 | | | | 4,035 | | | | 55.6 | | | | 139.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | | | (1,269 | ) | | | 2,530 | | | | 5,508 | | | | 825 | | | | 5,802 | | | | (150.2 | ) | | | (121.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NONINTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 653 | | | | 628 | | | | 622 | | | | 648 | | | | 700 | | | | 4.0 | | | | (6.7 | ) |
| Trust and investment fee income | | | 365 | | | | 410 | | | | 446 | | | | 423 | | | | 380 | | | | (11.0 | ) | | | (3.9 | ) |
| Investment securities gains | | | - | | | | 278 | | | | - | | | | - | | | | 128 | | | | (100.0 | ) | | | (100.0 | ) |
| Insurance agency commissions | | | 2,292 | | | | 2,427 | | | | 2,406 | | | | 2,689 | | | | 2,061 | | | | (5.6 | ) | | | 11.2 | |
| Other noninterest income | | | (704 | ) | | | 258 | | | | 1,103 | | | | 814 | | | | 750 | | | | (372.9 | ) | | | (193.9 | ) |
| Total noninterest income | | | 2,606 | | | | 4,001 | | | | 4,577 | | | | 4,574 | | | | 4,019 | | | | (34.9 | ) | | | (35.2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NONINTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and wages | | | 4,240 | | | | 4,386 | | | | 4,376 | | | | 4,416 | | | | 4,378 | | | | (3.3 | ) | | | (3.2 | ) |
| Employee benefits | | | 923 | | | | 945 | | | | 956 | | | | 1,170 | | | | 923 | | | | (2.3 | ) | | | - | |
| Occupancy expense | | | 609 | | | | 625 | | | | 638 | | | | 687 | | | | 563 | | | | (2.6 | ) | | | 8.2 | |
| Furniture and equipment expense | | | 235 | | | | 265 | | | | 212 | | | | 251 | | | | 234 | | | | (11.3 | ) | | | 0.4 | |
| Data processing | | | 654 | | | | 703 | | | | 694 | | | | 666 | | | | 660 | | | | (7.0 | ) | | | (0.9 | ) |
| Directors' fees | | | 107 | | | | 131 | | | | 127 | | | | 109 | | | | 83 | | | | (18.3 | ) | | | 28.9 | |
| Amortization of intangible assets | | | 74 | | | | 96 | | | | 96 | | | | 126 | | | | 126 | | | | (22.9 | ) | | | (41.3 | ) |
| Insurance agency commissions expense | | | 387 | | | | 275 | | | | 344 | | | | 385 | | | | 285 | | | | 40.7 | | | | 35.8 | |
| FDIC insurance premium expense | | | 387 | | | | 376 | | | | 344 | | | | 273 | | | | 254 | | | | 2.9 | | | | 52.4 | |
| Other noninterest expenses | | | 2,069 | | | | 1,907 | | | | 1,876 | | | | 2,415 | | | | 1,899 | | | | 8.5 | | | | 9.0 | |
| Total noninterest expense | | | 9,685 | | | | 9,709 | | | | 9,663 | | | | 10,498 | | | | 9,405 | | | | (0.2 | ) | | | 3.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) income before income taxes | | | (8,348 | ) | | | (3,178 | ) | | | 422 | | | | (5,099 | ) | | | 416 | | | | (162.7 | ) | | | (2,106.7 | ) |
| Income tax (benefit) expense | | | (3,274 | ) | | | (1,357 | ) | | | 129 | | | | (2,063 | ) | | | 91 | | | | (141.3 | ) | | | (3,697.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NET (LOSS) INCOME | | $ | (5,074 | ) | | $ | (1,821 | ) | | $ | 293 | | | $ | (3,036 | ) | | $ | 325 | | | | (178.6 | ) | | | (1,661.2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding - basic | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | - | | | | - | |
| Weighted average shares outstanding - diluted | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic net (loss) income per common share | | $ | (0.60 | ) | | $ | (0.22 | ) | | $ | 0.03 | | | $ | (0.36 | ) | | $ | 0.04 | | | | (172.7 | ) | | | (1,600.0 | ) |
| Diluted net (loss) income per common share | | | (0.60 | ) | | | (0.22 | ) | | | 0.03 | | | | (0.36 | ) | | | 0.04 | | | | (172.7 | ) | | | (1,600.0 | ) |
| Dividends paid per common share | | | - | | | | - | | | | - | | | | 0.01 | | | | 0.01 | | | | - | | | | (100.0 | ) |
| Shore Bancshares, Inc. | Page 10 of 11 |
| Consolidated Average Balance Sheets By Quarter | |
| (Dollars in thousands) | |
| | | | | | | | | | | | | | | | | | Average balance | |
| | | | | | | | | | | | | | | | | | 4Q 12 | | | 4Q 12 | |
| | | | | | | | | | | | | | | | | | compared to | | | compared to | |
| | | 4Q 12 | | | 3Q 12 | | | 2Q 12 | | | 1Q 12 | | | 4Q 11 | | | 3Q 12 | | | 4Q 11 | |
| | | Average | | | Yield/ | | | Average | | | Yield/ | | | Average | | | Yield/ | | | Average | | | Yield/ | | | Average | | | Yield/ | | | | | | | |
| | | balance | | | rate | | | balance | | | rate | | | balance | | | rate | | | balance | | | rate | | | balance | | | rate | | | | | | | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 799,512 | | | | 5.09 | % | | $ | 808,244 | | | | 5.23 | % | | $ | 816,553 | | | | 5.38 | % | | $ | 832,585 | | | | 5.33 | % | | $ | 854,302 | | | | 5.42 | % | | | (1.1 | )% | | | (6.4 | )% |
| Investment securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 143,137 | | | | 1.85 | | | | 135,257 | | | | 2.01 | | | | 130,528 | | | | 2.18 | | | | 129,767 | | | | 2.35 | | | | 118,315 | | | | 2.67 | | | | 5.8 | | | | 21.0 | |
| Tax-exempt | | | 1,322 | | | | 5.05 | | | | 2,614 | | | | 5.07 | | | | 3,771 | | | | 5.32 | | | | 4,270 | | | | 5.36 | | | | 4,410 | | | | 5.27 | | | | (49.4 | ) | | | (70.0 | ) |
| Federal funds sold | | | 7,782 | | | | 0.12 | | | | 11,971 | | | | 0.11 | | | | 11,200 | | | | 0.10 | | | | 9,794 | | | | 0.06 | | | | 8,709 | | | | 0.05 | | | | (35.0 | ) | | | (10.6 | ) |
| Interest-bearing deposits | | | 156,832 | | | | 0.22 | | | | 150,170 | | | | 0.21 | | | | 124,171 | | | | 0.20 | | | | 111,690 | | | | 0.17 | | | | 103,342 | | | | 0.18 | | | | 4.4 | | | | 51.8 | |
| Total earning assets | | | 1,108,585 | | | | 3.94 | % | | | 1,108,256 | | | | 4.10 | % | | | 1,086,223 | | | | 4.35 | % | | | 1,088,106 | | | | 4.40 | % | | | 1,089,078 | | | | 4.58 | % | | | - | | | | 1.8 | |
| Cash and due from banks | | | 21,258 | | | | | | | | 20,158 | | | | | | | | 21,424 | | | | | | | | 18,174 | | | | | | | | 18,728 | | | | | | | | 5.5 | | | | 13.5 | |
| Other assets | | | 67,596 | | | | | | | | 69,921 | | | | | | | | 70,458 | | | | | | | | 68,163 | | | | | | | | 68,014 | | | | | | | | (3.3 | ) | | | (0.6 | ) |
| Allowance for credit losses | | | (14,304 | ) | | | | | | | (14,189 | ) | | | | | | | (14,507 | ) | | | | | | | (14,877 | ) | | | | | | | (15,168 | ) | | | | | | | 0.8 | | | | (5.7 | ) |
| Total assets | | $ | 1,183,135 | | | | | | | $ | 1,184,146 | | | | | | | $ | 1,163,598 | | | | | | | $ | 1,159,566 | | | | | | | $ | 1,160,652 | | | | | | | | (0.1 | ) | | | 1.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | $ | 169,398 | | | | 0.18 | % | | $ | 167,423 | | | | 0.18 | % | | $ | 152,685 | | | | 0.18 | % | | $ | 153,291 | | | | 0.19 | % | | $ | 157,657 | | | | 0.19 | % | | | 1.2 | | | | 7.4 | |
| Money market and savings deposits (1) | | | 281,593 | | | | 1.21 | | | | 279,003 | | | | 1.19 | | | | 276,527 | | | | 1.18 | | | | 279,355 | | | | 1.12 | | | | 273,906 | | | | 1.07 | | | | 0.9 | | | | 2.8 | |
| Certificates of deposit $100,000 or more | | | 231,232 | | | | 1.40 | | | | 238,624 | | | | 1.46 | | | | 242,662 | | | | 1.46 | | | | 240,521 | | | | 1.46 | | | | 241,810 | | | | 1.46 | | | | (3.1 | ) | | | (4.4 | ) |
| Other time deposits | | | 204,213 | | | | 1.59 | | | | 207,547 | | | | 1.66 | | | | 205,046 | | | | 1.73 | | | | 201,743 | | | | 1.83 | | | | 201,249 | | | | 1.91 | | | | (1.6 | ) | | | 1.5 | |
| Interest-bearing deposits | | | 886,436 | | | | 1.15 | | | | 892,597 | | | | 1.18 | | | | 876,920 | | | | 1.21 | | | | 874,910 | | | | 1.21 | | | | 874,622 | | | | 1.21 | | | | (0.7 | ) | | | 1.4 | |
| Short-term borrowings | | | 13,573 | | | | 0.27 | | | | 14,909 | | | | 0.27 | | | | 13,818 | | | | 0.31 | | | | 17,621 | | | | 0.35 | | | | 16,421 | | | | 0.37 | | | | (9.0 | ) | | | (17.3 | ) |
| Long-term debt | | | - | | | | - | | | | 455 | | | | 4.58 | | | | 455 | | | | 4.63 | | | | 455 | | | | 4.63 | | | | 466 | | | | 4.46 | | | | (100.0 | ) | | | (100.0 | ) |
| Total interest-bearing liabilities | | | 900,009 | | | | 1.14 | % | | | 907,961 | | | | 1.17 | % | | | 891,193 | | | | 1.20 | % | | | 892,986 | | | | 1.20 | % | | | 891,509 | | | | 1.20 | % | | | (0.9 | ) | | | 1.0 | |
| Noninterest-bearing deposits | | | 156,406 | | | | | | | | 148,096 | | | | | | | | 144,210 | | | | | | | | 136,260 | | | | | | | | 139,226 | | | | | | | | 5.6 | | | | 12.3 | |
| Accrued expenses and other liabilities | | | 9,020 | | | | | | | | 8,768 | | | | | | | | 9,421 | | | | | | | | 8,662 | | | | | | | | 8,897 | | | | | | | | 2.9 | | | | 1.4 | |
| Stockholders' equity | | | 117,700 | | | | | | | | 119,321 | | | | | | | | 118,774 | | | | | | | | 121,658 | | | | | | | | 121,020 | | | | | | | | (1.4 | ) | | | (2.7 | ) |
| Total liabilities and stockholders' equity | | $ | 1,183,135 | | | | | | | $ | 1,184,146 | | | | | | | $ | 1,163,598 | | | | | | | $ | 1,159,566 | | | | | | | $ | 1,160,652 | | | | | | | | (0.1 | ) | | | 1.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest spread | | | | | | | 2.80 | % | | | | | | | 2.93 | % | | | | | | | 3.15 | % | | | | | | | 3.20 | % | | | | | | | 3.38 | % | | | | | | | | |
| Net interest margin | | | | | | | 3.02 | % | | | | | | | 3.15 | % | | | | | | | 3.36 | % | | | | | | | 3.42 | % | | | | | | | 3.60 | % | | | | | | | | |
| (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 $552 thousand for the fourth quarter of 2012, $524 thousand for the third quarter of 2012, $502 thousand for the second quarter of 2012, $460 thousand for the first quarter of 2012 and $405 thousand for the fourth 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 | |
| | | 4Q 12 | | | 3Q 12 | | | 2Q 12 | | | 1Q 12 | | | 4Q 11 | | | 12/31/2012 | | | 12/31/2011 | |
| | | | | | | | | | | | | | | | | | | | | | |
| The following reconciles return on average equity and return on average tangible equity (Note 1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income | | $ | (5,074 | ) | | $ | (1,821 | ) | | $ | 293 | | | $ | (3,036 | ) | | $ | 325 | | | $ | (9,638 | ) | | $ | (897 | ) |
| Net (loss) income - annualized (A) | | $ | (20,186 | ) | | $ | (7,244 | ) | | $ | 1,178 | | | $ | (12,211 | ) | | $ | 1,289 | | | $ | (9,638 | ) | | $ | (897 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income, excluding net amortization and impairment charges of intangible assets | | $ | (5,029 | ) | | $ | (1,763 | ) | | $ | 351 | | | $ | (2,960 | ) | | $ | 401 | | | $ | (9,401 | ) | | $ | 335 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income, excluding net amortization and impairment charges of intangible assets - annualized (B) | | $ | (20,007 | ) | | $ | (7,014 | ) | | $ | 1,412 | | | $ | (11,905 | ) | | $ | 1,591 | | | $ | (9,401 | ) | | $ | 335 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average stockholders' equity (C) | | $ | 117,700 | | | $ | 119,321 | | | $ | 118,774 | | | $ | 121,658 | | | $ | 121,020 | | | $ | 119,359 | | | $ | 121,496 | |
| Less: Average goodwill and other intangible assets | | | (16,313 | ) | | | (16,401 | ) | | | (16,497 | ) | | | (16,606 | ) | | | (16,732 | ) | | | (16,454 | ) | | | (17,926 | ) |
| Average tangible equity (D) | | $ | 101,387 | | | $ | 102,920 | | | $ | 102,277 | | | $ | 105,052 | | | $ | 104,288 | | | $ | 102,905 | | | $ | 103,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average equity (GAAP) (A)/(C) | | | (17.15 | )% | | | (6.07 | )% | | | 0.99 | % | | | (10.04 | )% | | | 1.07 | % | | | (8.07 | )% | | | (0.74 | )% |
| Return on average tangible equity (Non-GAAP) (B)/(D) | | | (19.73 | )% | | | (6.82 | )% | | | 1.38 | % | | | (11.33 | )% | | | 1.53 | % | | | (9.14 | )% | | | 0.32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest expense (E) | | $ | 9,685 | | | $ | 9,709 | | | $ | 9,663 | | | $ | 10,498 | | | $ | 9,405 | | | $ | 39,555 | | | $ | 39,167 | |
| Less: Amortization of intangible assets | | | (74 | ) | | | (96 | ) | | | (96 | ) | | | (126 | ) | | | (126 | ) | | | (392 | ) | | | (512 | ) |
| Impairment charges | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,344 | ) |
| Adjusted noninterest expense (F) | | $ | 9,611 | | | $ | 9,613 | | | $ | 9,567 | | | $ | 10,372 | | | $ | 9,279 | | | $ | 39,163 | | | $ | 37,311 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable-equivalent net interest income (G) | | $ | 8,413 | | | $ | 8,769 | | | $ | 9,077 | | | $ | 9,243 | | | $ | 9,889 | | | $ | 35,502 | | | $ | 39,983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest income (H) | | $ | 2,606 | | | $ | 4,001 | | | $ | 4,577 | | | $ | 4,574 | | | $ | 4,019 | | | $ | 15,758 | | | $ | 17,318 | |
| Less: Investment securities (gains)/losses | | | - | | | | (278 | ) | | | - | | | | - | | | | (128 | ) | | | (278 | ) | | | (563 | ) |
| Other nonrecurring (gains)/losses | | | 1,339 | | | | - | | | | (217 | ) | | | - | | | | (56 | ) | | | 1,122 | | | | (56 | ) |
| Adjusted noninterest income (I) | | $ | 3,945 | | | $ | 3,723 | | | $ | 4,360 | | | $ | 4,574 | | | $ | 3,835 | | | $ | 16,602 | | | $ | 16,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Efficiency ratio (GAAP) (E)/(G)+(H) | | | 87.89 | % | | | 76.03 | % | | | 70.77 | % | | | 75.98 | % | | | 67.62 | % | | | 77.17 | % | | | 68.35 | % |
| Efficiency ratio (Non-GAAP) (F)/(G)+(I) | | | 77.77 | % | | | 76.95 | % | | | 71.20 | % | | | 75.07 | % | | | 67.61 | % | | | 75.16 | % | | | 65.83 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following reconciles book value per common share and tangible book value per common share (Note 1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders' equity (J) | | $ | 114,026 | | | $ | 118,163 | | | $ | 119,467 | | | $ | 118,584 | | | $ | 121,249 | | | | | | | | | |
| Less: Goodwill and other intangible assets | | | (16,270 | ) | | | (16,344 | ) | | | (16,440 | ) | | | (16,536 | ) | | | (16,662 | ) | | | | | | | | |
| Tangible equity (K) | | $ | 97,756 | | | $ | 101,819 | | | $ | 103,027 | | | $ | 102,048 | | | $ | 104,587 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares outstanding (L) | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | 8,457 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Book value per common share (GAAP) (J)/(L) | | $ | 13.48 | | | $ | 13.97 | | | $ | 14.13 | | | $ | 14.02 | | | $ | 14.34 | | | | | | | | | |
| Tangible book value per common share (Non-GAAP) (K)/(L) | | $ | 11.56 | | | $ | 12.04 | | | $ | 12.18 | | | $ | 12.07 | | | $ | 12.37 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following reconciles average equity to average assets and average tangible equity to average tangible assets (Note 1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average stockholders' equity (M) | | $ | 117,700 | | | $ | 119,321 | | | $ | 118,774 | | | $ | 121,658 | | | $ | 121,020 | | | $ | 119,359 | | | $ | 121,496 | |
| Less: Average goodwill and other intangible assets | | | (16,313 | ) | | | (16,401 | ) | | | (16,497 | ) | | | (16,606 | ) | | | (16,732 | ) | | | (16,454 | ) | | | (17,926 | ) |
| Average tangible equity (N) | | $ | 101,387 | | | $ | 102,920 | | | $ | 102,277 | | | $ | 105,052 | | | $ | 104,288 | | | $ | 102,905 | | | $ | 103,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average assets (O) | | $ | 1,183,135 | | | $ | 1,184,146 | | | $ | 1,163,598 | | | $ | 1,159,566 | | | $ | 1,160,652 | | | $ | 1,172,452 | | | $ | 1,139,943 | |
| Less: Average goodwill and other intangible assets | | | (16,313 | ) | | | (16,401 | ) | | | (16,497 | ) | | | (16,606 | ) | | | (16,732 | ) | | | (16,454 | ) | | | (17,926 | ) |
| Average tangible assets (P) | | $ | 1,166,822 | | | $ | 1,167,745 | | | $ | 1,147,101 | | | $ | 1,142,960 | | | $ | 1,143,920 | | | $ | 1,155,998 | | | $ | 1,122,017 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average equity/average assets (GAAP) (M)/(O) | | | 9.95 | % | | | 10.08 | % | | | 10.21 | % | | | 10.49 | % | | | 10.43 | % | | | 10.18 | % | | | 10.66 | % |
| Average tangible equity/average tangible assets (Non-GAAP) (N)/(P) | | | 8.69 | % | | | 8.81 | % | | | 8.92 | % | | | 9.19 | % | | | 9.12 | % | | | 8.90 | % | | | 9.23 | % |
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.
