SHORE BANCSHARES, INC. 
By EASTON, Md., Jan. 25, 2012 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) today reported net income of $325 thousand, or $0.04 per diluted common share, for the fourth quarter of 2011, compared to net income of $94 thousand, or $0.01 per diluted common share, for the third quarter of 2011 and net income of $850 thousand, or $0.10 per diluted common share, for the fourth quarter of 2010. The Company reported a net loss of $897 thousand, or $(0.11) per diluted common share, for 2011, compared to a net loss of $1.7 million, or $(0.20) per diluted common share, for 2010.
When comparing the fourth quarter of 2011 to the third quarter of 2011, the increase in net income was primarily due to lower impairment charges of $1.3 million. During the third quarter of 2011, the Company recorded goodwill impairment charges of $1.2 million and other intangible assets impairment charges of $120 thousand. The decrease in impairment charges was mainly offset by a higher provision for credit losses ($385 thousand) and lower net interest income ($286 thousand) and investment securities gains ($226 thousand). When comparing the fourth quarter of 2011 to the fourth quarter of 2010, the main reason for the lower net income was a decline in net interest income of $1.0 million, which was partially offset by a decrease in the provision for credit losses of $357 thousand.
When comparing fiscal year 2011 to fiscal year 2010, the principal factors resulting in the lower net loss were a $1.7 million decrease in impairment charges and a $1.6 million decrease in the provision for credit losses, which were partially offset by a decline in net interest income of $2.9 million.
"Net income was modest for the final quarter of 2011, but we did produce an improvement over the linked third quarter of last year," said W. Moorhead Vermilye, chief executive officer. "We were disappointed to show a loss for the full year of 2011, but encouraged that the loss narrowed to about half the amount we reported for the full year of 2010."
"Our ratio of nonperforming assets to total assets was 7.66% at December 31, 2011, compared to 8.02% at September 30, 2011. Nonperforming assets decreased $4.2 million from where they stood at the end of the third quarter as two large credits totaling $8.2 million were brought current during the final three months of the year, and our ratio of the allowance for credit losses to period-end loans increased to 1.70% at December 31, 2011, up from 1.57% at September 30, 2011 and 1.59% at December 31, 2010."
"All of these statistics are evidence of a very tough ongoing credit environment, but they do reflect that we are making gradual progress. Although we remain very cautious, evidence suggests to us that area real estate prices might have bottomed out, which, if true, should lead to better progress in resolving and disposing our problem assets. In the meantime, we believe our provision for credit losses and the resulting allowance as of year end are adequate to provide for probable losses in our loan portfolio."
"As we have noted previously, it took a year or two more than in other regions for the Delmarva Peninsula micro-economy to fully experience the impact of this long-running national economic downturn, and we believe that the recovery in our market areas and our return to consistent profitability will likewise lag behind much of the regional community banking industry. As we work diligently to improve credit quality and our overall performance, it is important to note that our capital levels remain strong. For 2011, the Company's ratio of average tangible equity to average tangible assets was 9.23% which compared very favorably to area peers," said Vermilye.
The Company's return on average assets for the fourth quarter of 2011 was 0.11%, compared to 0.03% and 0.30% for the quarters ended September 30, 2011 and December 31, 2010, respectively. The return on average equity was 1.07% for the fourth quarter of 2011, compared to 0.31% for the third quarter of 2011 and 2.73% for the fourth quarter of 2010. The return on average tangible equity was 1.53% for the fourth quarter of 2011, compared to 4.21% for the third quarter of 2011 and 3.49% for the fourth quarter of 2010. The return on average tangible equity for the third quarter of 2011 was positively impacted by the impairment charges of $1.3 million. See the financial tables that follow for additional information.
The Company's return on average assets for 2011 was (0.08)%, compared to (0.15)% for 2010. The return on average equity was (0.74)% and (1.33)% for 2011 and 2010, respectively, while the return on average tangible equity was 0.32% and 1.05% for 2011 and 2010, respectively.
Total assets were $1.158 billion at December 31, 2011, a 2.5% increase when compared to the $1.130 billion at the end of 2010. Total loans decreased 6.1% to $841.1 million while total earning assets increased 2.1% to $1.082 billion when compared to December 31, 2010. Total deposits increased 3.1% to $1.010 billion while total stockholders' equity decreased 1.0% from the end of 2010. The ratio of average equity to average assets was 10.66% and 11.05% for 2011 and 2010, respectively, while the ratio of average tangible equity to average tangible assets was 9.23% and 9.43% for 2011 and 2010, respectively. Capital levels remain well above regulatory minimums to be considered well-capitalized.
Review of Quarterly Financial Results
Net interest income for the fourth quarter of 2011 was $9.8 million, a 2.8% decrease from the third quarter of 2011 and a 9.5% decrease from the same period last year. The decrease in net interest income when compared to the third quarter of 2011 and the fourth quarter of 2010 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 3.60% for the fourth quarter of 2011, 3.77% for the third quarter of 2011 and 4.09% for the fourth quarter of 2010.
The provision for credit losses was $4.0 million for the three months ended December 31, 2011. The comparable amounts were $3.7 million and $4.4 million for the three months ended September 30, 2011 and December 31, 2010, respectively. The ratio of the allowance for credit losses to period-end loans was 1.70% at December 31, 2011, increasing from 1.57% at September 30, 2011 and 1.59% at December 31, 2010. Management believes that the provision for credit losses and the resulting allowance were adequate at December 31, 2011 to provide for probable losses in our loan portfolio.
The level of provision for credit losses was primarily in response to loan charge-offs, nonperforming loans and a weak economy. Net charge-offs were $3.3 million for the fourth quarter of 2011, lower than the $6.5 million for the third quarter of 2011 and even with the amount for the fourth quarter of 2010. The ratio of quarter-to-date annualized net charge-offs to average loans was 1.53% for the fourth quarter of 2011, 2.95% for the third quarter of 2011 and 1.46% for the fourth quarter of 2010. Nonperforming assets decreased $4.2 million when compared to the end of September 2011 but increased $19.1 million when compared to the end of December 2010. The decrease from the end of the prior quarter was primarily in loans 90 days past due and still accruing. This decrease was mainly due to two large credits totaling $8.2 million which were brought current during the fourth quarter of 2011. The ratio of nonperforming assets to total assets was 7.66% at December 31, 2011, compared to 8.02% at September 30, 2011 and 6.16% at December 31, 2010.
Total noninterest income for the fourth quarter of 2011 decreased $504 thousand, or 11.1%, when compared to the third quarter of 2011. The decrease was primarily due to a $251 thousand decline in insurance agency commissions and a $226 thousand decline in gains on sales of investment securities. Noninterest income for the fourth quarter of 2011 increased $71 thousand, or 1.8%, when compared to the fourth quarter of 2010. The increase was primarily due to gains on sales of investment securities of $128 thousand and an increase in other noninterest income of $75 thousand, partially offset by a $99 thousand decline in service charges on deposit accounts. Included in other noninterest income for the fourth quarter of 2011 was a $56 thousand gain relating to proceeds from a life insurance policy on a former CNB director. The lower service charges on deposit accounts were due to a decrease in customer use of overdraft protection programs.
Total noninterest expense for the fourth quarter of 2011 decreased $1.3 million, or 11.9%, when compared to the third quarter of 2011 mainly due to the $1.3 million goodwill and other intangible assets impairment charges recorded in the third quarter of 2011. When compared to the fourth quarter of 2010, total noninterest expense for the fourth quarter of 2011 increased $323 thousand, or 3.6%, primarily due to higher expenses related to other real estate owned activities included in other noninterest expenses.
Review of 2011 Financial Results
Net interest income for 2011 was $39.8 million, a decrease of 6.7% when compared to 2010. 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 3.74% for 2011 and 4.02% for 2010.
The provisions for credit losses for 2011 and 2010 were $19.5 million and $21.1 million, respectively. Net charge-offs were $19.4 million and $17.8 million for 2011 and 2010, respectively. The ratio of year-to-date annualized net charge-offs to average loans was 2.22% for 2011 and 1.96% for 2010.
Total noninterest income for 2011 declined $723 thousand when compared to the same period in 2010. The decrease in noninterest income was mainly due to declines in insurance agency commissions, service charges on deposit accounts and other noninterest income. Other noninterest income for 2010 included a $224 thousand gain relating to the surrender of directors' life insurance policies. These decreases in noninterest income were partially offset by $563 thousand in gains on sales of investment securities.
Total noninterest expense for 2011 decreased $2.6 million when compared to the same period in 2010. The primary reason for the decrease was lower expenses related to impairment charges, salaries, FDIC insurance premiums and insurance agency commissions. These expenses were somewhat offset by higher expenses related to other real estate owned activities and higher data processing charges relating 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 at www.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 by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".
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,
------------ ------------
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
PROFITABILITY FOR THE PERIOD
Net interest income $9,837 $10,866 (9.5)% $39,764 $42,639 (6.7)%
Provision for credit losses 4,035 4,392 (8.1) 19,470 21,119 (7.8)
Noninterest income 4,019 3,948 1.8 17,318 18,041 (4.0)
Noninterest expense 9,405 9,082 3.6 39,167 41,720 (6.1)
----- ----- ------ ------
Income (loss) before income taxes 416 1,340 (69.0) (1,555) (2,159) 28.0
Income tax expense (benefit) 91 490 (81.4) (658) (492) (33.7)
--- --- ---- ----
Net income (loss) $325 $850 (61.8) $(897) $(1,667) 46.2
==== ==== ===== =======
Return on average assets 0.11% 0.30% (19) bp (0.08)% (0.15)% 7 bp
Return on average equity 1.07 2.73 (166) (0.74) (1.33) 59
Return on average tangible equity (1) 1.53 3.49 (196) 0.32 1.05 (73)
Net interest margin 3.60 4.09 (49) 3.74 4.02 (28)
Efficiency ratio - GAAP 67.62 61.03 659 68.35 68.46 (11)
Efficiency ratio - Non-GAAP (1) 67.61 60.17 744 65.83 62.83 300
PER SHARE DATA
Basic net income (loss) per common share $0.04 $0.10 (60.0)% $(0.11) $(0.20) 45.0%
Diluted net income (loss) per common share 0.04 0.10 (60.0) (0.11) (0.20) 45.0
Dividends paid per common share 0.01 0.06 (83.3) 0.09 0.24 (62.5)
Book value per common share at period end 14.34 14.51 (1.2)
Tangible book value per common share at period end (1) 12.37 12.32 0.4
Market value at period end 5.15 10.54 (51.1)
Market range:
High 6.13 10.73 (42.9) 11.11 14.80 (24.9)
Low 4.20 9.25 (54.6) 3.95 9.20 (57.1)
PERIOD-END BALANCE SHEET DATA
Loans $841,050 $895,404 (6.1)%
Securities 136,260 105,782 28.8
Assets 1,158,193 1,130,311 2.5
Deposits 1,009,919 979,516 3.1
Stockholders' equity 121,249 122,513 (1.0)
AVERAGE BALANCE SHEET DATA
Loans $854,302 $903,075 (5.4)% $873,155 $906,732 (3.7)%
Securities 122,725 103,600 18.5 113,568 107,242 5.9
Earning assets 1,089,078 1,060,645 2.7 1,069,458 1,068,264 0.1
Assets 1,160,652 1,128,517 2.8 1,139,943 1,136,916 0.3
Deposits 1,013,848 978,444 3.6 992,071 980,332 1.2
Stockholders' equity 121,020 123,341 (1.9) 121,496 125,586 (3.3)
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets 10.43% 10.93% (50) bp 10.66% 11.05% (39) bp
Average tangible equity to average tangible assets (1) 9.12 9.50 (38) 9.23 9.43 (20)
Annualized net charge-offs to average loans 1.53 1.46 7 2.22 1.96 26
Allowance for credit losses to period-end loans 1.70 1.59 11
Allowance for credit losses to nonaccrual loans 27.81 39.26 (1,145)
Allowance for credit losses to nonperforming loans (2) 18.02 21.59 (357)
Nonaccrual loans to total loans 6.11 4.05 206
Nonaccrual loans to total assets 4.44 3.21 123
Nonperforming assets to total loans+other real estate and
other assets owned (3) 10.43 7.74 269
Nonperforming assets to total assets 7.66 6.16 150
(1) See the reconciliation table on page 11 of 11.
(2) Nonperforming loans include nonaccrual, 90 days past due
and still accruing and accruing troubled debt restructurings.
(3) Nonperforming assets include nonperforming loans and
other real estate and other assets owned.
Shore Bancshares, Inc. Page 5 of 11
Consolidated Balance Sheets
(In thousands, except per share data)
December 31, 2011
December 31, December 31, compared to
2011 2010 December 31, 2010
---- ---- -----------------
ASSETS
Cash and due from banks $22,986 $19,680 16.8%
Interest-bearing deposits with other banks 99,776 21,593 362.1
Federal funds sold 4,980 36,691 (86.4)
Investments available for sale (at fair value) 129,780 99,055 31.0
Investments held to maturity 6,480 6,727 (3.7)
Loans 841,050 895,404 (6.1)
Less: allowance for credit losses (14,288) (14,227) 0.4
-------
Loans, net 826,762 881,177 (6.2)
------- -------
Premises and equipment, net 14,662 14,483 1.2
Goodwill 12,454 13,678 (8.9)
Other intangible assets, net 4,208 4,840 (13.1)
Other real estate and other assets owned, net 9,385 3,702 153.5
Other assets 26,720 28,685 (6.9)
------ ------
Total assets $1,158,193 $1,130,311 2.5
========== ==========
LIABILITIES
Noninterest-bearing deposits $133,801 $124,188 7.7
Interest-bearing deposits 876,118 855,328 2.4
------- -------
Total deposits 1,009,919 979,516 3.1
Short-term borrowings 17,817 16,041 11.1
Accrued expenses and other liabilities 8,753 11,309 (22.6)
Long-term debt 455 932 (51.2)
--- ---
Total liabilities 1,036,944 1,007,798 2.9
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares 85 84 1.2
Warrant - 1,543 (100.0)
Additional paid in capital 32,052 30,242 6.0
Retained earnings 90,801 92,458 (1.8)
Accumulated other comprehensive loss (1,689) (1,814) 6.9
------ ------
Total stockholders' equity 121,249 122,513 (1.0)
------- -------
Total liabilities and stockholders' equity $1,158,193 $1,130,311 2.5
========== ==========
Period-end common shares outstanding 8,457 8,443 0.2
Book value per common share $14.34 $14.51 (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 Twelve Months Ended
December 31, December 31,
------------ ------------
2011 2010 % Change 2011 2010 % Change
---- ---- -------- ---- ---- --------
INTEREST INCOME
Interest and fees on
loans $11,649 $12,958 (10.1)% $47,549 $51,962 (8.5)%
Interest and
dividends on
investment
securities:
Taxable 797 804 (0.9) 3,031 3,209 (5.5)
Tax-exempt 38 47 (19.1) 154 212 (27.4)
Interest on federal
funds sold 1 13 (92.3) 25 60 (58.3)
Interest on deposits
with other banks 46 7 557.1 93 18 416.7
--- ---
Total interest
income 12,531 13,829 (9.4) 50,852 55,461 (8.3)
------ ------ ------
INTEREST EXPENSE
Interest on deposits 2,673 2,937 (9.0) 10,995 12,681 (13.3)
Interest on short-
term borrowings 15 15 - 56 83 (32.5)
Interest on long-
term debt 6 11 (45.5) 37 58 (36.2)
--- --- --- ---
Total interest
expense 2,694 2,963 (9.1) 11,088 12,822 (13.5)
----- ----- ------ ------
NET INTEREST INCOME 9,837 10,866 (9.5) 39,764 42,639 (6.7)
Provision for credit
losses 4,035 4,392 (8.1) 19,470 21,119 (7.8)
----- ----- ------ ------
NET INTEREST INCOME
AFTER PROVISION
FOR CREDIT LOSSES 5,802 6,474 (10.4) 20,294 21,520 (5.7)
-----
NONINTEREST INCOME
Service charges on
deposit accounts 700 799 (12.4) 2,845 3,257 (12.6)
Trust and investment
fee income 380 358 6.1 1,563 1,503 4.0
Investment
securities gains 128 - - 563 - -
Insurance agency
commissions 2,061 2,116 (2.6) 9,358 10,113 (7.5)
Other noninterest
income 750 675 11.1 2,989 3,168 (5.7)
--- -----
Total noninterest
income 4,019 3,948 1.8 17,318 18,041 (4.0)
----- ----- ------ ------
NONINTEREST EXPENSE
Salaries and wages 4,378 4,220 3.7 16,825 17,477 (3.7)
Employee benefits 923 893 3.4 3,840 3,829 0.3
Occupancy expense 563 562 0.2 2,312 2,328 (0.7)
Furniture and
equipment expense 234 262 (10.7) 1,059 1,200 (11.8)
Data processing 660 620 6.5 2,852 2,607 9.4
Directors' fees 83 68 22.1 500 412 21.4
Goodwill and other
intangible assets
impairment - - - 1,344 3,051 (55.9)
Amortization of
intangible assets 126 129 (2.3) 512 515 (0.6)
Insurance agency
commissions expense 285 339 (15.9) 1,267 1,569 (19.2)
FDIC insurance
premium expense 254 445 (42.9) 1,298 1,834 (29.2)
Other noninterest
expenses 1,899 1,544 23.0 7,358 6,898 6.7
----- ----- -----
Total noninterest
expense 9,405 9,082 3.6 39,167 41,720 (6.1)
----- ----- ------ ------
Income (loss) before
income taxes 416 1,340 (69.0) (1,555) (2,159) 28.0
Income tax expense
(benefit) 91 490 (81.4) (658) (492) (33.7)
--- ---- ----
NET INCOME (LOSS) $325 $850 (61.8) $(897) $(1,667) 46.2
==== ==== ===== =======
Weighted average
shares outstanding
-basic 8,457 8,443 0.2 8,451 8,442 0.1
Weighted average
shares outstanding
-diluted 8,457 8,443 0.2 8,451 8,442 0.1
Basic net income
(loss) per common
share $0.04 $0.10 (60.0) $(0.11) $(0.20) 45.0
Diluted net income
(loss) per common
share 0.04 0.10 (60.0) (0.11) (0.20) 45.0
Dividends paid per
common share 0.01 0.06 (83.3) 0.09 0.24 (62.5)
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,
------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate
------- ---- ------- ---- ------- ---- ------- ----
Earning assets
Loans $854,302 5.42% $903,075 5.71% $873,155 5.46% $906,732 5.75%
Investment securities
Taxable 118,315 2.67 98,378 3.24 109,059 2.78 101,162 3.17
Tax-exempt 4,410 5.27 5,222 5.40 4,509 5.19 6,080 5.29
Federal funds sold 8,709 0.05 34,018 0.16 23,808 0.10 39,770 0.15
Interest-bearing deposits 103,342 0.18 19,952 0.12 58,927 0.16 14,520 0.12
------- ------ ------ ------
Total earning assets 1,089,078 4.58% 1,060,645 5.20% 1,069,458 4.78% 1,068,264 5.22%
Cash and due from banks 18,728 19,867 19,198 16,567
Other assets 68,014 62,305 67,695 65,774
Allowance for credit losses (15,168) (14,300) (16,408) (13,689)
-------
Total assets $1,160,652 $1,128,517 $1,139,943 $1,136,916
========== ========== ========== ==========
Interest-bearing liabilities
Demand deposits $157,657 0.19% $128,592 0.22% $145,533 0.21% $130,297 0.24%
Money market and savings deposits 273,906 1.07 258,713 0.84 265,910 1.00 258,650 0.76
Certificates of deposit $100,000 or more 241,810 1.46 256,167 1.77 245,214 1.62 256,393 2.00
Other time deposits 201,249 1.91 208,808 2.23 205,154 1.99 214,121 2.46
------- ------- ------- -------
Interest-bearing deposits 874,622 1.21 852,280 1.37 861,811 1.28 859,461 1.48
Short-term borrowings 16,421 0.37 15,381 0.39 15,319 0.37 16,348 0.51
Long-term debt 466 4.46 932 4.46 814 4.50 1,304 4.41
--- --- --- -----
Total interest-bearing liabilities 891,509 1.20% 868,593 1.35% 877,944 1.26% 877,113 1.46%
Noninterest-bearing deposits 139,226 126,164 130,260 120,871
Accrued expenses and other liabilities 8,897 10,419 10,243 13,346
Stockholders' equity 121,020 123,341 121,496 125,586
-------
Total liabilities and stockholders' equity $1,160,652 $1,128,517 $1,139,943 $1,136,916
========== ========== ========== ==========
Net interest spread 3.38% 3.85% 3.52% 3.76%
Net interest margin 3.60% 4.09% 3.74% 4.02%
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 11 4Q 11
2011 2011 2011 2011 2010 compared to compared to
(4Q 11) (3Q 11) (2Q 11) (1Q 11) (4Q 10) 3Q 11 4Q 10
------ ------ ------ ------ ------ ----- -----
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income $9,889 $10,172 $10,001 $9,921 $10,932 (2.8)% (9.5)%
Less: Taxable-equivalent adjustment 52 49 59 59 66 6.1 (21.2)
--- --- --- --- ---
Net interest income 9,837 10,123 9,942 9,862 10,866 (2.8) (9.5)
Provision for credit losses 4,035 3,650 5,395 6,390 4,392 10.5 (8.1)
Noninterest income 4,019 4,523 4,381 4,395 3,948 (11.1) 1.8
Noninterest expense 9,405 10,677 9,194 9,891 9,082 (11.9) 3.6
----- ------ ----- ----- -----
Income (loss) before income taxes 416 319 (266) (2,024) 1,340 30.4 (69.0)
Income tax expense (benefit) 91 225 (33) (941) 490 (59.6) (81.4)
--- --- --- ---- ---
Net income (loss) $325 $94 $(233) $(1,083) $850 245.7 (61.8)
==== === ===== ======= ====
Return on average assets 0.11% 0.03% (0.08)% (0.39)% 0.30% 8 bp (19) bp
Return on average equity 1.07 0.31 (0.77) (3.59) 2.73 76 (166)
Return on average tangible equity (1) 1.53 4.21 (0.60) (3.92) 3.49 (268) (196)
Net interest margin 3.60 3.77 3.80 3.79 4.09 (17) (49)
Efficiency ratio - GAAP 67.62 72.66 63.93 69.09 61.03 (504) 659
Efficiency ratio - Non-GAAP (1) 67.61 64.18 63.05 68.57 60.17 343 744
PER SHARE DATA
Basic net income (loss) per common share $0.04 $0.01 $(0.03) $(0.13) $0.10 300.0% (60.0)%
Diluted net income (loss) per common share 0.04 0.01 (0.03) (0.13) 0.10 300.0 (60.0)
Dividends paid per common share 0.01 0.01 0.01 0.06 0.06 - (83.3)
Book value per common share at period end 14.34 14.31 14.30 14.32 14.51 0.2 (1.2)
Tangible book value per common share at period end (1) 12.37 12.32 12.14 12.14 12.32 0.4 0.4
Market value at period end 5.15 4.36 6.98 9.75 10.54 18.1 (51.1)
Market range:
High 6.13 7.06 10.21 11.11 10.73 (13.2) (42.9)
Low 4.20 3.95 6.51 9.42 9.25 6.3 (54.6)
PERIOD-END BALANCE SHEET DATA
Loans $841,050 $862,566 $877,331 $884,715 $895,404 (2.5)% (6.1)%
Securities 136,260 112,328 113,271 106,920 105,782 21.3 28.8
Assets 1,158,193 1,157,536 1,124,191 1,131,334 1,130,311 0.1 2.5
Deposits 1,009,919 1,011,919 973,442 986,486 979,516 (0.2) 3.1
Stockholders' equity 121,249 120,986 120,941 120,926 122,513 0.2 (1.0)
AVERAGE BALANCE SHEET DATA
Loans $854,302 $869,221 $881,976 $887,531 $903,075 (1.7)% (5.4)%
Securities 122,725 113,938 111,190 106,235 103,600 7.7 18.5
Earning assets 1,089,078 1,069,636 1,056,658 1,062,164 1,060,645 1.8 2.7
Assets 1,160,652 1,142,588 1,125,213 1,131,259 1,128,517 1.6 2.8
Deposits 1,013,848 994,968 976,840 982,249 978,444 1.9 3.6
Stockholders' equity 121,020 121,327 121,187 122,466 123,341 (0.3) (1.9)
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets 10.43% 10.62% 10.77% 10.83% 10.93% (19) bp (50) bp
Average tangible equity to average tangible assets (1) 9.12 9.17 9.29 9.35 9.50 (6) (38)
Annualized net charge-offs to average loans 1.53 2.95 2.96 1.44 1.46 (142) 7
Allowance for credit losses to period-end loans 1.70 1.57 1.86 1.97 1.59 13 11
Allowance for credit losses to nonaccrual loans 27.81 27.31 33.74 35.83 39.26 50 (1,145)
Allowance for credit losses to nonperforming loans (2) 18.02 16.31 22.68 21.16 21.59 171 (357)
Nonaccrual loans to total loans 6.11 5.75 5.53 5.51 4.05 36 206
Nonaccrual loans to total assets 4.44 4.28 4.31 4.31 3.21 16 123
Nonperforming assets to total loans+other real estate and
other assets owned (3) 10.43 10.65 9.04 9.82 7.74 (22) 269
Nonperforming assets to total assets 7.66 8.02 7.12 7.72 6.16 (36) 150
(1) See the reconciliation table on page 11 of 11.
(2) Nonperforming loans include nonaccrual, 90 days past due
and still accruing and accruing troubled debt restructurings.
(3) Nonperforming assets include nonperforming loans and
other real estate and other assets owned.
Shore Bancshares, Inc. Page 9 of 11
Consolidated Statements of Income By Quarter
(In thousands, except per share data)
4Q 11 4Q 11
compared to compared to
4Q 11 3Q 11 2Q 11 1Q 11 4Q 10 3Q 11 4Q 10
----- ----- ----- ----- ----- ----- -----
INTEREST INCOME
Interest and fees on loans $11,649 $12,003 $11,896 $12,001 $12,958 (2.9)% (10.1)%
Interest and dividends on investment securities:
Taxable 797 795 782 657 804 0.3 (0.9)
Tax-exempt 38 38 40 38 47 - (19.1)
Interest on federal funds sold 1 3 5 16 13 (66.7) (92.3)
Interest on deposits with other banks 46 29 12 6 7 58.6 557.1
--- --- --- --- ---
Total interest income 12,531 12,868 12,735 12,718 13,829 (2.6) (9.4)
INTEREST EXPENSE
Interest on deposits 2,673 2,720 2,769 2,833 2,937 (1.7) (9.0)
Interest on short-term borrowings 15 15 13 13 15 - -
Interest on long-term debt 6 10 11 10 11 (40.0) (45.5)
--- --- --- --- ---
Total interest expense 2,694 2,745 2,793 2,856 2,963 (1.9) (9.1)
----- ----- ----- ----- -----
NET INTEREST INCOME 9,837 10,123 9,942 9,862 10,866 (2.8) (9.5)
Provision for credit losses 4,035 3,650 5,395 6,390 4,392 10.5 (8.1)
----- ----- ----- ----- -----
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 5,802 6,473 4,547 3,472 6,474 (10.4) (10.4)
NONINTEREST INCOME
Service charges on deposit accounts 700 697 744 704 799 0.4 (12.4)
Trust and investment fee income 380 389 418 376 358 (2.3) 6.1
Investment securities gains 128 354 2 79 - (63.8) -
Insurance agency commissions 2,061 2,312 2,475 2,510 2,116 (10.9) (2.6)
Other noninterest income 750 771 742 726 675 (2.7) 11.1
--- --- --- ---
Total noninterest income 4,019 4,523 4,381 4,395 3,948 (11.1) 1.8
----- ----- ----- ----- -----
NONINTEREST EXPENSE
Salaries and wages 4,378 4,097 4,104 4,246 4,220 6.9 3.7
Employee benefits 923 878 886 1,153 893 5.1 3.4
Occupancy expense 563 585 568 596 562 (3.8) 0.2
Furniture and equipment expense 234 262 291 272 262 (10.7) (10.7)
Data processing 660 661 680 851 620 (0.2) 6.5
Directors' fees 83 198 112 107 68 (58.1) 22.1
Goodwill and other intangible assets impairment - 1,344 - - - (100.0) -
Amortization of intangible assets 126 129 128 129 129 (2.3) (2.3)
Insurance agency commissions expense 285 250 357 375 339 14.0 (15.9)
FDIC insurance premium expense 254 180 404 460 445 41.1 (42.9)
Other noninterest expenses 1,899 2,093 1,664 1,702 1,544 (9.3) 23.0
----- ----- ----- ----- -----
Total noninterest expense 9,405 10,677 9,194 9,891 9,082 (11.9) 3.6
----- ------ ----- ----- -----
Income (loss) before income taxes 416 319 (266) (2,024) 1,340 30.4 (69.0)
Income tax expense (benefit) 91 225 (33) (941) 490 (59.6) (81.4)
--- --- --- ---- ---
NET INCOME (LOSS) $325 $94 $(233) $(1,083) $850 245.7 (61.8)
==== === ===== ======= ====
Weighted average shares outstanding - basic 8,457 8,457 8,446 8,443 8,443 - 0.2
Weighted average shares outstanding - diluted 8,457 8,457 8,446 8,443 8,443 - 0.2
Basic net income (loss) per common share $0.04 $0.01 $(0.03) $(0.13) $0.10 300.0 (60.0)
Diluted net income (loss) per common share 0.04 0.01 (0.03) (0.13) 0.10 300.0 (60.0)
Dividends paid per common share 0.01 0.01 0.01 0.06 0.06 - (83.3)
Shore Bancshares, Inc. Page 10 of 11
Consolidated Average Balance Sheets By Quarter
(Dollars in thousands)
Average balance
---------------
4Q 11 4Q 11
compared to compared to
4Q 11 3Q 11 2Q 11 1Q 11 4Q 10 3Q 11 4Q 10
----- ----- ----- ----- ----- ----- -----
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate balance rate
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earning assets
Loans $854,302 5.42% $869,221 5.49% $881,976 5.43% $887,531 5.50% $903,075 5.71% (1.7)% (5.4)%
Investment securities
Taxable 118,315 2.67 109,498 2.88 106,609 2.94 101,625 2.62 98,378 3.24 8.1 20.3
Tax-exempt 4,410 5.27 4,440 5.12 4,581 5.27 4,610 5.08 5,222 5.40 (0.7) (15.5)
Federal funds sold 8,709 0.05 15,905 0.07 24,310 0.09 46,813 0.14 34,018 0.16 (45.2) (74.4)
Interest-bearing deposits 103,342 0.18 70,572 0.16 39,182 0.12 21,585 0.12 19,952 0.12 46.4 418.0
------- ------ ------ ------ ------
Total earning assets 1,089,078 4.58% 1,069,636 4.79% 1,056,658 4.86% 1,062,164 4.88% 1,060,645 5.20% 1.8 2.7
Cash and due from banks 18,728 20,414 18,327 19,316 19,867 (8.3) (5.7)
Other assets 68,014 69,394 68,190 65,426 62,305 (2.0) 9.2
Allowance for credit losses (15,168) (16,856) (17,962) (15,647) (14,300) (10.0) 6.1
Total assets $1,160,652 $1,142,588 $1,125,213 $1,131,259 $1,128,517 1.6 2.8
========== ========== ========== ========== ==========
Interest-bearing liabilities
Demand deposits $157,657 0.19% $154,685 0.20% $137,775 0.22% $131,628 0.22% $128,592 0.22% 1.9 22.6
Money market and savings deposits 273,906 1.07 266,871 1.03 261,869 0.97 260,841 0.93 258,713 0.84 2.6 5.9
Certificates of deposit $100,000 or more 241,810 1.46 235,362 1.63 244,805 1.67 259,179 1.70 256,167 1.77 2.7 (5.6)
Other time deposits 201,249 1.91 204,836 1.91 206,310 2.02 208,301 2.10 208,808 2.23 (1.8) (3.6)
------- ------- ------- ------- -------
Interest-bearing deposits 874,622 1.21 861,754 1.25 850,759 1.31 859,949 1.34 852,280 1.37 1.5 2.6
Short-term borrowings 16,421 0.37 15,640 0.37 15,020 0.36 14,165 0.37 15,381 0.39 5.0 6.8
Long-term debt 466 4.46 932 4.46 932 4.51 932 4.56 932 4.46 (50.0) (50.0)
--- --- --- --- ---
Total interest-bearing liabilities 891,509 1.20% 878,326 1.24% 866,711 1.29% 875,046 1.32% 868,593 1.35% 1.5 2.6
Noninterest-bearing deposits 139,226 133,214 126,081 122,300 126,164 4.5 10.4
Accrued expenses and other liabilities 8,897 9,721 11,234 11,447 10,419 (8.5) (14.6)
Stockholders' equity 121,020 121,327 121,187 122,466 123,341 (0.3) (1.9)
Total liabilities and stockholders' equity $1,160,652 $1,142,588 $1,125,213 $1,131,259 $1,128,517 1.6 2.8
========== ========== ========== ========== ==========
Net interest spread 3.38% 3.55% 3.57% 3.56% 3.85%
Net interest margin 3.60% 3.77% 3.80% 3.79% 4.09%
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 11 3Q 11 2Q 11 1Q 11 4Q 10 12/31/2011 12/31/2010
----- ----- ----- ----- ----- ---------- ----------
The following reconciles return on average equity and return on
average tangible equity (Note 1):
Net income (loss) $325 $94 $(233) $(1,083) $850 $(897) $(1,667)
==== === ===== ======= ==== ===== =======
Net income (loss) - annualized (A) $1,289 $373 $(935) $(4,392) $3,372 $(897) $(1,667)
====== ==== ===== ======= ====== ===== =======
Net income (loss), excluding net amortization and
impairment charges of intangible assets $401 $1,094 $(155) $(1,005) $928 $335 $1,101
==== ====== ===== ======= ==== ==== ======
Net income (loss), excluding net amortization and
impairment charges of intangible assets - annualized (B) $1,591 $4,340 $(622) $(4,076) $3,682 $335 $1,101
====== ====== ===== ======= ====== ==== ======
Average stockholders' equity (C) $121,020 $121,327 $121,187 $122,466 $123,341 $121,496 $125,586
Less: Average goodwill and other intangible assets (16,732) (18,190) (18,334) (18,465) (17,877) (17,926) (20,337)
------- ------- ------- ------- ------- ------- -------
Average tangible equity (D) $104,288 $103,137 $102,853 $104,001 $105,464 $103,570 $105,249
======== ======== ======== ======== ======== ======== ========
Return on average equity (GAAP) (A)/(C) 1.07% 0.31% (0.77)% (3.59)% 2.73% (0.74)% (1.33)%
==== ==== ====== ====== ==== ====== ======
Return on average tangible equity (Non-GAAP) (B)/(D) 1.53% 4.21% (0.60)% (3.92)% 3.49% 0.32% 1.05%
==== ==== ====== ====== ==== ==== ====
The following reconciles GAAP efficiency ratio and non-GAAP
efficiency ratio (Note 2):
Noninterest expense (E) $9,405 $10,677 $9,194 $9,891 $9,082 $39,167 $41,720
Less: Amortization of intangible assets (126) (129) (128) (129) (129) (512) (515)
Impairment charges - (1,344) - - - (1,344) (3,051)
Adjusted noninterest expense (F) $9,279 $9,204 $9,066 $9,762 $8,953 $37,311 $38,154
====== ====== ====== ====== ====== ======= =======
Taxable-equivalent net interest income (G) $9,889 $10,172 $10,001 $9,921 $10,932 $39,983 $42,904
====== ======= ======= ====== ======= ======= =======
Noninterest income (H) $4,019 $4,523 $4,381 $4,395 $3,948 $17,318 $18,041
Less: Investment securities (gains)/losses (128) (354) (2) (79) - (563) -
Other nonrecurring (gains)/losses (56) - - - - (56) (224)
Adjusted noninterest income (I) $3,835 $4,169 $4,379 $4,316 $3,948 $16,699 $17,817
====== ====== ====== ====== ====== ======= =======
Efficiency ratio (GAAP) (E)/(G)+(H) 67.62% 72.66% 63.93% 69.09% 61.03% 68.35% 68.46%
===== ===== ===== ===== ===== ===== =====
Efficiency ratio (Non-GAAP) (F)/(G)+(I) 67.61% 64.18% 63.05% 68.57% 60.17% 65.83% 62.83%
===== ===== ===== ===== ===== ===== =====
The following reconciles book value per common share and tangible
book value per common share (Note 1):
Stockholders' equity (J) $121,249 $120,986 $120,941 $120,926 $122,513
Less: Goodwill and other intangible assets (16,662) (16,788) (18,261) (18,389) (18,518)
------- ------- ------- ------- -------
Tangible equity (K) $104,587 $104,198 $102,680 $102,537 $103,995
======== ======== ======== ======== ========
Shares outstanding (L) 8,457 8,457 8,457 8,443 8,443
===== ===== ===== ===== =====
Book value per common share (GAAP) (J)/(L) $14.34 $14.31 $14.30 $14.32 $14.51
====== ====== ====== ====== ======
Tangible book value per common share (Non-GAAP) (K)/(L) $12.37 $12.32 $12.14 $12.14 $12.32
====== ====== ====== ====== ======
The following reconciles average equity to average assets and
average tangible equity to average tangible assets (Note 1):
Average stockholders' equity (M) $121,020 $121,327 $121,187 $122,466 $123,341 $121,496 $125,586
Less: Average goodwill and other intangible assets (16,732) (18,190) (18,334) (18,465) (17,877) (17,926) (20,337)
------- ------- ------- ------- ------- ------- -------
Average tangible equity (N) $104,288 $103,137 $102,853 $104,001 $105,464 $103,570 $105,249
======== ======== ======== ======== ======== ======== ========
Average assets (O) $1,160,652 $1,142,588 $1,125,213 $1,131,259 $1,128,517 $1,139,943 $1,136,916
Less: Average goodwill and other intangible assets (16,732) (18,190) (18,334) (18,465) (17,877) (17,926) (20,337)
------- ------- ------- ------- ------- ------- -------
Average tangible assets (P) $1,143,920 $1,124,398 $1,106,879 $1,112,794 $1,110,640 $1,122,017 $1,116,579
========== ========== ========== ========== ========== ========== ==========
Average equity/average assets (GAAP) (M)/(O) 10.43% 10.62% 10.77% 10.83% 10.93% 10.66% 11.05%
===== ===== ===== ===== ===== ===== =====
Average tangible equity/average tangible assets (Non-GAAP) (N)/(P) 9.12% 9.17% 9.29% 9.35% 9.50% 9.23% 9.43%
==== ==== ==== ==== ==== ==== ====
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.
SOURCE Shore Bancshares, Inc.
