Shore Bancshares Reports Third Quarter and Nine-Month Results
Shore Bancshares Reports Third Quarter and Nine-Month Results
PR Newswire
EASTON, Md., Oct. 23, 2012
EASTON, Md., Oct. 23, 2012 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ:
SHBI) reported a net loss of $1.8 million or $(0.22) per diluted common share
for the third quarter of 2012, compared to net income of $293 thousand or
$0.03 per diluted common share for the second quarter of 2012, and net income
of $94 thousand or $0.01 per diluted common share for the third quarter of
2011.
The Company reported a net loss of $4.6 million or $(0.54) per diluted common
share for the first nine months of 2012, compared to a net loss of $1.2
million or $(0.14) per diluted common share for the first nine months of 2011.
"As we continue to charge off problem assets, we added $6.2 million to the
provision for credit losses during the third quarter. Net charge-offs for the
third quarter were $6.2 million, of which $4.2 million were attributable to
two sizeable real estate loan relationships," said W. Moorhead Vermilye, chief
executive officer. "Net charge-offs during prior quarters this year were $4.1
million for the second quarter and $9.1 million for the first quarter.
Clearly, there is a very high cost involved in working our way out of
troubled loans and removing them from the balance sheet, but we are moving as
aggressively as possible through this tough cycle. Fortunately, the
underlying strength of the company has enabled us to maintain capital levels
substantially above regulatory minimums to be considered well capitalized, as
evidenced by our ratio of average equity to average assets of 10.26% for the
first nine months of 2012 and the ratio of average tangible equity to average
tangible assets of 8.97% for the nine-month period."
When comparing the third quarter of 2012 to the second quarter of 2012, the
primary reason for the difference in results was an increase in the provision
for credit losses of $2.7 million. When comparing the third quarter of 2012
to the third quarter of 2011, the main reasons for the difference in results
were an increase in the provision for credit losses of $2.6 million and a
decline in net interest income of $1.4 million. When comparing the first nine
months of 2012 to the first nine months of 2011, the principal factors driving
the difference were an increase in the provision for credit losses of $2.7
million and a decline in net interest income of $3.0 million.
Balance Sheet Review
Total assets were $1.179 billion at September 30, 2012, a $20.4 million, or
1.8%, increase when compared to the $1.158 billion at the end of 2011. Total
loans decreased 3.9% to $808.0 million while total earning assets increased
1.6% to $1.1 billion when compared to December 31, 2011. Total deposits
increased 2.8% to $1.039 billion while total stockholders' equity decreased
2.5% from the end of 2011. The ratio of average equity to average assets was
10.26% and 10.74% for the first nine months of 2012 and 2011, respectively,
while the ratio of average tangible equity to average tangible assets was
8.97% and 9.27% for the first nine months of 2012 and 2011, respectively.
Capital levels remain well above regulatory minimums to be considered
well-capitalized.
Review of Quarterly Financial Results
Net interest income for the third quarter of 2012 was $8.7 million, a 3.4%
decrease from the second quarter of 2012 and a 13.8% decrease from the same
period last year. The decrease in net interest income when compared to the
second quarter of 2012 was primarily due to lower yields earned on average
earning assets. The decrease in net interest income when compared to the
third 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 3.15% for the third quarter of 2012, 3.36%
for the second quarter of 2012 and 3.77% for the third quarter of 2011.
The provision for credit losses was $6.2 million for the three months ended
September 30, 2012. The comparable amounts were $3.5 million and $3.7 million
for the three months ended June 30, 2012 and September 30, 2011,
respectively. The ratio of the allowance for credit losses to period-end
loans was 1.60% at both September 30, 2012 and June 30, 2012 and 1.57% at
September 30, 2011.
The higher level of provision for credit losses for the third quarter of 2012
when compared to the second quarter of 2012 and the third quarter of 2011 was
primarily in response to loan charge-offs. Net charge-offs were $6.2 million
for the third quarter of 2012, $4.1 million for the second quarter of 2012 and
$6.5 million for the third quarter of 2011. A large portion of the loan
charge-offs during the third quarter of 2012, $4.2 million, resulted from two
real estate loan relationships. The ratio of quarter-to-date annualized net
charge-offs to average loans was 3.07% for the third quarter of 2012, 2.01%
for the second quarter of 2012 and 2.95% for the third quarter of 2011. Total
nonperforming assets at September 30, 2012 increased $3.1 million when
compared to June 30, 2012, which included a $13.6 million increase in accruing
troubled debt restructurings net of an $8.5 million decline in nonaccrual
loans and a $3.1 million decline in other real estate owned. 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 September 30, 2012
increased $10.4 million when compared to September 30, 2011, primarily due to
an increase in troubled debt restructurings. The ratio of nonperforming
assets to total assets was 8.77% at September 30, 2012, compared to 8.53% at
June 30, 2012 and 8.02% at September 30, 2011.
Total noninterest income for the third quarter of 2012 decreased $576
thousand, or 12.6%, when compared to the second quarter of 2012 and decreased
$522 thousand, or 11.5%, when compared to the third quarter of 2011. The
lower amount when compared to the second quarter of 2012 was primarily the
result of a decrease in other noninterest income ($845 thousand) partially
offset by an increase in investment securities gains ($278 thousand).
Included in other noninterest income for the third quarter of 2012 was $581
thousand in losses on the sales of other real estate owned, mainly relating to
two properties. Included in other noninterest income for the second quarter
of 2012 was a $217 thousand gain on the sale of a bank branch building. The
decrease in noninterest income during the third quarter of 2012 when compared
to the third quarter of 2011 was primarily due to a decline in other
noninterest income ($513 thousand) mainly from the $581 thousand in losses on
the sales of other real estate owned.
Total noninterest expense for the third quarter of 2012 remained relatively
flat when compared to the second quarter of 2012. When compared to the third
quarter of 2011, total noninterest expense for the third quarter of 2012
decreased $968 thousand, or 9.1%. This decrease was primarily due to a
decline in goodwill impairment ($1.3 million) and other noninterest expenses
($186 thousand). During the third quarter of 2012, goodwill and other
intangible assets were subjected to the annual assessment for impairment. As
a result of the assessment, it was determined that there was no impairment at
the Company's subsidiaries that have these intangible assets on their balance
sheets. Included in other noninterest expenses were lower amounts related to
other real estate owned activities ($250 thousand). Partially offsetting the
decrease in total noninterest expense were increases in salaries and wages
($289 thousand) and FDIC insurance premium expense ($196 thousand).
Review of Nine-Month Financial Results
Net interest income for the first nine months of 2012 was $27.0 million, a
decrease of 9.9% when compared to the first nine months of 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 3.31% for the first nine months of 2012 and 3.79% for the first
nine months of 2011.
The provisions for credit losses for the nine months ended September 30, 2012
and 2011 were $18.1 million and $15.4 million, respectively. Net charge-offs
were $19.4 million and $16.1 million for the nine months ended September 30,
2012 and 2011, respectively. The ratio of year-to-date annualized net
charge-offs to average loans was 3.17% for the first nine months of 2012 and
2.45% for the first nine months of 2011.
Total noninterest income for the nine months ended September 30, 2012
decreased $147 thousand, or 1.1%, when compared to the same period in 2011.
This decrease was primarily due to a decline in service charges on deposit
accounts ($247 thousand) and investment securities gains ($157 thousand) which
was partially offset by an increase in insurance agency commissions ($225
thousand).
Total noninterest expense for the nine months ended September 30, 2012
increased $108 thousand, or less than 1%, when compared to the same period in
2011. The increase was primarily due to higher salaries and wages ($731
thousand) and other noninterest expenses ($739 thousand) which was partially
offset by the $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 ($393
thousand) and collection expense for loans ($217 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. 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 Nine Months Ended
September 30, September 30,
2012 2011 Change 2012 2011 Change
PROFITABILITY
FOR THE PERIOD
Net $ $ $ $
interest 8,730 10,123 (13.8) % 26,958 29,927 (9.9) %
income
Provision
for credit 6,200 3,650 69.9 18,095 15,435 17.2
losses
Noninterest 4,001 4,523 (11.5) 13,152 13,299 (1.1)
income
Noninterest 9,709 10,677 (9.1) 29,870 29,762 0.4
expense
(Loss)
income before (3,178) 319 (1,096.2) (7,855) (1,971) (298.5)
income taxes
Income
tax (benefit) (1,357) 225 (703.1) (3,291) (749) (339.4)
expense
Net $ $ (2,037.2) $ $ (273.5)
(loss) income (1,821) 94 (4,564) (1,222)
Return on
average (0.61) % 0.03 % (64) bp (0.52) % (0.14) % (38) bp
assets
Return on
average (6.07) 0.31 (638) (5.08) (1.34) (374)
equity
Return on
average (6.82) 4.21 (1,103) (5.65) (0.09) (556)
tangible
equity (1)
Net
interest 3.15 3.77 (62) 3.31 3.79 (48)
margin
Efficiency 76.03 72.66 337 74.23 68.59 564
ratio - GAAP
Efficiency 76.95 64.18 1,277 74.35 65.25 910
ratio -
Non-GAAP (1)
PER SHARE DATA
Basic net
(loss) income $ $ (2,300.0) % $ $ (285.7) %
per common (0.22) 0.01 (0.54) (0.14)
share
Diluted
net (loss) (0.22) 0.01 (2,300.0) (0.54) (0.14) (285.7)
income per
common share
Dividends
paid per - 0.01 (100.0) 0.01 0.08 (87.5)
common share
Book
value per 13.97 14.31 (2.4)
common share
at period end
Tangible
book value per
common share 12.04 12.32 (2.3)
at period end
(1)
Market
value at 6.02 4.36 38.1
period end
Market
range:
High 6.33 7.06 (10.3) 7.45 11.11 (32.9)
Low 4.98 3.95 26.1 4.91 3.95 24.3
AVERAGE
BALANCE SHEET
DATA
Loans $ $ (7.0) % $ $ (6.9) %
808,244 869,221 819,088 879,509
137,871 113,938 21.0 135,411 110,482 22.6
Securities
Earning 1,108,256 1,069,636 3.6 1,094,247 1,062,846 3.0
assets
Assets 1,184,146 1,142,588 3.6 1,169,158 1,132,964 3.2
Deposits 1,040,693 994,968 4.6 1,024,390 984,733 4.0
Stockholders' 119,321 121,327 (1.7) 119,916 121,656 (1.4)
equity
CREDIT QUALITY
DATA AT PERIOD
END
Net $ $ (3.6) % $ $ 20.5 %
charge-offs 6,235 6,468 19,428 16,122
$ $
Nonaccrual 39,442 49,581 (20.4)
loans
Loans 90
days past due 4,675 10,516 (55.5)
and still
accruing
Accruing
troubled debt 50,785 22,929 121.5
restructurings
Total
nonperforming 94,902 83,026 14.3
loans
Other
real estate
and other 8,418 9,865 (14.7)
assets owned,
net
Total $ $
nonperforming 103,320 92,891 11.2
assets
CAPITAL AND
CREDIT QUALITY
RATIOS
Average
equity to 10.08 % 10.62 % (54) bp 10.26 % 10.74 % (48) bp
average assets
Average
tangible
equity to 8.81 9.17 (36) 8.97 9.27 (30)
average
tangible
assets (1)
Annualized net 3.07 2.95 12 3.17 2.45 72
charge-offs to
average loans
Allowance
for credit
losses to 1.60 1.57 3
period-end
loans
Allowance
for credit
losses to 32.85 27.31 554
nonaccrual
loans
Allowance
for credit
losses to 13.65 16.31 (266)
nonperforming
loans
Nonaccrual 4.88 5.75 (87)
loans to total
loans
Nonaccrual 3.35 4.28 (93)
loans to total
assets
Nonperforming
assets to
total
loans+other
real estate
and
other 12.65 10.65 200
assets owned
Nonperforming 8.77 8.02 75
assets to
total assets
(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)
September September
30, 2012 30, 2012
September December September compared compared
30, 31, 30, to to
2012 2011 2011 December September
31, 2011 30, 2011
ASSETS
Cash and due from $ $ $ (4.3) % (17.0) %
banks 22,005 22,986 26,519
Interest-bearing 138,422 99,776 92,293 38.7 50.0
deposits with other banks
Federal funds sold 23,021 4,980 9,966 362.3 131.0
Investments available 126,372 129,780 105,804 (2.6) 19.4
for sale (at fair value)
Investments held to 4,075 6,480 6,524 (37.1) (37.5)
maturity
Loans 808,030 841,050 862,566 (3.9) (6.3)
Less: allowance for (12,955) (14,288) (13,540) (9.3) (4.3)
credit losses
Loans, net 795,075 826,762 849,026 (3.8) (6.4)
Premises and 15,537 14,662 14,236 6.0 9.1
equipment, net
Goodwill 12,454 12,454 12,454 - -
Other intangible 3,890 4,208 4,334 (7.6) (10.2)
assets, net
Other real estate and 8,418 9,385 9,865 (10.3) (14.7)
other assets owned, net
Other assets 29,364 26,720 26,515 9.9 10.7
$ $ $ 1.8 1.8
Total assets 1,178,633 1,158,193 1,157,536
LIABILITIES
Noninterest-bearing $ $ $ 17.0 15.3
deposits 156,579 133,801 135,822
Interest-bearing 881,935 876,118 876,097 0.7 0.7
deposits
Total 1,038,514 1,009,919 1,011,919 2.8 2.6
deposits
Short-term borrowings 13,079 17,817 15,292 (26.6) (14.5)
Accrued expenses and 8,422 8,753 8,407 (3.8) 0.2
other liabilities
Long-term debt 455 455 932 - (51.2)
1,060,470 1,036,944 1,036,550 2.3 2.3
Total liabilities
STOCKHOLDERS' EQUITY
Common stock, par
value $0.01; authorized
35,000,000 shares 85 85 85 - -
Warrant - - 1,543 - (100.0)
Additional paid in 32,120 32,052 30,438 0.2 5.5
capital
Retained earnings 86,152 90,801 90,560 (5.1) (4.9)
Accumulated other (194) (1,689) (1,640) 88.5 88.2
comprehensive loss
Total stockholders' 118,163 121,249 120,986 (2.5) (2.3)
equity
$ $ $
Total liabilities and 1,178,633 1,158,193 1,157,536 1.8 1.8
stockholders' equity
Period-end common shares 8,457 8,457 8,457 - -
outstanding
Book value per common $ $ $ (2.6) (2.4)
share 13.97 14.34 14.31
Shore Bancshares, Page 6
Inc. of 11
Consolidated
Statements of Income
(In thousands, except
per share data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2012 2011 % Change 2012 2011 %
Change
INTEREST INCOME
Interest and fees $ 10,604 $ (11.7) % $ 32,505 $ 35,900 (9.5) %
on loans 12,003
Interest and
dividends on
investment
securities:
Taxable 685 795 (13.8) 2,149 2,234 (3.8)
Tax-exempt 22 38 (42.1) 92 116 (20.7)
Interest on 3 3 - 7 24 (70.8)
federal funds sold
Interest on
deposits with other 79 29 172.4 188 47 300.0
banks
11,393 12,868 (11.5) 34,941 38,321 (8.8)
Total interest income
INTEREST EXPENSE
Interest on 2,647 2,720 (2.7) 7,931 8,322 (4.7)
deposits
Interest on 10 15 (33.3) 36 41 (12.2)
short-term borrowings
Interest on 6 10 (40.0) 16 31 (48.4)
long-term debt
Total interest 2,663 2,745 (3.0) 7,983 8,394 (4.9)
expense
NET INTEREST INCOME 8,730 10,123 (13.8) 26,958 29,927 (9.9)
Provision for credit 6,200 3,650 69.9 18,095 15,435 17.2
losses
NET INTEREST INCOME
AFTER PROVISION
FOR CREDIT LOSSES 2,530 6,473 (60.9) 8,863 14,492 (38.8)
NONINTEREST INCOME
Service charges 628 697 (9.9) 1,898 2,145 (11.5)
on deposit accounts
Trust and 410 389 5.4 1,279 1,183 8.1
investment fee income
Investment 278 354 (21.5) 278 435 (36.1)
securities gains
Insurance agency 2,427 2,312 5.0 7,522 7,297 3.1
commissions
Other noninterest 258 771 (66.5) 2,175 2,239 (2.9)
income
Total noninterest 4,001 4,523 (11.5) 13,152 13,299 (1.1)
income
NONINTEREST EXPENSE
Salaries and 4,386 4,097 7.1 13,178 12,447 5.9
wages
Employee benefits 945 878 7.6 3,071 2,917 5.3
Occupancy 625 585 6.8 1,950 1,749 11.5
expense
Furniture and 265 262 1.1 728 825 (11.8)
equipment expense
Data processing 703 661 6.4 2,063 2,192 (5.9)
Directors' fees 131 198 (33.8) 367 417 (12.0)
Goodwill and
other intangible - 1,344 (100.0) - 1,344 (100.0)
assets impairment
Amortization of 96 129 (25.6) 318 386 (17.6)
intangible assets
Insurance agency 275 250 10.0 1,004 982 2.2
commissions expense
FDIC insurance 376 180 108.9 993 1,044 (4.9)
premium expense
Other noninterest 1,907 2,093 (8.9) 6,198 5,459 13.5
expenses
Total noninterest 9,709 10,677 (9.1) 29,870 29,762 0.4
expense
(Loss) income before (3,178) 319 (1,096.2) (7,855) (1,971) (298.5)
income taxes
Income tax (benefit) (1,357) 225 (703.1) (3,291) (749) (339.4)
expense
NET (LOSS) INCOME $ $ (2,037.2) $ $ (273.5)
(1,821) 94 (4,564) (1,222)
Weighted average
shares outstanding - 8,457 8,457 - 8,457 8,449 0.1
basic
Weighted average
shares outstanding - 8,457 8,457 - 8,457 8,449 0.1
diluted
Basic net (loss) $ $ $ $
income per common (0.22) 0.01 (2,300.0) (0.54) (0.14) (285.7)
share
Diluted net (loss)
income per common (0.22) 0.01 (2,300.0) (0.54) (0.14) (285.7)
share
Dividends paid per - 0.01 (100.0) 0.01 0.08 (87.5)
common share
Shore Bancshares, Page 7
Inc. of 11
Consolidated
Average Balance
Sheets
(Dollars in
thousands)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate
Earning assets
Loans $ 5.23 % $ 5.49 % $ 5.31 % $ 5.47 %
808,244 869,221 819,088 879,509
Investment
securities
Taxable 135,257 2.01 109,498 2.88 131,863 2.18 105,939 2.82
Tax-exempt 2,614 5.07 4,440 5.12 3,548 5.27 4,543 5.16
Federal funds 11,971 0.11 15,905 0.07 10,992 0.09 28,896 0.11
sold
Interest-bearing 150,170 0.21 70,572 0.16 128,756 0.19 43,959 0.14
deposits
Total earning 1,108,256 4.10 % 1,069,636 4.79 % 1,094,247 4.28 % 1,062,846 4.84 %
assets
Cash and due from 20,158 20,414 19,920 19,356
banks
Other assets 69,921 69,394 69,514 67,588
Allowance for (14,189) (16,856) (14,523) (16,826)
credit losses
Total assets $ $ $ $
1,184,146 1,142,588 1,169,158 1,132,964
Interest-bearing
liabilities
Demand deposits $ 0.18 % $ 0.20 % $ 0.18 % $ 0.21 %
167,423 154,685 157,835 141,447
Money market and
savings deposits 279,003 1.19 266,871 1.03 278,297 1.16 263,216 0.97
(1)
Certificates of
deposit $100,000 or 238,624 1.46 235,362 1.63 240,595 1.46 246,362 1.67
more
Other time 207,547 1.66 204,836 1.91 204,789 1.74 206,470 2.01
deposits
Interest-bearing 892,597 1.18 861,754 1.25 881,516 1.20 857,495 1.30
deposits
Short-term 14,909 0.27 15,640 0.37 15,448 0.31 14,947 0.36
borrowings
Long-term debt 455 4.58 932 4.46 455 4.61 932 4.51
Total
interest-bearing 907,961 1.17 % 878,326 1.24 % 897,419 1.19 % 873,374 1.29 %
liabilities
Noninterest-bearing 148,096 133,214 142,874 127,238
deposits
Accrued expenses
and other 8,768 9,721 8,949 10,696
liabilities
Stockholders' 119,321 121,327 119,916 121,656
equity
Total liabilities $ $ $ $
and stockholders' 1,184,146 1,142,588 1,169,158 1,132,964
equity
Net interest spread 2.93 % 3.55 % 3.09 % 3.55 %
Net interest margin 3.15 % 3.77 % 3.31 % 3.79 %
(1) Interest on money market and savings deposits includes an adjustment to
expense related to interest rate caps and the hedged
deposits associated with them. This adjustment increased interest
expense $524 thousand and $348 thousand for the third
quarter of 2012 and 2011, respectively, and $1.5 million and $907 thousand for the
first nine months of 2012 and 2011, respectively.
Shore Bancshares, Page 8 of
Inc. 11
Financial
Highlights By
Quarter
(Dollars in
thousands, except
per share data)
3rd 2nd 1st 4th 3rd 3Q 12 3Q 12
quarter quarter quarter quarter quarter
2012 2012 2012 2011 2011 compared compared
to to
(3Q 12) (2Q 12) (1Q 12) (4Q 11) (3Q 11) 2Q 12 3Q 11
PROFITABILITY FOR
THE PERIOD
Taxable-equivalent $ $ $ $ $ (3.4) % (13.8) %
net interest 8,769 9,077 9,243 9,889 10,172
income
Less:
Taxable-equivalent 39 44 48 52 49 (11.4) (20.4)
adjustment
Net interest 8,730 9,033 9,195 9,837 10,123 (3.4) (13.8)
income
Provision for 6,200 3,525 8,370 4,035 3,650 75.9 69.9
credit losses
Noninterest 4,001 4,577 4,574 4,019 4,523 (12.6) (11.5)
income
Noninterest 9,709 9,663 10,498 9,405 10,677 0.5 (9.1)
expense
(Loss) income
before income (3,178) 422 (5,099) 416 319 (853.1) (1,096.2)
taxes
Income tax (1,357) 129 (2,063) 91 225 (1,151.9) (703.1)
(benefit) expense
Net (loss) $ $ $ $ $ (721.5) (2,037.2)
income (1,821) 293 (3,036) 325 94
Return on (0.61) % 0.10 % (1.05) % 0.11 % 0.03 % (71) bp (64) bp
average assets
Return on (6.07) 0.99 (10.04) 1.07 0.31 (706) (638)
average equity
Return on
average tangible (6.82) 1.38 (11.33) 1.53 4.21 (820) (1,103)
equity (1)
Net interest 3.15 3.36 3.42 3.60 3.77 (21) (62)
margin
Efficiency 76.03 70.77 75.98 67.62 72.66 526 337
ratio - GAAP
Efficiency
ratio - Non-GAAP 76.95 71.20 75.07 67.61 64.18 575 1,277
(1)
PER SHARE DATA
Basic net $ $ $ $ $
(loss) income per (0.22) 0.03 (0.36) 0.04 0.01 (833.3) % (2,300.0) %
common share
Diluted net
(loss) income per (0.22) 0.03 (0.36) 0.04 0.01 (833.3) (2,300.0)
common share
Dividends
paid per common - - 0.01 0.01 0.01 - (100.0)
share
Book value
per common share 13.97 14.13 14.02 14.34 14.31 (1.1) (2.4)
at period end
Tangible book
value per common 12.04 12.18 12.07 12.37 12.32 (1.1) (2.3)
share at period
end (1)
Market value 6.02 5.98 7.09 5.15 4.36 0.7 38.1
at period end
Market range:
High 6.33 7.45 7.40 6.13 7.06 (15.0) (10.3)
Low 4.98 5.51 4.91 4.20 3.95 (9.6) 26.1
AVERAGE BALANCE
SHEET DATA
Loans $ $ $ $ $ (1.0) % (7.0) %
808,244 816,553 832,585 854,302 869,221
Securities 137,871 134,299 134,037 122,725 113,938 2.7 21.0
Earning 1,108,256 1,086,223 1,088,106 1,089,078 1,069,636 2.0 3.6
assets
Assets 1,184,146 1,163,598 1,159,566 1,160,652 1,142,588 1.8 3.6
Deposits 1,040,693 1,021,130 1,011,170 1,013,848 994,968 1.9 4.6
Stockholders' 119,321 118,774 121,658 121,020 121,327 0.5 (1.7)
equity
CREDIT QUALITY
DATA AT PERIOD END
Net $ $ $ $ $ 52.9 % (3.6) %
charge-offs 6,235 4,079 9,114 3,287 6,468
Nonaccrual $ $ $ $ $ (17.8) (20.4)
loans 39,442 47,958 49,405 51,370 49,581
Loans 90 days
past due and still 4,675 3,519 3,796 2,723 10,516 32.9 (55.5)
accruing
Accruing
troubled debt 50,785 37,231 30,010 25,208 22,929 36.4 121.5
restructurings
Total
nonperforming 94,902 88,708 83,211 79,301 83,026 7.0 14.3
loans
Other real
estate and other 8,418 11,499 11,418 9,385 9,865 (26.8) (14.7)
assets owned, net
Total $ $ $ $ $
nonperforming 103,320 100,207 94,629 88,686 92,891 3.1 11.2
assets
CAPITAL AND CREDIT
QUALITY RATIOS
Average
equity to average 10.08 % 10.21 % 10.49 % 10.43 % 10.62 % (13) bp (54) bp
assets
Average
tangible equity to 8.81 8.92 9.19 9.12 9.17 (11) (36)
average tangible
assets (1)
Annualized
net charge-offs to 3.07 2.01 4.40 1.53 2.95 106 12
average loans
Allowance for
credit losses to 1.60 1.60 1.65 1.70 1.57 - 3
period-end
loans
Allowance for
credit losses to 32.85 27.09 27.41 27.81 27.31 576 554
nonaccrual
loans
Allowance for
credit losses to 13.65 14.64 16.28 18.02 16.31 (99) (266)
nonperforming
loans
Nonaccrual
loans to total 4.88 5.92 6.03 6.11 5.75 (104) (87)
loans
Nonaccrual
loans to total 3.35 4.08 4.22 4.44 4.28 (73) (93)
assets
Nonperforming
assets to total
loans+other real
estate and
other 12.65 12.20 11.40 10.43 10.65 45 200
assets owned
Nonperforming
assets to total 8.77 8.53 8.09 7.66 8.02 24 75
assets
(1) See the
reconciliation
table on page 11
of 11.
Shore Bancshares, Page 9 of
Inc. 11
Consolidated
Statements of Income
By Quarter
(In thousands, except
per share data)
3Q 12 3Q 12
compared compared
to to
3Q 12 2Q 12 1Q 12 4Q 11 3Q 11 2Q 12 3Q 11
INTEREST INCOME
Interest and fees $ 10,604 $ $ 11,011 $ $ (2.6) % (11.7) %
on loans 10,890 11,649 12,003
Interest and
dividends on
investment
securities:
Taxable 685 707 757 797 795 (3.1) (13.8)
Tax-exempt 22 32 38 38 38 (31.3) (42.1)
Interest on 3 2 2 1 3 50.0 -
federal funds sold
Interest on
deposits with other 79 61 48 46 29 29.5 172.4
banks
11,393 11,692 11,856 12,531 12,868 (2.6) (11.5)
Total interest income
INTEREST EXPENSE
Interest on 2,647 2,643 2,641 2,673 2,720 0.2 (2.7)
deposits
Interest on 10 11 15 15 15 (9.1) (33.3)
short-term borrowings
Interest on 6 5 5 6 10 20.0 (40.0)
long-term debt
Total interest 2,663 2,659 2,661 2,694 2,745 0.2 (3.0)
expense
NET INTEREST INCOME 8,730 9,033 9,195 9,837 10,123 (3.4) (13.8)
Provision for credit 6,200 3,525 8,370 4,035 3,650 75.9 69.9
losses
NET INTEREST INCOME
AFTER PROVISION
FOR CREDIT LOSSES 2,530 5,508 825 5,802 6,473 (54.1) (60.9)
NONINTEREST INCOME
Service charges 628 622 648 700 697 1.0 (9.9)
on deposit accounts
Trust and 410 446 423 380 389 (8.1) 5.4
investment fee income
Investment 278 - - 128 354 - (21.5)
securities gains
Insurance agency 2,427 2,406 2,689 2,061 2,312 0.9 5.0
commissions
Other noninterest 258 1,103 814 750 771 (76.6) (66.5)
income
Total noninterest 4,001 4,577 4,574 4,019 4,523 (12.6) (11.5)
income
NONINTEREST EXPENSE
Salaries and 4,386 4,376 4,416 4,378 4,097 0.2 7.1
wages
Employee benefits 945 956 1,170 923 878 (1.2) 7.6
Occupancy 625 638 687 563 585 (2.0) 6.8
expense
Furniture and 265 212 251 234 262 25.0 1.1
equipment expense
Data processing 703 694 666 660 661 1.3 6.4
Directors' fees 131 127 109 83 198 3.1 (33.8)
Goodwill and
other intangible - - - - 1,344 - (100.0)
assets impairment
Amortization of 96 96 126 126 129 - (25.6)
intangible assets
Insurance agency 275 344 385 285 250 (20.1) 10.0
commissions expense
FDIC insurance 376 344 273 254 180 9.3 108.9
premium expense
Other noninterest 1,907 1,876 2,415 1,899 2,093 1.7 (8.9)
expenses
Total noninterest 9,709 9,663 10,498 9,405 10,677 0.5 (9.1)
expense
(Loss) income before (3,178) 422 (5,099) 416 319 (853.1) (1,096.2)
income taxes
Income tax (benefit) (1,357) 129 (2,063) 91 225 (1,151.9) (703.1)
expense
NET (LOSS) INCOME $ $ $ $ $ (721.5) (2,037.2)
(1,821) 293 (3,036) 325 94
Weighted average
shares outstanding - 8,457 8,457 8,457 8,457 8,457 - -
basic
Weighted average
shares outstanding - 8,457 8,457 8,457 8,457 8,457 - -
diluted
Basic net (loss) $ $ $ $ $
income per common (0.22) 0.03 (0.36) 0.04 0.01 (833.3) (2,300.0)
share
Diluted net (loss)
income per common (0.22) 0.03 (0.36) 0.04 0.01 (833.3) (2,300.0)
share
Dividends paid per - - 0.01 0.01 0.01 - (100.0)
common share
Shore Bancshares, Page 10
Inc. of 11
Consolidated Average Balance
Sheets By Quarter
(Dollars in
thousands)
Average balance
3Q 12 3Q 12
compared compared
to to
3Q 12 2Q 12 1Q 12 4Q 11 3Q 11 2Q 12 3Q 11
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
balance rate balance rate balance rate balance rate balance rate
Earning assets
Loans $ 5.23 % $ 5.38 % $ 5.33 % $ 5.42 % $ 5.49 % (1.0) % (7.0) %
808,244 816,553 832,585 854,302 869,221
Investment
securities
Taxable 135,257 2.01 130,528 2.18 129,767 2.35 118,315 2.67 109,498 2.88 3.6 23.5
Tax-exempt 2,614 5.07 3,771 5.32 4,270 5.36 4,410 5.27 4,440 5.12 (30.7) (41.1)
Federal funds 11,971 0.11 11,200 0.10 9,794 0.06 8,709 0.05 15,905 0.07 6.9 (24.7)
sold
Interest-bearing 150,170 0.21 124,171 0.20 111,690 0.17 103,342 0.18 70,572 0.16 20.9 112.8
deposits
Total earning 1,108,256 4.10 % 1,086,223 4.35 % 1,088,106 4.40 % 1,089,078 4.58 % 1,069,636 4.79 % 2.0 3.6
assets
Cash and due from 20,158 21,424 18,174 18,728 20,414 (5.9) (1.3)
banks
Other assets 69,921 70,458 68,163 68,014 69,394 (0.8) 0.8
Allowance for (14,189) (14,507) (14,877) (15,168) (16,856) (2.2) (15.8)
credit losses
Total assets $ $ $ $ $ 1.8 3.6
1,184,146 1,163,598 1,159,566 1,160,652 1,142,588
Interest-bearing
liabilities
Demand deposits $ 0.18 % $ 0.18 % $ 0.19 % $ 0.19 % $ 0.20 % 9.7 8.2
167,423 152,685 153,291 157,657 154,685
Money market and
savings deposits 279,003 1.19 276,527 1.18 279,355 1.12 273,906 1.07 266,871 1.03 0.9 4.5
(1)
Certificates of
deposit $100,000 or 238,624 1.46 242,662 1.46 240,521 1.46 241,810 1.46 235,362 1.63 (1.7) 1.4
more
Other time 207,547 1.66 205,046 1.73 201,743 1.83 201,249 1.91 204,836 1.91 1.2 1.3
deposits
Interest-bearing 892,597 1.18 876,920 1.21 874,910 1.21 874,622 1.21 861,754 1.25 1.8 3.6
deposits
Short-term 14,909 0.27 13,818 0.31 17,621 0.35 16,421 0.37 15,640 0.37 7.9 (4.7)
borrowings
Long-term debt 455 4.58 455 4.63 455 4.63 466 4.46 932 4.46 - (51.2)
Total
interest-bearing 907,961 1.17 % 891,193 1.20 % 892,986 1.20 % 891,509 1.20 % 878,326 1.24 % 1.9 3.4
liabilities
Noninterest-bearing 148,096 144,210 136,260 139,226 133,214 2.7 11.2
deposits
Accrued expenses
and other 8,768 9,421 8,662 8,897 9,721 (6.9) (9.8)
liabilities
Stockholders' 119,321 118,774 121,658 121,020 121,327 0.5 (1.7)
equity
Total liabilities $ $ $ $ $
and stockholders' 1,184,146 1,163,598 1,159,566 1,160,652 1,142,588 1.8 3.6
equity
Net interest spread 2.93 % 3.15 % 3.20 % 3.38 % 3.55 %
Net interest margin 3.15 % 3.36 % 3.42 % 3.60 % 3.77 %
(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 $524 thousand for the third quarter of 2012, $502 thousand for the second quarter of 2012, $460 thousand for the
first quarter of 2012, $405 thousand for the fourth
quarter of 2011 and $348 thousand for the
third quarter of 2011.
Shore Bancshares, Page 11 of
Inc. 11
Reconciliation of
Generally Accepted
Accounting
Principles (GAAP)
and Non-GAAP
Measures
(In thousands,
except per share
data)
YTD YTD
3Q 12 2Q 12 1Q 12 4Q 11 3Q 11 9/30/2012 9/30/2011
The following
reconciles return
on average equity
and return on
average tangible
equity (Note 1):
Net (loss) $ $ $ $ $ $ $
income (1,821) 293 (3,036) 325 94 (4,564) (1,222)
Net (loss) income $ $ $ $ $ $ $
- annualized (A) (7,244) 1,178 (12,211) 1,289 373 (6,096) (1,634)
Net (loss) income,
excluding net
amortization and
impairment $ $ $ $ $ $ $
charges of (1,763) 351 (2,960) 401 1,094 (4,371) (66)
intangible assets
Net (loss) income,
excluding net
amortization and
impairment
charges of $ $ $ $ $ $ $
intangible assets (7,014) 1,412 (11,905) 1,591 4,340 (5,839) (88)
- annualized (B)
Average $ $ $ $ $ $ $
stockholders' 119,321 118,774 121,658 121,020 121,327 119,916 121,656
equity (C)
Less: Average
goodwill and other (16,401) (16,497) (16,606) (16,732) (18,190) (16,501) (18,329)
intangible assets
Average tangible $ $ $ $ $ $ $
equity (D) 102,920 102,277 105,052 104,288 103,137 103,415 103,327
Return on average
equity (GAAP) (6.07) % 0.99 % (10.04) % 1.07 % 0.31 % (5.08) % (1.34) %
(A)/(C)
Return on average
tangible equity (6.82) % 1.38 % (11.33) % 1.53 % 4.21 % (5.65) % (0.09) %
(Non-GAAP)
(B)/(D)
The following
reconciles GAAP
efficiency ratio
and non-GAAP
efficiency ratio
(Note 2):
Noninterest $ $ $ $ $ $ $
expense (E) 9,709 9,663 10,498 9,405 10,677 29,870 29,762
Less:
Amortization of (96) (96) (126) (126) (129) (318) (386)
intangible assets
- - - - (1,344) - (1,344)
Impairment charges
Adjusted $ $ $ $ $ $ $
noninterest 9,613 9,567 10,372 9,279 9,204 29,552 28,032
expense (F)
Taxable-equivalent $ $ $ $ $ $ $
net interest 8,769 9,077 9,243 9,889 10,172 27,089 30,094
income (G)
Noninterest income $ $ $ $ $ $ $
(H) 4,001 4,577 4,574 4,019 4,523 13,152 13,299
Less: Investment
securities (278) - - (128) (354) (278) (435)
(gains)/losses
Other
nonrecurring - (217) - (56) - (217) -
(gains)/losses
Adjusted $ $ $ $ $ $ $
noninterest income 3,723 4,360 4,574 3,835 4,169 12,657 12,864
(I)
Efficiency ratio
(GAAP) 76.03 % 70.77 % 75.98 % 67.62 % 72.66 % 74.23 % 68.59 %
(E)/(G)+(H)
Efficiency ratio
(Non-GAAP) 76.95 % 71.20 % 75.07 % 67.61 % 64.18 % 74.35 % 65.25 %
(F)/(G)+(I)
The following
reconciles book
value per common
share and
tangible
book value per
common share (Note
1):
Stockholders' $ $ $ $ $
equity (J) 118,163 119,467 118,584 121,249 120,986
Less: Goodwill
and other (16,344) (16,440) (16,536) (16,662) (16,788)
intangible assets
Tangible equity $ $ $ $ $
(K) 101,819 103,027 102,048 104,587 104,198
Shares outstanding 8,457 8,457 8,457 8,457 8,457
(L)
Book value per $ $ $ $ $
common share 13.97 14.13 14.02 14.34 14.31
(GAAP) (J)/(L)
Tangible book
value per common $ $ $ $ $
share (Non-GAAP) 12.04 12.18 12.07 12.37 12.32
(K)/(L)
The following
reconciles average
equity to average
assets and
average tangible
equity to average
tangible assets
(Note 1):
Average $ $ $ $ $ $ $
stockholders' 119,321 118,774 121,658 121,020 121,327 119,916 121,656
equity (M)
Less: Average
goodwill and other (16,401) (16,497) (16,606) (16,732) (18,190) (16,501) (18,329)
intangible assets
Average tangible $ $ $ $ $ $ $
equity (N) 102,920 102,277 105,052 104,288 103,137 103,415 103,327
Average assets (O) $ $ $ $ $ $ $
1,184,146 1,163,598 1,159,566 1,160,652 1,142,588 1,169,158 1,132,964
Less: Average
goodwill and other (16,401) (16,497) (16,606) (16,732) (18,190) (16,501) (18,329)
intangible assets
Average tangible $ $ $ $ $ $ $
assets (P) 1,167,745 1,147,101 1,142,960 1,143,920 1,124,398 1,152,657 1,114,635
Average
equity/average 10.08 % 10.21 % 10.49 % 10.43 % 10.62 % 10.26 % 10.74 %
assets (GAAP)
(M)/(O)
Average tangible
equity/average
tangible assets 8.81 % 8.92 % 9.19 % 9.12 % 9.17 % 8.97 % 9.27 %
(Non-GAAP)
(N)/(P)
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.
Website: http://www.shbi.com
Contact: W. Moorhead Vermilye, Chief Executive Officer, +1-410-763-7800; Shore
Bancshares, Inc., 18 E. Dover Street, Easton, Maryland 21601, +1-410-763-7800
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