Shore Bancshares Reports 2012 Results
Shore Bancshares Reports 2012 Results
PR Newswire
EASTON, Md., Jan. 29, 2013
EASTON, Md., Jan. 29, 2013 /PRNewswire/ -- 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, the primary 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.
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 decrease included 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.
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 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 Page 4 of
Bancshares, 11
Inc.
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 8,381 9,837 (14.8) % 35,339 39,764 (11.1) %
income
Provision
for credit 9,650 4,035 139.2 27,745 19,470 42.5
losses
Noninterest 2,606 4,019 (35.2) 15,758 17,318 (9.0)
income
Noninterest 9,685 9,405 3.0 39,555 39,167 1.0
expense
(Loss)
income before (8,348) 416 (2,106.7) (16,203) (1,555) (942.0)
income taxes
Income
tax (benefit) (3,274) 91 (3,697.8) (6,565) (658) (897.7)
expense
Net $ $ (1,661.2) $ $ (974.5)
(loss) income (5,074) 325 (9,638) (897)
Return on
average (1.71) % 0.11 % (182) bp (0.82) % (0.08) % (74) bp
assets
Return on
average (17.15) 1.07 (1,822) (8.07) (0.74) (733)
equity
Return on
average (19.73) 1.53 (2,126) (9.14) 0.32 (946)
tangible
equity (1)
Net
interest 3.02 3.60 (58) 3.23 3.74 (51)
margin
Efficiency 87.89 67.62 2,027 77.17 68.35 882
ratio - GAAP
Efficiency 77.77 67.61 1,016 75.16 65.83 933
ratio -
Non-GAAP (1)
PER SHARE DATA
Basic net
(loss) income $ $ (1,600.0) % $ $ (936.4) %
per common (0.60) 0.04 (1.14) (0.11)
share
Diluted
net (loss) (0.60) 0.04 (1,600.0) (1.14) (0.11) (936.4)
income per
common share
Dividends
paid per - 0.01 (100.0) 0.01 0.09 (88.9)
common share
Book
value per 13.48 14.34 (6.0)
common share
at period end
Tangible
book value per
common share 11.56 12.37 (6.5)
at period end
(1)
Market
value at 5.39 5.15 4.7
period end
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 $ $ (6.4) % $ $ (6.8) %
799,512 854,302 814,167 873,155
144,459 122,725 17.7 137,686 113,568 21.2
Securities
Earning 1,108,585 1,089,078 1.8 1,097,851 1,069,458 2.7
assets
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' 117,700 121,020 (2.7) 119,359 121,496 (1.8)
equity
CREDIT QUALITY
DATA AT PERIOD
END
Net $ $ 101.2 % $ $ 34.2 %
charge-offs 6,614 3,287 26,042 19,409
$ $
Nonaccrual 36,474 51,370 (29.0)
loans
Loans 90
days past due 460 2,723 (83.1)
and still
accruing
Accruing
troubled debt 52,353 25,208 107.7
restructurings
Total
nonperforming 89,287 79,301 12.6
loans
Other
real estate
and other 7,659 9,385 (18.4)
assets owned,
net
Total $ $
nonperforming 96,946 88,686 9.3
assets
CAPITAL AND
CREDIT QUALITY
RATIOS
Average
equity to 9.95 % 10.43 % (48) bp 10.18 % 10.66 % (48) bp
average assets
Average
tangible
equity to 8.69 9.12 (43) 8.90 9.23 (33)
average
tangible
assets (1)
Annualized net 3.29 1.53 176 3.20 2.22 98
charge-offs to
average loans
Allowance
for credit
losses to 2.04 1.70 34
period-end
loans
Allowance
for credit
losses to 43.84 27.81 1,603
nonaccrual
loans
Allowance
for credit
losses to 17.91 18.02 (11)
nonperforming
loans
Nonaccrual 4.65 6.11 (146)
loans to total
loans
Nonaccrual 3.08 4.44 (136)
loans to total
assets
Nonperforming
assets to
total
loans+other
real estate
and
other 12.23 10.43 180
assets owned
Nonperforming 8.18 7.66 52
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)
December
31, 2012
December 31, December 31, compared to
2012 2011 December
31, 2011
ASSETS
Cash and due from banks $ $ 15.6 %
26,579 22,986
Interest-bearing deposits with 164,864 99,776 65.2
other banks
Federal funds sold 8,750 4,980 75.7
Investments available for sale 145,508 129,780 12.1
(at fair value)
Investments held to maturity 2,657 6,480 (59.0)
Loans 785,082 841,050 (6.7)
Less: allowance for credit (15,991) (14,288) 11.9
losses
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 7,659 9,385 (18.4)
assets owned, net
Other assets 28,836 26,720 7.9
Total $ 1,185,807 $ 2.4
assets 1,158,193
LIABILITIES
Noninterest-bearing deposits $ $ 15.1
153,992 133,801
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 8,747 8,753 (0.1)
liabilities
Long-term debt - 455 (100.0)
Total 1,071,781 1,036,944 3.4
liabilities
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 85 85 -
authorized 35,000,000 shares
Additional paid in capital 32,155 32,052 0.3
Retained earnings 81,078 90,801 (10.7)
Accumulated other 708 (1,689) 141.9
comprehensive income (loss)
Total 114,026 121,249 (6.0)
stockholders' equity
Total $
liabilities and stockholders' $ 1,185,807 1,158,193 2.4
equity
Period-end common shares 8,457 8,457 -
outstanding
Book value per common share $ $ (6.0)
13.48 14.34
Shore Bancshares, Page 6 of
Inc. 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 $ 10,193 $ (12.5) % $ 42,698 $ (10.2) %
on loans 11,649 47,549
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 3 1 200.0 10 25 (60.0)
federal funds sold
Interest on
deposits with other 86 46 87.0 274 93 194.6
banks
10,960 12,531 (12.5) 45,901 50,852 (9.7)
Total interest income
INTEREST EXPENSE
Interest on 2,570 2,673 (3.9) 10,501 10,995 (4.5)
deposits
Interest on 9 15 (40.0) 45 56 (19.6)
short-term borrowings
Interest on - 6 (100.0) 16 37 (56.8)
long-term debt
Total interest 2,579 2,694 (4.3) 10,562 11,088 (4.7)
expense
NET INTEREST INCOME 8,381 9,837 (14.8) 35,339 39,764 (11.1)
Provision for credit 9,650 4,035 139.2 27,745 19,470 42.5
losses
NET INTEREST INCOME
AFTER PROVISION
FOR CREDIT LOSSES (1,269) 5,802 (121.9) 7,594 20,294 (62.6)
NONINTEREST INCOME
Service charges 653 700 (6.7) 2,551 2,845 (10.3)
on deposit accounts
Trust and 365 380 (3.9) 1,644 1,563 5.2
investment fee income
Investment - 128 (100.0) 278 563 (50.6)
securities gains
Insurance agency 2,292 2,061 11.2 9,814 9,358 4.9
commissions
Other noninterest (704) 750 (193.9) 1,471 2,989 (50.8)
income
Total noninterest 2,606 4,019 (35.2) 15,758 17,318 (9.0)
income
NONINTEREST EXPENSE
Salaries and 4,240 4,378 (3.2) 17,418 16,825 3.5
wages
Employee benefits 923 923 - 3,994 3,840 4.0
Occupancy 609 563 8.2 2,559 2,312 10.7
expense
Furniture and 235 234 0.4 963 1,059 (9.1)
equipment expense
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 - - - - 1,344 (100.0)
assets impairment
Amortization of 74 126 (41.3) 392 512 (23.4)
intangible assets
Insurance agency 387 285 35.8 1,391 1,267 9.8
commissions expense
FDIC insurance 387 254 52.4 1,380 1,298 6.3
premium expense
Other noninterest 2,069 1,899 9.0 8,267 7,358 12.4
expenses
Total noninterest 9,685 9,405 3.0 39,555 39,167 1.0
expense
(Loss) income before (8,348) 416 (2,106.7) (16,203) (1,555) (942.0)
income taxes
Income tax (benefit) (3,274) 91 (3,697.8) (6,565) (658) (897.7)
expense
NET (LOSS) INCOME $ $ (1,661.2) $ $ (974.5)
(5,074) 325 (9,638) (897)
Weighted average
shares outstanding - 8,457 8,457 - 8,457 8,451 0.1
basic
Weighted average
shares outstanding - 8,457 8,457 - 8,457 8,451 0.1
diluted
Basic net (loss) $ $ $ $
income per common (0.60) 0.04 (1,600.0) (1.14) (0.11) (936.4)
share
Diluted net (loss)
income per common (0.60) 0.04 (1,600.0) (1.14) (0.11) (936.4)
share
Dividends paid per - 0.01 (100.0) 0.01 0.09 (88.9)
common share
Shore Bancshares, Page 7
Inc. 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 $ 5.09 % $ 5.42 % $ 5.26 % $ 5.46 %
799,512 854,302 814,167 873,155
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 7,782 0.12 8,709 0.05 10,185 0.10 23,808 0.10
sold
Interest-bearing 156,832 0.22 103,342 0.18 135,813 0.20 58,927 0.16
deposits
Total earning 1,108,585 3.94 % 1,089,078 4.58 % 1,097,851 4.20 % 1,069,458 4.78 %
assets
Cash and due from 21,258 18,728 20,256 19,198
banks
Other assets 67,596 68,014 68,813 67,695
Allowance for (14,304) (15,168) (14,468) (16,408)
credit losses
Total assets $ $ $ $
1,183,135 1,160,652 1,172,452 1,139,943
Interest-bearing
liabilities
Demand deposits $ 0.18 % $ 0.19 % $ 0.18 % $ 0.21 %
169,398 157,657 160,741 145,533
Money market and
savings deposits 281,593 1.21 273,906 1.07 279,126 1.17 265,910 1.00
(1)
Certificates of
deposit $100,000 or 231,232 1.40 241,810 1.46 238,241 1.44 245,214 1.62
more
Other time 204,213 1.59 201,249 1.91 204,644 1.70 205,154 1.99
deposits
Interest-bearing 886,436 1.15 874,622 1.21 882,752 1.19 861,811 1.28
deposits
Short-term 13,573 0.27 16,421 0.37 14,976 0.30 15,319 0.37
borrowings
Long-term debt - - 466 4.46 341 4.61 814 4.50
Total
interest-bearing 900,009 1.14 % 891,509 1.20 % 898,069 1.18 % 877,944 1.26 %
liabilities
Noninterest-bearing 156,406 139,226 146,057 130,260
deposits
Accrued expenses
and other 9,020 8,897 8,967 10,243
liabilities
Stockholders' 117,700 121,020 119,359 121,496
equity
Total liabilities $ $ $ $
and stockholders' 1,183,135 1,160,652 1,172,452 1,139,943
equity
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, Page 8 of 11
Inc.
Financial
Highlights By
Quarter
(Dollars in
thousands, except
per share data)
4th 3rd 2nd 1st 4th 4Q 12 4Q 12
quarter quarter quarter quarter quarter
2012 2012 2012 2012 2011 compared compared
to to
(4Q 12) (3Q 12) (2Q 12) (1Q 12) (4Q 11) 3Q 12 4Q 11
PROFITABILITY FOR
THE PERIOD
Taxable-equivalent $ $ $ $ $ (4.1) % (14.9) %
net interest 8,413 8,769 9,077 9,243 9,889
income
Less:
Taxable-equivalent 32 39 44 48 52 (17.9) (38.5)
adjustment
Net interest 8,381 8,730 9,033 9,195 9,837 (4.0) (14.8)
income
Provision for 9,650 6,200 3,525 8,370 4,035 55.6 139.2
credit losses
Noninterest 2,606 4,001 4,577 4,574 4,019 (34.9) (35.2)
income
Noninterest 9,685 9,709 9,663 10,498 9,405 (0.2) 3.0
expense
(Loss) income
before income (8,348) (3,178) 422 (5,099) 416 (162.7) (2,106.7)
taxes
Income tax (3,274) (1,357) 129 (2,063) 91 (141.3) (3,697.8)
(benefit) expense
Net (loss) $ $ $ $ $ (178.6) (1,661.2)
income (5,074) (1,821) 293 (3,036) 325
Return on (1.71) % (0.61) % 0.10 % (1.05) % 0.11 % (110) bp (182) bp
average assets
Return on (17.15) (6.07) 0.99 (10.04) 1.07 (1,108) (1,822)
average equity
Return on
average tangible (19.73) (6.82) 1.38 (11.33) 1.53 (1,291) (2,126)
equity (1)
Net interest 3.02 3.15 3.36 3.42 3.60 (13) (58)
margin
Efficiency 87.89 76.03 70.77 75.98 67.62 1,186 2,027
ratio - GAAP
Efficiency
ratio - Non-GAAP 77.77 76.95 71.20 75.07 67.61 82 1,016
(1)
PER SHARE DATA
Basic net $ $ $ $ $
(loss) income per (0.60) (0.22) 0.03 (0.36) 0.04 (172.7) % (1,600.0) %
common share
Diluted net
(loss) income per (0.60) (0.22) 0.03 (0.36) 0.04 (172.7) (1,600.0)
common share
Dividends
paid per common - - - 0.01 0.01 - (100.0)
share
Book value
per common share 13.48 13.97 14.13 14.02 14.34 (3.5) (6.0)
at period end
Tangible book
value per common 11.56 12.04 12.18 12.07 12.37 (4.0) (6.5)
share at period
end (1)
Market value 5.39 6.02 5.98 7.09 5.15 (10.5) 4.7
at period end
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 $ $ $ $ $ (1.1) % (6.4) %
799,512 808,244 816,553 832,585 854,302
Securities 144,459 137,871 134,299 134,037 122,725 4.8 17.7
Earning 1,108,585 1,108,256 1,086,223 1,088,106 1,089,078 - 1.8
assets
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' 117,700 119,321 118,774 121,658 121,020 (1.4) (2.7)
equity
CREDIT QUALITY
DATA AT PERIOD END
Net $ $ $ $ $ 6.1 % 101.2 %
charge-offs 6,614 6,235 4,079 9,114 3,287
Nonaccrual $ $ $ $ $ (7.5) (29.0)
loans 36,474 39,442 47,958 49,405 51,370
Loans 90 days
past due and still 460 4,675 3,519 3,796 2,723 (90.2) (83.1)
accruing
Accruing
troubled debt 52,353 50,785 37,231 30,010 25,208 3.1 107.7
restructurings
Total
nonperforming 89,287 94,902 88,708 83,211 79,301 (5.9) 12.6
loans
Other real
estate and other 7,659 8,418 11,499 11,418 9,385 (9.0) (18.4)
assets owned, net
Total $ $ $ $ $
nonperforming 96,946 103,320 100,207 94,629 88,686 (6.2) 9.3
assets
CAPITAL AND CREDIT
QUALITY RATIOS
Average
equity to average 9.95 % 10.08 % 10.21 % 10.49 % 10.43 % (13) bp (48) bp
assets
Average
tangible equity to 8.69 8.81 8.92 9.19 9.12 (12) (43)
average tangible
assets (1)
Annualized
net charge-offs to 3.29 3.07 2.01 4.40 1.53 22 176
average loans
Allowance for
credit losses to 2.04 1.60 1.60 1.65 1.70 44 34
period-end
loans
Allowance for
credit losses to 43.84 32.85 27.09 27.41 27.81 1,099 1,603
nonaccrual
loans
Allowance for
credit losses to 17.91 13.65 14.64 16.28 18.02 426 (11)
nonperforming
loans
Nonaccrual
loans to total 4.65 4.88 5.92 6.03 6.11 (23) (146)
loans
Nonaccrual
loans to total 3.08 3.35 4.08 4.22 4.44 (27) (136)
assets
Nonperforming
assets to total
loans+other real 12.23 12.65 12.20 11.40 10.43 (42) 180
estate and other
assets owned
Nonperforming
assets to total 8.18 8.77 8.53 8.09 7.66 (59) 52
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)
4Q 12 4Q 12
compared compared
to to
4Q 12 3Q 12 2Q 12 1Q 12 4Q 11 3Q 12 4Q 11
INTEREST INCOME
Interest and fees $ 10,193 $ 10,604 $ $ 11,011 $ (3.9) % (12.5) %
on loans 10,890 11,649
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 3 3 2 2 1 - 200.0
federal funds sold
Interest on
deposits with other 86 79 61 48 46 8.9 87.0
banks
10,960 11,393 11,692 11,856 12,531 (3.8) (12.5)
Total interest income
INTEREST EXPENSE
Interest on 2,570 2,647 2,643 2,641 2,673 (2.9) (3.9)
deposits
Interest on 9 10 11 15 15 (10.0) (40.0)
short-term borrowings
Interest on - 6 5 5 6 (100.0) (100.0)
long-term debt
Total interest 2,579 2,663 2,659 2,661 2,694 (3.2) (4.3)
expense
NET INTEREST INCOME 8,381 8,730 9,033 9,195 9,837 (4.0) (14.8)
Provision for credit 9,650 6,200 3,525 8,370 4,035 55.6 139.2
losses
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 653 628 622 648 700 4.0 (6.7)
on deposit accounts
Trust and 365 410 446 423 380 (11.0) (3.9)
investment fee income
Investment - 278 - - 128 (100.0) (100.0)
securities gains
Insurance agency 2,292 2,427 2,406 2,689 2,061 (5.6) 11.2
commissions
Other noninterest (704) 258 1,103 814 750 (372.9) (193.9)
income
Total noninterest 2,606 4,001 4,577 4,574 4,019 (34.9) (35.2)
income
NONINTEREST EXPENSE
Salaries and 4,240 4,386 4,376 4,416 4,378 (3.3) (3.2)
wages
Employee benefits 923 945 956 1,170 923 (2.3) -
Occupancy 609 625 638 687 563 (2.6) 8.2
expense
Furniture and 235 265 212 251 234 (11.3) 0.4
equipment expense
Data processing 654 703 694 666 660 (7.0) (0.9)
Directors' fees 107 131 127 109 83 (18.3) 28.9
Amortization of 74 96 96 126 126 (22.9) (41.3)
intangible assets
Insurance agency 387 275 344 385 285 40.7 35.8
commissions expense
FDIC insurance 387 376 344 273 254 2.9 52.4
premium expense
Other noninterest 2,069 1,907 1,876 2,415 1,899 8.5 9.0
expenses
Total noninterest 9,685 9,709 9,663 10,498 9,405 (0.2) 3.0
expense
(Loss) income before (8,348) (3,178) 422 (5,099) 416 (162.7) (2,106.7)
income taxes
Income tax (benefit) (3,274) (1,357) 129 (2,063) 91 (141.3) (3,697.8)
expense
NET (LOSS) INCOME $ $ $ $ $ (178.6) (1,661.2)
(5,074) (1,821) 293 (3,036) 325
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 (0.60) (0.22) 0.03 (0.36) 0.04 (172.7) (1,600.0)
share
Diluted net (loss)
income per common (0.60) (0.22) 0.03 (0.36) 0.04 (172.7) (1,600.0)
share
Dividends paid per - - - 0.01 0.01 - (100.0)
common share
Shore Bancshares, Page 10 of
Inc. 11
Consolidated
Average Balance
Sheets By Quarter
(Dollars in
thousands)
Average balance
4Q 12 4Q 12
compared compared
to 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 $ 5.09 % $ 5.23 % $ 5.38 % $ 5.33 % $ 5.42 % (1.1) % (6.4) %
799,512 808,244 816,553 832,585 854,302
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 7,782 0.12 11,971 0.11 11,200 0.10 9,794 0.06 8,709 0.05 (35.0) (10.6)
sold
Interest-bearing 156,832 0.22 150,170 0.21 124,171 0.20 111,690 0.17 103,342 0.18 4.4 51.8
deposits
Total earning 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
assets
Cash and due from 21,258 20,158 21,424 18,174 18,728 5.5 13.5
banks
Other assets 67,596 69,921 70,458 68,163 68,014 (3.3) (0.6)
Allowance for (14,304) (14,189) (14,507) (14,877) (15,168) 0.8 (5.7)
credit losses
Total assets $ $ $ $ $ (0.1) 1.9
1,183,135 1,184,146 1,163,598 1,159,566 1,160,652
Interest-bearing
liabilities
Demand deposits $ 0.18 % $ 0.18 % $ 0.18 % $ 0.19 % $ 0.19 % 1.2 7.4
169,398 167,423 152,685 153,291 157,657
Money market and
savings deposits 281,593 1.21 279,003 1.19 276,527 1.18 279,355 1.12 273,906 1.07 0.9 2.8
(1)
Certificates of
deposit $100,000 or 231,232 1.40 238,624 1.46 242,662 1.46 240,521 1.46 241,810 1.46 (3.1) (4.4)
more
Other time 204,213 1.59 207,547 1.66 205,046 1.73 201,743 1.83 201,249 1.91 (1.6) 1.5
deposits
Interest-bearing 886,436 1.15 892,597 1.18 876,920 1.21 874,910 1.21 874,622 1.21 (0.7) 1.4
deposits
Short-term 13,573 0.27 14,909 0.27 13,818 0.31 17,621 0.35 16,421 0.37 (9.0) (17.3)
borrowings
Long-term debt - - 455 4.58 455 4.63 455 4.63 466 4.46 (100.0) (100.0)
Total
interest-bearing 900,009 1.14 % 907,961 1.17 % 891,193 1.20 % 892,986 1.20 % 891,509 1.20 % (0.9) 1.0
liabilities
Noninterest-bearing 156,406 148,096 144,210 136,260 139,226 5.6 12.3
deposits
Accrued expenses
and other 9,020 8,768 9,421 8,662 8,897 2.9 1.4
liabilities
Stockholders' 117,700 119,321 118,774 121,658 121,020 (1.4) (2.7)
equity
Total liabilities $ $ $ $ $
and stockholders' 1,183,135 1,184,146 1,163,598 1,159,566 1,160,652 (0.1) 1.9
equity
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, Page 11 of
Inc. 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 (5,029) (1,763) 351 (2,960) 401 (9,401) 335
intangible assets
Net (loss) income,
excluding net
amortization and
impairment
charges of $ $ $ $ $ $ $
intangible assets (20,007) (7,014) 1,412 (11,905) 1,591 (9,401) 335
- annualized (B)
Average $ $ $ $ $ $ $
stockholders' 117,700 119,321 118,774 121,658 121,020 119,359 121,496
equity (C)
Less: Average
goodwill and other (16,313) (16,401) (16,497) (16,606) (16,732) (16,454) (17,926)
intangible assets
Average tangible $ $ $ $ $ $ $
equity (D) 101,387 102,920 102,277 105,052 104,288 102,905 103,570
Return on average
equity (GAAP) (17.15) % (6.07) % 0.99 % (10.04) % 1.07 % (8.07) % (0.74) %
(A)/(C)
Return on average
tangible equity (19.73) % (6.82) % 1.38 % (11.33) % 1.53 % (9.14) % 0.32 %
(Non-GAAP)
(B)/(D)
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 (74) (96) (96) (126) (126) (392) (512)
intangible assets
- - - - - - (1,344)
Impairment charges
Adjusted $ $ $ $ $ $ $
noninterest 9,611 9,613 9,567 10,372 9,279 39,163 37,311
expense (F)
Taxable-equivalent $ $ $ $ $ $ $
net interest 8,413 8,769 9,077 9,243 9,889 35,502 39,983
income (G)
Noninterest income $ $ $ $ $ $ $
(H) 2,606 4,001 4,577 4,574 4,019 15,758 17,318
Less: Investment
securities - (278) - - (128) (278) (563)
(gains)/losses
Other
nonrecurring 1,339 - (217) - (56) 1,122 (56)
(gains)/losses
Adjusted $ $ $ $ $ $ $
noninterest income 3,945 3,723 4,360 4,574 3,835 16,602 16,699
(I)
Efficiency ratio
(GAAP) 87.89 % 76.03 % 70.77 % 75.98 % 67.62 % 77.17 % 68.35 %
(E)/(G)+(H)
Efficiency ratio
(Non-GAAP) 77.77 % 76.95 % 71.20 % 75.07 % 67.61 % 75.16 % 65.83 %
(F)/(G)+(I)
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 (16,270) (16,344) (16,440) (16,536) (16,662)
intangible assets
Tangible equity $ $ $ $ $
(K) 97,756 101,819 103,027 102,048 104,587
Shares outstanding 8,457 8,457 8,457 8,457 8,457
(L)
Book value per $ $ $ $ $
common share 13.48 13.97 14.13 14.02 14.34
(GAAP) (J)/(L)
Tangible book
value per common $ $ $ $ $
share (Non-GAAP) 11.56 12.04 12.18 12.07 12.37
(K)/(L)
The following
reconciles average
equity to average
assets and
average tangible
equity to average
tangible assets
(Note 1):
Average $ $ $ $ $ $ $
stockholders' 117,700 119,321 118,774 121,658 121,020 119,359 121,496
equity (M)
Less: Average
goodwill and other (16,313) (16,401) (16,497) (16,606) (16,732) (16,454) (17,926)
intangible assets
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 (16,313) (16,401) (16,497) (16,606) (16,732) (16,454) (17,926)
intangible assets
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 9.95 % 10.08 % 10.21 % 10.49 % 10.43 % 10.18 % 10.66 %
assets (GAAP)
(M)/(O)
Average tangible
equity/average
tangible assets 8.69 % 8.81 % 8.92 % 9.19 % 9.12 % 8.90 % 9.23 %
(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
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