Exhibit 99.1

 

 

28969 Information Lane

 Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports Third Quarter and Nine-Month Results

 

Easton, Maryland (10/22/2020) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported income from continuing operations of $3.391 million or $0.27 per diluted common share for the third quarter of 2020, compared to income from continuing operations of $5.335 million or $0.43 per diluted common share for the second quarter of 2020, and income from continuing operations of $4.214 million or $0.33 per diluted common share for the third quarter of 2019. Income from continuing operations for the first nine months of 2020 was $11.844 million or $0.95 per diluted common share, compared to income from continuing operations of $12.270 million or $0.96 per diluted common share for the first nine months of 2019.

 

When comparing net income from continuing operations for the third quarter of 2020 to the second quarter of 2020, net income decreased $1.9 million, primarily due to an increase in noninterest expenses of $2.2 million. Net interest income increased $252 thousand in the third quarter when compared to the second quarter, which was more than offset by an increase in provision for credit losses of $500 thousand and a decrease in noninterest income of $188 thousand. When comparing income from continuing operations for the third quarter of 2020 to the third quarter of 2019, net income decreased $823 thousand due to an increase in noninterest expense of $447 thousand, coupled with an increase in provision for credit losses of $1.3 million, partially offset by an increase in net interest income of $603 thousand.

 

“The positive earnings and strategic moves by management in the third quarter furthered the Company’s ability to achieve its core objectives.” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer.  “During the quarter, the Company issued and sold $25 million of fixed to floating rate subordinated notes due 2030 to further strengthen the Company’s capital position and provided $1.5 million to its allowance for loan losses to position the Company to face the continuing adverse economic consequences of this pandemic, including any future deterioration in credit quality. COVID related loan deferrals were significantly reduced to approximately 1% of the outstanding loan balance as of September 30, 2020. Loan demand has remained strong throughout the third quarter with an annualized growth rate of 5%, which is anticipated to improve as we approach year-end. Lastly, we reinstated our common stock repurchase program to utilize some of our excess liquidity and to capitalize on purchasing our shares below tangible book value.”

 

Ongoing response to COVID-19

 

Employees

 

Many of our non-branch personnel have returned to our offices and continue to practice social distancing as the Company has implemented enhanced cleaning and disinfecting procedures across all locations. Most of our Company meetings have transitioned to telephonic or video conferencing. We suspended all unnecessary business-related travel, public events, and meetings with outside parties to promote the safety and well-being of our employees.

 

Banking Locations

 

All our branch locations remain open, with normal hours of operation. We have re-opened our branch lobbies to the public with limits on the number of people allowed in the branch at any time. The drive-thru locations have expanded their capabilities to accommodate an array of transactions for our customers. We notified our customers of our changes in operations as well as promoted the use of online and mobile banking.

 

 

Page 2 of 18

 

Customers

 

We thank our customers for their commitment and understanding as we continue to find ways to serve them as safely and securely as possible. For our customers impacted by the pandemic, we have provided fee waivers and loan payment deferrals to assist them during this challenging time.

 

Loan Deferrals

 

As of September 30, 2020, the Company’s outstanding COVID related loan deferral balance amounted to $12.9 million, or 0.91% of the total loan portfolio. The most significant deferrals by loan type or industry were as follows: other commercial of $6.4 million, hospitality of $4.7 million, residential 1-4 family rentals of $1.1 million, consumer loans of $435 thousand, restaurants of $220 thousand and retail stores of $160 thousand.

 

Small Business Administration’s Paycheck Protection Program (“PPP”)

 

We remain an SBA preferred lender and are actively participating in the PPP program. From the inception of the program through August 8, 2020, we provided loans for 1,488 small business customers totaling $126.7 million.

 

Share Repurchases

 

We reinstated our common stock repurchase program on September 1, 2020. During the third quarter of 2020, we repurchased approximately 310,800 shares of the Company’s common stock.

 

Dividends

 

We currently expect to maintain our quarterly cash dividends based on our strong capital position.

 

Balance Sheet Review

 

Total assets were $1.828 billion at September 30, 2020, a $268.9 million, or 17.2%, increase when compared to $1.559 billion at the end of 2019. The increase was primarily due to the $175.3 million, or 14.0%, increase in gross loans, of which $126.7 million related to PPP loans. The increase in gross loans was funded by an increase in deposits of $252.8 million, or 18.8%.

 

Total deposits increased $252.8 million, or 18.8%, when compared to December 31, 2019. The increase in total deposits consisted of increases in the following categories: Interest-bearing checking accounts of $109.5 million, noninterest-bearing deposits of $108.7 million and savings and money market accounts of $37.3 million, partially offset by a decrease in time deposits of $2.7 million.

 

Total stockholders’ equity increased $6.1 million, or 3.2%, when compared to the end of 2019. At September 30, 2020, the ratio of total equity to total assets was 10.88% and the ratio of total tangible equity to total tangible assets was 9.92%.

 

Total assets at September 30, 2020 increased $266.5 million, or 17.1%, when compared to total assets at September 30, 2019, primarily the result of loan growth of $188.9 million and increases in cash and cash equivalents of $53.1 million and investment securities of $9.9 million. In addition, other assets increased $16.9 million, primarily the result of purchasing additional bank owned life insurance (“BOLI”) in the fourth quarter of 2019.

 

Total deposits at September 30, 2020 increased $268.6 million, or 20.3%, when compared to September 30, 2019. The increase in total deposits included growth within interest-bearing checking accounts of $123.2 million, noninterest-bearing deposits of $102.7 million, savings and money market accounts of $53.1 million and time deposits of $1.7 million. Brokered deposits of $12.1 million matured in 2019 and were not renewed.

 

Total stockholders’ equity increased $4.9 million, or 2.5%, when compared to September 30, 2019.

 

 

Page 3 of 18

 

Review of Quarterly Financial Results

 

Net interest income was $13.3 million for the third quarter of 2020, compared to $13.0 million for the second quarter of 2020 and $12.7 million for the third quarter of 2019. The increase in net interest income when compared to the second quarter of 2020 was primarily due to increases in the average balances in loans of $32.4 million, taxable investment securities of $28.1 million and interest-bearing deposits with other banks of $69.8 million. These increases in the average balances on earning assets contributed $304 thousand to interest income over the second quarter, despite a decline in the weighted average yield on these assets of 26bps. In addition, the weighted average rate paid on interest-bearing deposits declined by 8bps in the third quarter when compared to the second quarter, reducing interest expense by $87 thousand. However, this decline was more than offset by the $142 thousand of additional interest expense related to subordinated debt issued during the third quarter. Net interest income increased when compared to the third quarter of 2019, primarily due to lower rates paid on interest bearing deposits of 44bps and the elimination of short and long-term advances from FHLB borrowings which reduced interest expense by a combined $935 thousand. Lower yields on earning assets of 66bps, specifically, taxable investment securities and interest-bearing deposits with other banks, reduced interest income by $330 thousand for the third quarter, partially offset by the increase in the average balance in loans of $171.3 million. The higher average balance on loans was driven by the $127.6 million of PPP loans funded in the second quarter of 2020 which had yet to be forgiven in accordance with SBA guidelines and had an average yield of 2.00% for the third quarter. The forgiveness of PPP loans which is anticipated in future quarters will have a positive impact on the net interest margin as these loans carry a much lower yield than our traditional loan portfolio. The Company’s net interest margin decreased to 3.17% for the third quarter of 2020 from 3.41% in the second quarter of 2020 and down from 3.52% in the third quarter of 2019. The decline in net interest margin in the third quarter of 2020 when compared to the second quarter of 2020 and the third quarter of 2019, was significantly impacted by excess liquidity of approximately $100 million, which has yet to be fully invested. Without this excess liquidity the margin for the third quarter would have been 3.37%.

 

The provision for credit losses was $1.5 million for the three months ended September 30, 2020. The comparable amounts were $1.0 million and $200 thousand for the three months ended June 30, 2020 and September 30, 2019, respectively. The ratio of the allowance for credit losses to period-end loans was 0.90% at September 30, 2020. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.98% at September 30, 2020, higher than both the 0.86% at June 30, 2020 and the 0.84% at September 30, 2019. The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, and the increase in provision for loan losses as compared to both the prior periods were the result of new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic. The Company reported net recoveries in the third quarter of 2020 of $187 thousand, compared to net charge-offs of $288 thousand for the second quarter of 2020 and $67 thousand for the third quarter of 2019.

 

At September 30, 2020, nonperforming assets were $8.4 million, a decrease of $3.9 million, or 31.8%, when compared to June 30, 2020, primarily due to a decrease in nonaccrual loans of $4.7 million, or 40.2%. Other real estate owned remained at $38 thousand and accruing troubled debt restructurings (“TDRs”) decreased $45 thousand, or less than 1% over the same time period. When comparing September 30, 2020 to September 30, 2019, nonperforming assets decreased $4.9 million, or 37.1%, primarily due to a decrease in nonaccrual loans of $5.6 million, or 44.4%. TDR’s decreased $321 thousand, or 4.2%, and other real estate owned decreased $36 thousand, or 48.6%, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.86%, 1.14% and 1.34% at September 30, 2020, June 30, 2020 and September 30, 2019, respectively. In addition, the ratio of accruing TDRs to total loans at September 30, 2020 was 0.51%, compared to 0.52% at June 30, 2020 and 0.61% at September 30, 2019.

 

Total noninterest income for the third quarter of 2020 decreased $188 thousand, or 6.8%, when compared to the second quarter of 2020 and increased $52 thousand, or 2.1%, when compared to the third quarter of 2019. The decrease was primarily due to sales of available for sale securities at a gain of $347 thousand in the second quarter of 2020. Absent the sale of these securities, noninterest income would have increased $159 thousand, or 6.6%, for the third quarter of 2020, which was primarily the result of increases in loan fee income and service charges on deposit accounts. The increase in noninterest income from the third quarter of 2019 was due to additional income from BOLI purchased late in the fourth quarter of 2019, offset by lower service charges on deposit accounts.

 

Total noninterest expense from continuing operations for the third quarter of 2020 increased $2.2 million, or 28.3%, when compared to the second quarter of 2020 and increased $447 thousand, or 4.8%, when compared to the third quarter of 2019. The increase in noninterest expense when compared to the second quarter of 2020 was primarily related to higher salaries and wages, due to the significant volume of PPP loans originated in the second quarter which resulted in heightened deferrals of direct origination costs during the second quarter of 2020. The deferred origination costs are being amortized over the lives of the related PPP loans and will be accelerated upon forgiveness or repayment. The increase in noninterest expenses when compared to the third quarter of 2019 was primarily due to higher salaries and wages, employee benefits and data processing fees, partially offset by decreases in other real estate owned expenses and other loan expenses.

 

 

Page 4 of 18

 

Review of Nine-Month Financial Results

 

Net interest income for the first nine months of 2020 was $38.8 million, an increase of $1.5 million, or 3.9%, when compared to the first nine months of 2019. The increase was due to lower interest expense on interest-bearing deposits of $1.4 million and an aggregate decrease of $679 thousand related to the elimination of both short and long-term advances from the FHLB, partially offset by the addition of subordinated debt of $148 thousand. Although the average balance of total earning assets increased by $145 million, or 10.3%, primarily in loans and interest-bearing deposits with other banks of $128.7 million and $51.8 million, respectively, the interest income from these assets was impacted by lower yields due to below market rates on PPP loans and Federal Reserve interest rate cuts during 2020. In addition, the average balance of taxable investment securities declined $35.5 million, or 22.2%, which reduced interest income by $668 thousand. These significant swings in both the average balances and rates on both sides of the balance sheet resulted in a net interest margin of 3.35% for the first nine months of 2020 compared to 3.56% for the first nine months of 2019.

 

The provision for credit losses for the nine months ended September 30, 2020 and 2019 was $2.9 million and $500 thousand, respectively, while net charge-offs were $580 thousand and $405 thousand, respectively. The increase in provision for credit losses was the result of new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans increased to 0.98% at September 30, 2020 from 0.84% at December 31, 2019. As previously discussed, this ratio increased primarily due to the addition of qualitative factors in the analysis of the allowance for loan losses. The ratio of annualized net charge-offs to average loans was 0.06% for the first nine months of 2020 and 0.04% for the first nine months of 2019. Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as changes within the Company’s portfolio are known.

 

Total noninterest income from continuing operations for the nine months ended September 30, 2020 increased $376 thousand, or 5.1%, when compared to the same period in 2019. The increase in noninterest income primarily consisted of increases in BOLI income, gains on sales of securities and other fees on bank services, partially offset by a decrease in service charges on deposit accounts.

 

Total noninterest expense from continuing operations for the nine months ended September 30, 2020 increased $131 thousand, or 0.5%, when compared to the same period in 2019. The increase was a result of higher costs related to employee benefits and higher data processing fees, which were almost entirely offset by decreases in salaries and wages due to the deferral of direct origination costs related to the origination of PPP loans, FDIC insurance premiums, other real estate owned expenses, and other loan related expenses. The deferred costs for salaries and wages are being recognized over the lives of the related loans as previously mentioned.

 

Shore Bancshares Information

 

Shore Bancshares 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 Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

 

Additional information is available at www.shorebancshares.com.

 

Forward-Looking Statements

 

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. 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”.

 

 

Page 5 of 18

 

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

 

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

 

For further information contact: Edward Allen, Executive Vice President and Chief Financial Officer, 410-763-7800

 

 

Page 6 of 18

 

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,												September 30,
		2020				2019				Change				2020				2019				Change
PROFITABILITY FOR THE PERIOD
Net interest income		$	13,283			$	12,680				4.8	%		$	38,832			$	37,367				3.9	%
Provision for credit losses			1,500				200				650.0				2,850				500				470.0
Noninterest income			2,581				2,529				2.1				7,702				7,326				5.1
Noninterest expense			9,831				9,384				4.8				27,843				27,712				0.5
Income from continuing operations before income taxes			4,533				5,625				(19.4	)			15,841				16,481				(3.9	)
Income tax expense			1,142				1,411				(19.1	)			3,997				4,211				(5.1	)
Income from continuing operations		$	3,391			$	4,214				(19.5	)		$	11,844			$	12,270				(3.5	)
Loss from discontinued operations before income taxes			—				(10	)			100.0				—				(113	)			100.0
Income tax benefit			—				(2	)			—				—				(27	)			100.0
Loss from discontinued operations			—				(8	)			100.0				—				(86	)			100.0
Net income		$	3,391			$	4,206				(19.4	)		$	11,844			$	12,184				(2.8	)
From Continuing Operations:
Return on average assets			0.76	%			1.10	%			(34	)bp			0.96	%			1.11	%			(15	)bp
Return on average equity			6.71				8.66				(195	)			7.99				8.68				(69	)
Return on average tangible equity (1)			7.63				9.90				(227	)			9.09				9.98				(89	)
Net interest margin			3.17				3.52				(35	)			3.35				3.56				(21	)
Efficiency ratio - GAAP			61.97				61.70				27				59.83				62.01				(218	)
Efficiency ratio - Non-GAAP (1)			61.05				60.58				47				59.26				60.81				(155	)
PER SHARE DATA
Basic and diluted net income per common share
Income from continuing operations		$	0.27			$	0.33				(18.2	)%		$	0.95			$	0.96				(1.0	)%
Loss from discontinued operations			—				—				—				—				(0.01	)			100.0
Net income		$	0.27			$	0.33				(18.2	)		$	0.95			$	0.95				—
Dividends paid per common share		$	0.12			$	0.10				20.0			$	0.36			$	0.30				20.0
Book value per common share at period end			16.28				15.22				7.0
Tangible book value per common share at period end (1)			14.69				13.66				7.5
Market value at period end			10.98				15.41				(28.7	)
Market range:
High			11.77				17.00				(30.8	)			17.56				17.00				3.3
Low			9.14				14.90				(38.7	)			7.63				14.00				(45.5	)
AVERAGE BALANCE SHEET DATA
Loans		$	1,406,683			$	1,235,374				13.9	%		$	1,348,362			$	1,219,623				10.6	%
Investment securities			136,017				155,324				(12.4	)			124,487				160,035				(22.2	)
Earning assets			1,670,194				1,432,252				16.6				1,553,974				1,408,937				10.3
Assets			1,771,944				1,513,790				17.1				1,652,876				1,480,813				11.6
Deposits			1,548,072				1,280,057				20.9				1,434,515				1,243,472				15.4
Stockholders' equity			201,079				193,120				4.1				198,095				189,094				4.8

 

 

Page 7 of 18

 

CREDIT QUALITY DATA
Net (recoveries) charge-offs		$	(187	)		$	67				(379.1	)%		$	580			$	405				43.2	%
Nonaccrual loans		$	6,966			$	12,530				(44.4	)
Loans 90 days past due and still accruing			1,373				712				92.8
Other real estate owned			38				74				(48.6	)
Total nonperforming assets			8,377				13,316				(37.1	)
Accruing troubled debt restructurings (TDRs)			7,267				7,588				(4.2	)
Total nonperforming assets and accruing TDRs		$	15,644			$	20,904				(25.2	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			10.88	%			12.42	%			(154	)bp
Period-end tangible equity to tangible assets (1)			9.92				11.29				(137	)
Annualized net (recoveries) charge-offs to average loans			(0.05	)			0.02				(7	)			0.06	%			0.04	%			2	bp
Allowance for credit losses as a percent of:
Period-end loans (2)			0.90				0.85				5
Nonaccrual loans			183.42				83.30				10,012
Nonperforming assets			152.52				78.39				7,413
Accruing TDRs			175.82				137.56				3,826
Nonperforming assets and accruing TDRs			81.67				49.93				3,174
As a percent of total loans:
Nonaccrual loans			0.49				1.01				(52	)
Accruing TDRs			0.51				0.61				(10	)
Nonaccrual loans and accruing TDRs			1.00				1.63				(63	)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.59				1.08				(49	)
Nonperforming assets and accruing TDRs			1.10				1.69				(59	)
As a percent of total assets:
Nonaccrual loans			0.38				0.80				(42	)
Nonperforming assets			0.46				0.85				(39	)
Accruing TDRs			0.40				0.49				(9	)
Nonperforming assets and accruing TDRs			0.86				1.34				(48	)

 

(1)

See the reconciliation table on page 18 of 18.

(2)

As of 9/30/2020 and 6/30/2020, this ratio includes PPP loans of $126.7 million and $123.0 million, respectively. Excluding these loans, the ratio is 0.98% and 0.86% for 9/30/2020 and 6/30/2020.

 

 

Page 8 of 18

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

 

														September 30, 2020
		September 30,				December 31,				September 30,				compared to
		2020				2019				2019				December 31, 2019
ASSETS
Cash and due from banks		$	17,577			$	18,465			$	22,777				(4.8	)%
Interest-bearing deposits with other banks			138,885				76,506				80,596				81.5
Cash and cash equivalents			156,462				94,971				103,373				64.7
Investment securities available for sale (at fair value)			139,349				122,791				138,911				13.5
Investment securities held to maturity			20,174				8,786				9,780				129.6
Equity securities, at fair value			1,396				1,342				1,339				4.0
Restricted securities			3,626				4,190				4,655				(13.5	)
Loans			1,423,965				1,248,654				1,235,035				14.0
Less: allowance for credit losses			(12,777	)			(10,507	)			(10,438	)			21.6
Loans, net			1,411,188				1,238,147				1,224,597				14.0
Premises and equipment, net			24,679				23,821				23,871				3.6
Goodwill			17,518				17,518				17,518				—
Other intangible assets, net			1,844				2,252				2,396				(18.1	)
Other real estate owned, net			38				74				74				(48.6	)
Right of use assets, net			4,769				4,771				4,908				(0.0	)
Other assets			47,129				40,572				30,257				16.2
Total assets		$	1,828,172			$	1,559,235			$	1,561,679				17.2
LIABILITIES
Noninterest-bearing deposits		$	465,304			$	356,618			$	362,557				30.5
Interest-bearing deposits			1,128,817				984,716				962,934				14.6
Total deposits			1,594,121				1,341,334				1,325,491				18.8
Securities sold under retail repurchase agreements			1,019				1,226				2,263				(16.9	)
Advances from FHLB - short-term			—				—				15,000				—
Advances from FHLB - long-term			—				15,000				15,000				(100.0	)
Subordinated debt			24,399				—				—				—
Total borrowings			25,418				16,226				32,263
Lease liabilities			4,840				4,792				4,923				1.0
Accrued expenses and other liabilities			4,912				4,081				5,039				20.4
Total liabilities			1,629,291				1,366,433				1,367,716				19.2
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares			122				125				127				(2.4	)
Additional paid in capital			58,090				61,045				64,879				(4.8	)
Retained earnings			138,765				131,425				128,924				5.6
Accumulated other comprehensive income			1,904				207				33				819.8
Total stockholders' equity			198,881				192,802				193,963				3.2
Total liabilities and stockholders' equity		$	1,828,172			$	1,559,235			$	1,561,679				17.2
Period-end common shares outstanding			12,218				12,500				12,742				(2.3	)
Book value per common share		$	16.28			$	15.42			$	15.22				5.6

 

 

Page 9 of 18

 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,												September 30,
		2020				2019				% Change				2020				2019				% Change
INTEREST INCOME
Interest and fees on loans		$	14,139			$	14,100				0.3	%		$	41,879			$	41,348				1.3	%
Interest on investment securities:
Taxable			730				870				(16.1	)			2,087				2,755				(24.2	)
Interest on deposits with other banks			33				223				(85.2	)			216				499				(56.7	)
Total interest income			14,902				15,193				(1.9	)			44,182				44,602				(0.9	)
INTEREST EXPENSE
Interest on deposits			1,470				2,288				(35.8	)			5,085				6,439				(21.0	)
Interest on short-term borrowings			1				117				(99.1	)			4				475				(99.2	)
Interest on long-term borrowings			148				108				37.0				261				321				—
Total interest expense			1,619				2,513				(35.6	)			5,350				7,235				(26.1	)
NET INTEREST INCOME			13,283				12,680				4.8				38,832				37,367				3.9
Provision for credit losses			1,500				200				650.0				2,850				500				470.0
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			11,783				12,480				(5.6	)			35,982				36,867				(2.4	)
NONINTEREST INCOME
Service charges on deposit accounts			647				990				(34.6	)			2,057				2,952				(30.3	)
Trust and investment fee income			381				383				(0.5	)			1,119				1,140				(1.8	)
Gains on sales and calls of investment securities			—				—				—				347				—				—
Other noninterest income			1,553				1,156				34.3				4,179				3,234				29.2
Total noninterest income			2,581				2,529				2.1				7,702				7,326				5.1

 

 

Page 10 of 18

 

NONINTEREST EXPENSE
Salaries and wages			4,143				3,853				7.5				10,569				11,411				(7.4	)
Employee benefits			1,489				1,299				14.6				4,746				3,621				31.1
Occupancy expense			774				697				11.0				2,174				2,056				5.7
Furniture and equipment expense			294				263				11.8				858				821				4.5
Data processing			1,114				972				14.6				3,195				2,801				14.1
Directors' fees			132				140				(5.7	)			386				342				12.9
Amortization of intangible assets			125				144				(13.2	)			407				461				(11.7	)
FDIC insurance premium expense			132				—				—				347				386				(10.1	)
Other real estate owned expenses, net			—				133				(100.0	)			18				426				(95.8	)
Legal and professional fees			447				495				(9.7	)			1,634				1,655				(1.3	)
Other noninterest expenses			1,181				1,388				(14.9	)			3,509				3,732				(6.0	)
Total noninterest expense			9,831				9,384				4.8				27,843				27,712				0.5
Income from continuing operations before income taxes			4,533				5,625				(19.4	)			15,841				16,481				(3.9	)
Income tax expense			1,142				1,411				(19.1	)			3,997				4,211				(5.1	)
Income from continuing operations			3,391				4,214				(19.5	)			11,844				12,270				(3.5	)
Loss from discontinued operations before income taxes			—				(10	)			100.0				—				(113	)			100.0
Income tax benefit			—				(2	)			100.0				—				(27	)			100.0
Loss from discontinued operations			—				(8	)			100.0				—				(86	)			100.0
NET INCOME		$	3,391			$	4,206				(19.4	)		$	11,844			$	12,184				(2.8	)
Weighted average shares outstanding - basic			12,483				12,764				(2.2	)			12,506				12,771				(2.1	)
Weighted average shares outstanding - diluted			12,483				12,769				(2.2	)			12,509				12,776				(2.1	)
Basic and diluted net income per common share
Income from continuing operations		$	0.27			$	0.33				(18.2	)		$	0.95			$	0.96				(1.0	)
Loss from discontinued operations			—				—				—				—				(0.01	)			100.0
Net income		$	0.27			$	0.33				(18.2	)		$	0.95			$	0.95				—
Dividends paid per common share			0.12				0.10				20.0				0.36				0.30				20.0

 

 

Page 11 of 18

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

 

		For the Three Months Ended																For the Nine Months Ended
		September 30,																September 30,
		2020								2019								2020								2019
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans (1), (2), (3)		$	1,406,683				4.01	%		$	1,235,374				4.54	%		$	1,348,362				4.16	%		$	1,219,623				4.55	%
Investment securities
Taxable			136,017				2.14				155,324				2.24				124,487				2.24				160,035				2.30
Interest-bearing deposits			127,494				0.10				41,554				2.13				81,125				0.36				29,279				2.28
Total earning assets			1,670,194				3.56	%			1,432,252				4.22	%			1,553,974				3.81	%			1,408,937				4.24	%
Cash and due from banks			18,860								18,127								18,302								17,520
Other assets			94,755								73,823								91,642								64,775
Allowance for credit losses			(11,865	)							(10,412	)							(11,042	)							(10,419	)
Total assets		$	1,771,944							$	1,513,790							$	1,652,876							$	1,480,813
Interest-bearing liabilities
Demand deposits		$	370,922				0.19	%		$	252,386				0.70	%		$	318,083				0.30	%		$	242,364				0.66	%
Money market and savings deposits			442,322				0.21				389,268				0.67				426,570				0.29				386,113				0.79
Brokered deposits			—				—				14,568				2.29				—				—				19,144				2.40
Certificates of deposit $100,000 or more			127,983				1.68				119,200				1.78				129,319				1.78				108,504				1.54
Other time deposits			148,223				1.42				149,708				1.49				149,841				1.52				145,381				1.28
Interest-bearing deposits			1,089,450				0.54				925,130				0.98				1,023,813				0.66				901,506				0.96
Securities sold under retail repurchase agreements and federal funds purchased			1,575				0.25				1,434				1.38				1,613				0.33				964				1.66
Advances from FHLB - short-term			—				—				16,295				2.73				—				—				23,070				2.68
Advances from FHLB - long-term			—				—				15,000				2.86				5,255				2.87				15,000				2.86
Subordinated debt			9,859				5.97				—				—				3,310				5.97				—				—
Total interest-bearing liabilities			1,100,884				0.59	%			957,859				1.04	%			1,033,991				0.69	%			940,540				1.03	%
Noninterest-bearing deposits			458,622								354,927								410,702								341,966
Accrued expenses and other liabilities			11,359								7,884								10,088								9,213
Stockholders' equity			201,079								193,120								198,095								189,094
Total liabilities and stockholders' equity		$	1,771,944							$	1,513,790							$	1,652,876							$	1,480,813
Net interest spread							2.97	%							3.18	%							3.12	%							3.21	%
Net interest margin							3.17	%							3.52	%							3.35	%							3.56	%

 

(1)   All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)   Average loan balances include nonaccrual loans.

(3)   Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

 

Page 12 of 18

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

 

		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter				Q3 2020				Q3 2020
		2020				2020				2020				2019				2019				compared to				compared to
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019				Q2 2020				Q3 2019
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income		$	13,317			$	13,068			$	12,554			$	12,808			$	12,724				1.9	%			4.7
Less: Taxable-equivalent adjustment			34				37				36				44				44				(8.1	)			(22.7	)
Net interest income			13,283				13,031				12,518				12,764				12,680				1.9				4.8
Provision for credit losses			1,500				1,000				350				200				200				50.0				650.0
Noninterest income			2,581				2,769				2,352				2,694				2,529				(6.8	)			2.1
Noninterest expense			9,831				7,663				10,349				9,845				9,384				28.3				4.8
Income from continuing operations before income taxes			4,533				7,137				4,171				5,413				5,625				(36.5	)			(19.4	)
Income tax expense			1,142				1,802				1,053				1,399				1,411				(36.6	)			(19.1	)
Income from continuing operations			3,391				5,335				3,118				4,014				4,214				(36.4	)			(19.5	)
Loss from discontinued operations before income taxes			—				—				—				—				(10	)			—				100.0
Income tax benefit			—				—				—				—				(2	)			—				—
Loss from discontinued operations			—				—				—				—				(8	)			—				100.0
Net income		$	3,391			$	5,335			$	3,118			$	4,014			$	4,206				(36.4	)			(19.4	)
From Continuing Operations:
Return on average assets			0.76	%			1.31	%			0.81	%			1.03	%			1.10	%			(55	)bp			(34	)
Return on average equity			6.71				10.79				6.45				8.24				8.66				(408	)			(195	)
Return on average tangible equity (1)			7.63				12.20				7.43				9.43				9.90				(457	)			(227	)
Net interest margin			3.17				3.41				3.48				3.47				3.52				(24	)			(35	)
Efficiency ratio - GAAP			61.97				48.50				69.60				63.69				61.70				1,347				27
Efficiency ratio - Non-GAAP (1)			61.05				48.58				68.46				62.58				60.58				1,247				47
PER SHARE DATA
Basic and diluted net income per common share
Income from continuing operations		$	0.27			$	0.43			$	0.25			$	0.32			$	0.33				(37.2	)%			(18.2	)
Loss from discontinued operations			—				—				—				—				—				—				—
Net income		$	0.27			$	0.43			$	0.25			$	0.32			$	0.33				(37.2	)			(18.2	)
Dividends paid per common share			0.12				0.12				0.12				0.12				0.10				—				20.0
Book value per common share at period end			16.28				15.98				15.62				15.42				15.22				1.9				7.0
Tangible book value per common share at period end (1)			14.69				14.42				14.06				13.84				13.66				1.9				7.5
Market value at period end			10.98				11.09				10.85				17.36				15.41				(1.0	)			(28.7	)
Market range:
High			11.77				12.40				17.56				17.90				17.00				(5.1	)			(30.8	)
Low			9.14				8.00				7.63				15.01				14.90				14.3				(38.7	)

 

 

Page 13 of 18

 

AVERAGE BALANCE SHEET DATA
Loans		$	1,406,683			$	1,374,324			$	1,263,441			$	1,246,355			$	1,235,374				2.4	%			13.9
Investment securities			136,017				107,908				129,410				145,544				155,324				26.0				(12.4	)
Earning assets			1,670,194				1,539,945				1,450,508				1,463,490				1,432,252				8.5				16.6
Assets			1,771,944				1,638,387				1,546,991				1,553,017				1,513,790				8.2				17.1
Deposits			1,548,072				1,427,063				1,327,162				1,334,047				1,280,057				8.5				20.9
Stockholders' equity			201,079				198,842				194,332				193,239				193,120				1.1				4.1
CREDIT QUALITY DATA
Net (recoveries) charge-offs		$	(187	)		$	288			$	479			$	131			$	67				(164.9	)%			(379.1	)
Nonaccrual loans		$	6,966			$	11,649			$	11,540			$	10,590			$	12,530				(40.2	)			(44.4	)
Loans 90 days past due and still accruing			1,373				604				721				1,326				712				127.3				92.8
Other real estate owned			38				38				38				74				74				—				(48.6	)
Total nonperforming assets		$	8,377			$	12,291			$	12,299			$	11,990			$	13,316				(31.8	)			(37.1	)
Accruing troubled debt restructurings (TDRs)		$	7,267			$	7,312			$	7,444			$	7,501			$	7,588				(0.6	)			(4.2	)
Total nonperforming assets and accruing TDRs		$	15,644			$	19,603			$	19,743			$	19,491			$	20,904				(20.2	)			(25.2	)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			10.88	%			11.64	%			12.45	%			12.37	%			12.42	%			(76	)bp			(154	)
Period-end tangible equity to tangible assets (1)			9.92				10.63				11.35				11.24				11.29				(71	)			(137	)
Annualized net (recoveries) charge-offs to average loans			(0.05	)			0.08				0.15				0.04				0.02				(13	)			(7	)
Allowance for credit losses as a percent of:
Period-end loans (2)			0.90				0.79				0.81				0.84				0.85				11				5
Nonaccrual loans			183.42				95.20				89.93				99.22				83.30				8,822				10,012
Nonperforming assets			152.52				90.23				84.38				87.63				78.39				6,229				7,413
Accruing TDRs			175.82				151.67				139.41				140.07				137.56				2,415				3,826
Nonperforming assets and accruing TDRs			81.67				56.57				52.57				53.91				49.93				2,510				3,174
As a percent of total loans:
Nonaccrual loans			0.49				0.83				0.90				0.85				1.01				(34	)			(52	)
Accruing TDRs			0.51				0.52				0.58				0.60				0.61				(1	)			(10	)
Nonaccrual loans and accruing TDRs			1.00				1.35				1.49				1.45				1.63				(35	)			(63	)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.59				0.87				0.96				0.96				1.08				(28	)			(49	)
Nonperforming assets and accruing TDRs			1.10				1.39				1.55				1.56				1.69				(29	)			(59	)
As a percent of total assets:
Nonaccrual loans			0.38				0.68				0.73				0.68				0.80				(30	)			(42	)
Nonperforming assets			0.46				0.71				0.78				0.77				0.85				(25	)			(39	)
Accruing TDRs			0.40				0.43				0.47				0.48				0.49				(3	)			(9	)
Nonperforming assets and accruing TDRs			0.86				1.14				1.25				1.25				1.34				(28	)			(48	)

 

(1)

See the reconciliation table on page 18 of 18.

(2)

As of 9/30/2020 and 6/30/2020, this ratio includes PPP loans of $126.7 million and $123.0 million, respectively. Excluding these loans, the ratio is 0.98% and 0.86% for 9/30/2020 and 6/30/2020.

 

 

Page 14 of 18

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)

 

																						Q3 2020				Q3 2020
																						compared to				compared to
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019				Q2 2020				Q3 2019
INTEREST INCOME
Interest and fees on loans		$	14,139			$	13,945			$	13,795			$	14,043			$	14,100				1.4	%			0.3	%
Interest on investment securities:
Taxable			730				638				719				827				870				14.4				(16.1	)
Interest on deposits with other banks			33				11				172				295				223				200.0				(85.2	)
Total interest income			14,902				14,594				14,686				15,165				15,193				2.1				(1.9	)
INTEREST EXPENSE
Interest on deposits			1,470				1,556				2,059				2,287				2,288				(5.5	)			(35.8	)
Interest on short-term borrowings			1				1				2				6				117				—				(99.1	)
Interest on long-term borrowings			148				6				107				108				108				2,366.7				37.0
Total interest expense			1,619				1,563				2,168				2,401				2,513				3.6				(35.6	)
NET INTEREST INCOME			13,283				13,031				12,518				12,764				12,680				1.9				4.8
Provision for credit losses			1,500				1,000				350				200				200				50.0				650.0
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			11,783				12,031				12,168				12,564				12,480				(2.1	)			(5.6	)
NONINTEREST INCOME
Service charges on deposit accounts			647				544				866				958				990				18.9				(34.6	)
Trust and investment fee income			381				363				375				382				383				5.0				(0.5	)
Gains on sales and calls of investment securities			—				347				—				—				—				(100.0	)			—
Other noninterest income			1,553				1,515				1,111				1,354				1,156				2.5				34.3
Total noninterest income			2,581				2,769				2,352				2,694				2,529				(6.8	)			2.1

 

 

Page 15 of 18

 

NONINTEREST EXPENSE
Salaries and wages			4,143				2,130				4,296				4,002				3,853				94.5				7.5
Employee benefits			1,489				1,535				1,722				1,662				1,299				(3.0	)			14.6
Occupancy expense			774				702				698				702				697				10.3				11.0
Furniture and equipment expense			294				247				317				286				263				19.0				11.8
Data processing			1,114				1,037				1,044				989				972				7.4				14.6
Directors' fees			132				113				141				137				140				16.8				(5.7	)
Amortization of intangible assets			125				138				144				144				144				(9.4	)			(13.2	)
FDIC insurance premium expense			132				124				91				(42	)			—				6.5				—
Other real estate owned expenses, net			—				—				18				(1	)			133				—				(100.0	)
Legal and professional fees			447				553				634				568				495				(19.2	)			(9.7	)
Other noninterest expenses			1,181				1,084				1,244				1,398				1,388				8.9				(14.9	)
Total noninterest expense			9,831				7,663				10,349				9,845				9,384				28.3				4.8
Income from continuing operations before income taxes			4,533				7,137				4,171				5,413				5,625				(36.5	)			(19.4	)
Income tax expense			1,142				1,802				1,053				1,399				1,411				(36.6	)			(19.1	)
Income from continuing operations			3,391				5,335				3,118				4,014				4,214				(36.4	)			(19.5	)
Loss from discontinued operations before income taxes			—				—				—				—				(10	)			—				100.0
Income tax benefit			—				—				—				—				(2	)			—				100.0
Loss from discontinued operations			—				—				—				—				(8	)			—				100.0
NET INCOME		$	3,391			$	5,335			$	3,118			$	4,014			$	4,206				(36.4	)			(19.4	)
Weighted average shares outstanding - basic			12,483				12,524				12,513				12,588				12,764				(0.3	)			(2.2	)
Weighted average shares outstanding - diluted			12,483				12,525				12,518				12,593				12,769				(0.3	)			(2.2	)
Basic and diluted net income per common share
Income from continuing operations		$	0.27			$	0.43			$	0.25			$	0.32			$	0.33				(37.2	)			(18.2	)
Loss from discontinued operations			—				—				—				—				—				—				—
Net income		$	0.27			$	0.43			$	0.25			$	0.32			$	0.33				(37.2	)			(18.2	)
Dividends paid per common share			0.12				0.12				0.12				0.12				0.10				—				20.0

 

 

Page 16 of 18

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)

 

																																										Average balance
																																										Q3 2020				Q3 2020
																																										compared to				compared to
		Q3 2020								Q2 2020								Q1 2020								Q4 2019								Q3 2019								Q2 2020				Q3 2019
		Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/				Average				Yield/
		balance				rate				balance				rate				balance				rate				balance				rate				balance				rate
Earning assets
Loans (1), (2), (3)			1,406,683				4.01	%		$	1,374,324				4.09	%		$	1,263,441				4.40	%		$	1,246,355				4.48	%		$	1,235,374				4.54	%			2.4	%			13.9	%
Investment securities
Taxable			136,017				2.14				107,908				2.37				129,410				2.22				145,544				2.27				155,324				2.24				26.0				(12.4	)
Interest-bearing deposits			127,494				0.10				57,713				0.07				57,657				1.20				71,591				1.63				41,554				2.13				120.9				206.8
Total earning assets			1,670,194				3.56	%			1,539,945				3.82	%			1,450,508				4.08	%			1,463,490				4.12	%			1,432,252				4.22	%			8.5				16.6
Cash and due from banks			18,860								18,167								17,874								20,382								18,127								3.8				4.0
Other assets			94,755								90,981								89,154								79,586								73,823								4.1				28.4
Allowance for credit losses			(11,865	)							(10,706	)							(10,545	)							(10,441	)							(10,412	)							10.8				14.0
Total assets		$	1,771,944							$	1,638,387							$	1,546,991							$	1,553,017							$	1,513,790								8.2				17.1
Interest-bearing liabilities
Demand deposits		$	370,922				0.19	%		$	298,568				0.20	%		$	284,176				0.56	%		$	284,193				0.76	%		$	252,386				0.70	%			24.2				47.0
Money market and savings deposits			442,322				0.21				426,963				0.23				410,252				0.46				397,662				0.51				389,268				0.67				3.6				13.6
Brokered deposits			—				—				—				—				—				—				8,135				2.15				14,568				2.29				—				(100.0	)
Certificates of deposit $100,000 or more			127,983				1.68				130,582				1.81				129,408				1.85				126,411				1.85				119,200				1.78				(2.0	)			7.4
Other time deposits			148,223				1.42				150,675				1.54				150,645				1.60				149,197				1.58				149,708				1.49				(1.6	)			(1.0	)
Interest-bearing deposits			1,089,450				0.54				1,006,788				0.62				974,481				0.85				965,598				0.94				925,130				0.98				8.2				17.8
Securities sold under retail repurchase agreements and federal funds purchased			1,575				0.25				2,030				0.20				1,235				0.65				1,889				1.26				17,729				2.64				(22.4	)			(91.1	)
Advances from FHLB - short-term			—				—				—				—				—				—				—				—				—				—				—				—
Advances from FHLB - long-term			—				—				824				2.93				15,000				2.87				15,000				2.86				15,000				2.86				(100.0	)			(100.0	)
Subordinated debt			9,859				5.97				—				—				—				—				—				—				—				—				100.0				100.0
Total interest-bearing liabilities			1,100,884				0.59	%			1,009,642				0.62	%			990,716				0.88	%			982,487				0.97	%			957,859				1.04	%			9.0				14.9
Noninterest-bearing deposits			458,622								420,275								352,681								368,449								354,927								9.1				29.2
Accrued expenses and other liabilities			11,359								9,628								9,262								8,842								7,884								18.0				44.1
Stockholders' equity			201,079								198,842								194,332								193,239								193,120								1.1				4.1
Total liabilities and stockholders' equity		$	1,771,944							$	1,638,387							$	1,546,991							$	1,553,017							$	1,513,790								8.2				17.1
Net interest spread							2.97	%							3.20	%							3.20	%							3.15	%							3.18	%
Net interest margin							3.17	%							3.41	%							3.48	%							3.47	%							3.52	%

 

(1)

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2)

Average loan balances include nonaccrual loans.

(3)

Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

 

Page 17 of 18

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)

 

																						YTD				YTD
		Q3 2020				Q2 2020				Q1 2020				Q4 2019				Q3 2019				9/30/2020				9/30/2019
The following reconciles return on average equity and return on average tangible equity from continuing operations (Note 1):
Income from continuing operations		$	3,391			$	5,335			$	3,118			$	4,014			$	4,214			$	11,844			$	12,270
Income from continuing operations - annualized (A)		$	13,490			$	21,457			$	12,541			$	15,925			$	16,719			$	15,821			$	16,405
Net income, excluding net amortization of intangible assets		$	3,484			$	5,438			$	3,225			$	4,121			$	4,321			$	12,148			$	12,614
Net income, excluding net amortization of intangible assets - annualized (B)		$	13,860			$	21,872			$	12,971			$	16,350			$	17,143			$	16,227			$	16,865
Average stockholders' equity (C)		$	201,079			$	198,842			$	194,332			$	193,239			$	193,120			$	198,095			$	189,094
Less:  Average goodwill and other intangible assets			(19,430	)			(19,560	)			(19,702	)			(19,846	)			(19,991	)			(19,564	)			(20,136	)
Average tangible equity (D)		$	181,649			$	179,282			$	174,630			$	173,393			$	173,129			$	178,531			$	168,958
Return on average equity (GAAP)  (A)/(C)			6.71	%			10.79	%			6.45	%			8.24	%			8.66	%			7.99	%			8.68	%
Return on average tangible equity (Non-GAAP)  (B)/(D)			7.63	%			12.20	%			7.43	%			9.43	%			9.90	%			9.09	%			9.98	%
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio from continuing operations (Note 2):
Noninterest expense (E)		$	9,831			$	7,663			$	10,349			$	9,845			$	9,384			$	27,843			$	27,712
Less:  Amortization of intangible assets			(125	)			(138	)			(144	)			(144	)			(144	)			(407	)			(461	)
Adjusted noninterest expense (F)		$	9,706			$	7,525			$	10,205			$	9,701			$	9,240			$	27,436			$	27,251
Net interest income (G)			13,283				13,031				12,518				12,764				12,680				38,832				37,367
Add:  Taxable-equivalent adjustment			34				37				36				44				44				107				119
Taxable-equivalent net interest income (H)		$	13,317			$	13,068			$	12,554			$	12,808			$	12,724			$	38,939			$	37,486
Noninterest income (I)		$	2,581			$	2,769			$	2,352			$	2,694			$	2,529			$	7,702				7,326
Less:  Investment securities (gains)			—				(347	)			—				—				—				(347	)			—
Adjusted noninterest income (J)		$	2,581			$	2,422			$	2,352			$	2,694			$	2,529			$	7,355			$	7,326
Efficiency ratio (GAAP)  (E)/(G)+(I)			61.97	%			48.50	%			69.60	%			63.69	%			61.70	%			59.83	%			62.01	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)			61.05	%			48.58	%			68.46	%			62.58	%			60.58	%			59.26	%			60.81	%

 

 

Page 18 of 18

 

The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (L)		$	198,881			$	200,134			$	195,694			$	192,802			$	193,963
Less:  Goodwill and other intangible assets			(19,362	)			(19,488	)			(19,626	)			(19,770	)			(19,914	)
Tangible equity (M)		$	179,519			$	180,646			$	176,068			$	173,032			$	174,049
Shares outstanding (N)			12,218				12,526				12,525				12,500				12,742
Book value per common share (GAAP)  (L)/(N)		$	16.28			$	15.98			$	15.62			$	15.42			$	15.22
Tangible book value per common share (Non-GAAP) (M)/(N)		$	14.69			$	14.42			$	14.06			$	13.84			$	13.66
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (O)		$	198,881			$	200,134			$	195,694			$	192,802			$	193,963
Less:  Goodwill and other intangible assets			(19,362	)			(19,488	)			(19,626	)			(19,770	)			(19,914	)
Tangible equity (P)		$	179,519			$	180,646			$	176,068			$	173,032			$	174,049
Assets (Q)		$	1,828,172			$	1,719,524			$	1,571,421			$	1,559,235			$	1,561,679
Less:  Goodwill and other intangible assets			(19,362	)			(19,488	)			(19,626	)			(19,770	)			(19,914	)
Tangible assets (R)		$	1,808,810			$	1,700,036			$	1,551,795			$	1,539,465			$	1,541,765
Period-end equity/assets (GAAP)  (O)/(Q)			10.88	%			11.64	%			12.45	%			12.37	%			12.42	%
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)			9.92	%			10.63	%			11.35	%			11.24	%			11.29	%

 

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.