Shore Bancshares Reports Second Quarter and First-Half Financial Results

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Shore Bancshares Reports Second Quarter and First-Half Financial Results

PR Newswire

EASTON, Md., July 28, 2022 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) (the "Company") reported net income of $7.499 million or $0.38 per diluted common share for the second quarter of 2022, compared to net income of $5.613 million or $0.28 per diluted common share for the first quarter of 2022, and net income of $4.031 million or $0.34 per diluted common share for the second quarter of 2021. Net income for the first half of 2022 was $13.112 million or $0.66 per diluted common share, compared to net income for the first half of 2021 of $8.028 million or $0.68 per diluted common share. Net income, excluding merger related expenses for the second quarter of 2022 was $7.674 million or $0.39 per diluted common share, compared to net income, excluding merger related expenses of $6.156 million or $0.31 per diluted common share for the first quarter of 2022 and net income, excluding merger related expenses of $4.311 million or $0.37 per diluted common share for the second quarter 2021.

When comparing net income, excluding merger related expenses, for the second quarter of 2022 to the first quarter of 2022 net income increased $1.5 million due to an increase in net interest income of $2.2 million. When comparing net income, excluding merger related expenses, for the second quarter of 2022 to the second quarter of 2021, net income increased $3.3 million primarily due to increases in net interest income of $10.5 million and noninterest income of $2.9 million.  These improvements to income in the second quarter of 2022 were partially offset by an increase in noninterest expenses of $9.4 million primarily as a result of the acquisition of Severn Bank ("Severn") in November of 2021.  

"We are pleased to announce our second quarter financial results," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer.  "We continue to see strong loan demand and opportunities for growth within our various markets.  With minimal merger expenses in the second quarter due to a shift from integration to operation, we noted positive trends in our ROA, efficiency ratio, and tangible book value.  Our outlook for the remainder of 2022 is a very positive one, as we continue to maintain our commitment and focus on core earnings and enhanced returns for our shareholders."

Balance Sheet Review

Total assets were $3.443 billion at June 30, 2022, a $17.6 million, or less than 1.0%, decrease when compared to $3.460 billion at the end of 2021. This decrease was due to a decline in interest bearing deposits with other banks of $182.2 million, or 32.1%, partially offset by increases in loans held for investment of $145.4 million, or 6.9%, and investment securities held to maturity of $54.4 million, or 13.4%. The positive organic loan growth for loans held for investment was due to strong loan demand, specifically within our commercial real estate, residential real estate and consumer loan portfolios, partially offset by paydowns in the commercial loan portfolio.  As of June 30, 2022, the Company had 37 Paycheck Protection Program ("PPP') loans totaling $1.7 million that were outstanding.

Total deposits decreased $11.9 million, or less than 1%, when compared to December 31, 2021. The decrease in total deposits was primarily due to decreases in money market and savings accounts of $79.7 million, $38.4 million in noninterest-bearing deposits and $12.0 million in time deposits offset by an increase in interest bearing checking accounts of $118.1 million.    

Total stockholders' equity increased $2.1 million, or less than 1%, when compared to December 31, 2021, primarily due to current year earnings, partially offset by an increase in unrealized losses of $6.7 million (net of tax) on available for sale securities which are recorded in accumulated other comprehensive income (loss). At June 30, 2022, the ratio of total equity to total assets was 10.25% and the ratio of total tangible equity to total tangible assets was 8.39% compared to 10.14% and 8.25% at the end of 2021.

Review of Quarterly Financial Results

Net interest income was $24.6 million for the second quarter of 2022, compared to $22.4 million for the first quarter of 2022 and $14.1 million for the second quarter of 2021. The increase in net interest income when compared to the first quarter of 2022 was primarily due to increases in interest and fees on loans of $1.4 million, interest on deposits with other banks of $572 thousand and interest on investment securities of $407 thousand, partially offset by an increase in expense on interest-bearing deposits of $153 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $81.4 million, or 3.8%. Accretion income from loans acquired from Severn increased over first quarter by $265 thousand. The increase in interest on deposits with other banks was primarily due to the recent increases to the fed funds rate.  The increase in interest on taxable investment securities was driven by an increase in the rates of 26bps and an increase in the average balance within these securities of $15.2 million, or 2.9%, resulting from additional purchases of held to maturity securities during second quarter of 2022. The increase in deposits with other banks and investment securities was primarily due to excess liquidity.   

The increase in net interest income when compared to the second quarter of 2021 was primarily due to increases in interest and fees on loans of $9.1 million, interest on taxable investment securities of $1.3 million and interest on deposits with other banks of $771 thousand, partially offset by increases in expenses on interest-bearing deposits of $455 thousand and long-term borrowings of $171 thousand, all of which were significantly impacted by the acquisition of Severn in the fourth quarter of 2021.  Excluding the merger related impact to the balance sheet, organic loan growth and excess liquidity resulted in an improved overall yield on total earning assets, while maintaining lower cost of funding on core deposits.

The Company's net interest margin increased to 3.10% for the second quarter of 2022 from 2.78% for the first quarter of 2022 and 2.91% for the second quarter of 2021. The increase in net interest margin when compared to the first quarter of 2022 and second quarter of 2021 was primarily due to higher average loan balances, accretion income from purchased loans and higher rates paid on lower yielding assets. Excess liquidity continues to compress the overall net interest margin. Absent excess liquidity of $200 million, we estimate our margin for the second quarter of 2022 would have been 3.31%.

The provision for credit losses was $200 thousand for the three months ended June 30, 2022.  The comparable amounts were $600 thousand and $650 thousand for the three months ended March 31, 2022 and June 30, 2021, respectively. The decrease in the provision for credit losses during the second quarter of 2022 as compared to the prior quarters was primarily attributed to significant net recoveries.  Net recoveries for the second quarter of 2022 were $573 thousand, compared to net recoveries of $166 thousand for the first quarter of 2022 and net recoveries of $125 thousand for the second quarter 2021.  The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.89% at June 30, 2022, compared to 0.92% at March 31, 2022 and 1.12% at June 30, 2021. The decline in the percentage of the allowance from the first quarter of 2022 was primarily due to decreased historical loss experience.  The decline in the percentage of the allowance from the second quarter of 2021 was primarily the result of improved credit quality, including lower historical loss experience as well as lower pandemic related qualitative reserves.

At June 30, 2022 and March 31, 2022, nonperforming assets were $4.0 million and $3.9 million respectively. The balance of nonperforming assets increased primarily due to an increase in loans 90 days past due still accruing of $671 thousand, or 146.2%, partially offset by a decrease in other real estate owned ("OREO") of $364 thousand, or 64.9%, and nonaccrual loans of $155 thousand, or 5.4%.  Accruing troubled debt restructuring ("TDRs") decreased $110 thousand, or 2.2%,  at June 30, 2022 compared to March 31, 2022.  When comparing the second quarter of 2022 to the second quarter of 2021, nonperforming assets decreased $882 thousand, or 18.0%, primarily due to decreases in nonaccrual loans of $1.3 million, or 31.8%, offset by an increase in loans 90 days past due still accruing of $378 thousand, or 50.3%. Accruing TDRs decreased $1.4 million, or 22.8%. The ratio of nonperforming assets and accruing TDRs to total assets was 0.26%, 0.25% and 0.53% at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.  In addition, the ratio of accruing TDRs to total loans at June 30, 2022 was 0.22% compared to 0.23% at March 31, 2022 and 0.43% at June 30, 2021.

Total noninterest income for the second quarter of 2022 decreased $213 thousand, or 3.5%, when compared to the first quarter of 2022 and increased $2.9 million, or 100.9%, when compared to the second quarter of 2021. The decrease compared to the first quarter of 2022 was primarily due to a decrease in revenue associated with the mortgage division of $771 thousand, or 41.3%, and partially offset by increases in interchange credits of $215 thousand, Mid-MD Title Company ("Mid-MD Title") revenue of $103 thousand and service charges on deposit accounts of $79 thousand.  The increase in noninterest income when compared to the second quarter of 2021 was largely impacted by the addition of Severn in the fourth quarter of 2021 which included mortgage-banking revenue of $1.1 million and Mid-MD Title revenue of $426 thousand and also contributed to the increase in service charges on deposit accounts of $755 thousand and interchange fees of $217 thousand.

Total noninterest expense, excluding merger related expenses, for the second quarter of 2022 increased $251 thousand or 1.2%, when compared to the first quarter of 2022 and increased $9.4 million, or 89.1%, when compared to the second quarter of 2021. The increase in noninterest expense when compared to the first quarter of 2022 was primarily due to increases in fee and loan servicing expenses as well as derivatives expense.  The increase from the second quarter of 2021 was primarily due to increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and legal and professional fees, which were all significantly impacted by adding Severn and its operations.  

Review of Six-Month Financial Results

Net interest income for the first six months of 2022 was $47.0 million, an increase of $19.1 million, or 68.6%, when compared to the first six months of 2021.  The increase in net interest income was primarily due to an increase in total interest income of $20.1 million, or 65.2%, specifically interest and fees on loans of $16.8 million, or 58.4%. The improvement of interest and fees on loans was primarily due to the increase in the average balance of $740.5 million, or 51.1%, coupled with accretion income from the acquired loans of $1.5 million for the first six months of 2022.  Taxable investment securities and interest on deposits with other banks increased $2.4 million and $978 thousand, respectively, partially offset by an increase in total interest expense of $974 thousand. The increase in interest expense was the result of an increase in the average balance of interest bearing deposits of $860.6 million, or 68.1%, despite the rates paid on these deposits declining 9bps.  Interest on long term borrowings increased by $346 thousand due to long-term advances with FHLB and junior subordinated debt acquired as part of the Severn acquisition.   

The provision for credit losses for the six months ended June 30, 2022 and 2021 was $800 thousand and $1.1 million, respectively. The decrease in provision for credit losses was the result of significant recoveries in the first six months of 2022 of $739 thousand compared to $125 thousand for the first six months of 2021. The ratio of the allowance to total loans decreased from 1.02% at June 30, 2021, to 0.68% at June 30, 2022. Excluding PPP loans and acquired loans, the ratio of the allowance for credit losses to period-end loans was 0.89% at June 30, 2022, lower than the 1.12% at June 30, 2021, primarily due to improved credit quality, lower historical loss experience, and reduced pandemic related qualitative factors.

Total noninterest income for the six months ended June 30, 2022 increased $6.4 million, or 117.6%, when compared to the same period in 2021. The increase in noninterest income primarily consisted of revenue associated with the mortgage division of $3.0 million, service charges on deposit accounts of $1.4 million, revenue from Mid-Maryland Title of $749 thousand and other noninterest income of $803 thousand. The increase in other noninterest income was primarily due to increases in rental income of $666 thousand and other loan fee income of $232 thousand partially offset by losses of $88 thousand related to market value adjustments of equity securities.

Total noninterest expense, excluding merger related expenses, for the six months ended June 30, 2022 increased $18.5 million, or 87.9%, when compared to the same period in 2021. The increase was primarily the result of higher salaries, employee benefits, occupancy expense, other intangibles, data processing costs, other noninterest expenses, and FDIC insurance premiums due to significant increases in new and existing customers and the acquisition of Severn. In addition, as previously mentioned, during the first six months of 2022 the Company recorded merger-related expenses of $971 thousand due to the acquisition of Severn.  

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. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; the magnitude and duration of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results. 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".

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.

 

 

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)





















For the Three Months Ended


For the Six Months Ended




June 30, 


June 30, 




2022


2021


 Change


2022


2021


 Change


PROFITABILITY FOR THE PERIOD


















Net interest income


$

24,618


$

14,103


74.6

%

$

47,048


$

27,902


68.6

%

Provision for credit losses



200



650


(69.2)



800



1,075


(25.6)


Noninterest income



5,833



2,903


100.9



11,879



5,460


117.6


Noninterest expense



20,094



10,876


84.8



40,426



21,375


89.1


Income before income taxes



10,157



5,480


85.3



17,701



10,912


62.2


Income tax expense



2,658



1,449


83.4



4,589



2,884


59.1


Net income


$

7,499


$

4,031


86.0


$

13,112


$

8,028


63.3






































Return on average assets



0.88

%


0.78

%

10

bp


0.77

%


0.80

%

(3)

bp

Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)



0.94



0.86


8



0.85



0.84


1


Return on average equity



8.52



8.19


33



7.49



8.23


(74)


Return on average tangible equity - Non-GAAP (1), (2)



11.41



9.89


152



10.41



9.62


79


Net interest margin



3.10



2.91


19



2.94



2.96


(2)


Efficiency ratio - GAAP



65.99



63.95


204



68.60



64.07


453


Efficiency ratio - Non-GAAP (1), (2)



63.44



60.90


254



65.13



62.06


307




















PER SHARE DATA


















Basic and diluted net income per common share


$

0.38


$

0.34


11.8

%

$

0.66


$

0.68


(2.9)

%



















Dividends paid per common share


$

0.12


$

0.12



$

0.24


$

0.24



Book value per common share at period end



17.77



16.91


5.1










Tangible book value per common share at period end - Non-GAAP (1)



14.26



15.29


(6.7)










Market value at period end



18.50



16.75


10.4










Market range:


















High



21.21



18.01


17.8



21.41



18.10


18.3


Low



17.91



16.10


11.2



17.91



12.99


37.9




















AVERAGE BALANCE SHEET DATA


















Loans


$

2,217,139


$

1,444,684


53.5

%

$

2,188,236


$

1,447,767


51.1

%

Investment securities



546,252



286,121


90.9



538,676



257,130


109.5


Earning assets



3,189,926



1,949,509


63.6



3,233,136



1,908,945


69.4


Assets



3,419,168



2,061,214


65.9



3,448,165



2,018,818


70.8


Deposits



2,993,098



1,822,148


64.3



3,018,517



1,782,627


69.3


Stockholders' equity



353,192



197,532


78.8



353,102



196,666


79.5




















CREDIT QUALITY DATA


















Net (recoveries) charge-offs


$

(573)


$

(125)


(358.4)

%

$

(739)


$

(125)


(491.2)

%



















Nonaccrual loans


$

2,693


$

3,947


(31.8)










Loans 90 days past due and still accruing



1,130



752


50.3










Other real estate owned



197



203


(3.0)










Total nonperforming assets



4,020



4,902


(18.0)










Accruing troubled debt restructurings (TDRs)



4,894



6,338


(22.8)










Total nonperforming assets and accruing TDRs


$

8,914


$

11,240


(20.7)














































CAPITAL AND CREDIT QUALITY RATIOS


















Period-end equity to assets



10.25

%


9.37

%

88

bp









Period-end tangible equity to tangible assets - Non-GAAP (1)



8.39



8.55


(16)




























Annualized net (recoveries) charge-offs to average loans



(0.10)



(0.03)


(7)



(0.07)

%


(0.03)

%

(4)

bp



















Allowance for credit losses as a percent of:


















Period-end loans (3)



0.68



1.02


(34)










Period-end loans (4)



0.89



1.12


(23)










Nonaccrual loans



574.94



382.27


193










Nonperforming assets



385.15



307.79


77










Accruing TDRs



316.37



238.06


78










Nonperforming assets and accruing TDRs



173.69



134.23


39




























As a percent of total loans:


















Nonaccrual loans



0.12



0.27


(15)










Accruing TDRs



0.22



0.43


(21)










Nonaccrual loans and accruing TDRs



0.34



0.70


(36)




























As a percent of total loans+other real estate owned:


















Nonperforming assets



0.18



0.33


(15)










Nonperforming assets and accruing TDRs



0.39



0.76


(37)




























As a percent of total assets:


















Nonaccrual loans



0.08



0.19


(11)










Nonperforming assets



0.12



0.23


(11)










Accruing TDRs



0.14



0.30


(16)










Nonperforming assets and accruing TDRs



0.26



0.53


(27)










____________________

(1)   See the reconciliation table that begins on page 14 of 15.

(2)   This ratio excludes merger related expenses (Non-GAAP).

(3)   As of June 30, 2022 and June 30, 2021, these ratios include all loans held for investment, including PPP loans of $1.7 million and $86.8 million, respectively.

(4)   As of June 30, 2022 and June 30, 2021, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)



























June 30, 2022


June 30, 2022





June 30, 



December 31, 


June 30, 


compared to


compared to




2022


2021


2021


December 31, 2021


June 30, 2021


ASSETS















Cash and due from banks


$

18,473


$

16,919


$

18,275


9.2

%

1.1

%

Interest-bearing deposits with other banks



384,536



566,694



218,913


(32.1)


75.7


Cash and cash equivalents



403,009



583,613



237,188


(30.9)


69.9

















Investment securities available for sale (at fair value)



94,689



116,982



113,957


(19.1)


(16.9)


Investment securities held to maturity (at amortized cost)



458,957



404,594



198,884


13.4


130.8


Equity securities, at fair value



1,271



1,372



1,384


(7.4)


(8.2)


Restricted securities



9,894



4,159



3,189


137.9


210.3

















Loans held for sale, at fair value



7,306



37,749



-


(80.6)


-

















Loans held for investment



2,264,579



2,119,175



1,472,429


6.9


53.8


Less: allowance for credit losses



(15,483)



(13,944)



(15,088)


11.0


(2.6)


Loans, net



2,249,096



2,105,231



1,457,341


6.8


54.3

















Premises and equipment, net



52,244



51,624



25,313


1.2


106.4


Goodwill



63,281



63,421



17,518


(0.2)


261.2


Other intangible assets, net



6,506



7,535



1,473


(13.7)


341.7


Other real estate owned, net



197



532



203


(63.0)


(3.0)


Mortgage servicing rights, at fair value



5,228



4,087




27.9



Right of use assets, net



9,979



11,370



5,616


(12.2)


77.7


Cash surrender value on life insurance



58,437



47,935



41,672


21.9


40.2


Other assets



22,456



19,932



16,522


12.7


35.9


Total assets


$

3,442,550


$

3,460,136


$

2,120,260


(0.5)


62.4

















LIABILITIES















Noninterest-bearing deposits


$

889,122


$

927,497


$

538,009


(4.1)


65.3


Interest-bearing deposits



2,125,209



2,098,739



1,342,573


1.3


58.3


Total deposits



3,014,331



3,026,236



1,880,582


(0.4)


60.3

















Securities sold under retail repurchase agreements





4,143



2,907


(100.0)


(100.0)


Advances from FHLB - long-term



10,054



10,135




(0.8)



Subordinated debt



42,917



42,762



24,490


0.4


75.2


Total borrowings



52,971



57,040



27,397





















Lease liabilities



10,216



11,567



5,757


(11.7)


77.5


Accrued expenses and other liabilities



12,255



14,600



7,842


(16.1)


56.3


Total liabilities



3,089,773



3,109,443



1,921,578


(0.6)


60.8

















COMMITMENTS AND CONTINGENCIES






























STOCKHOLDERS' EQUITY















Common stock, par value $0.01; authorized 35,000,000 shares



198



198



118



67.8


Additional paid in capital



200,914



200,473



51,544


0.2


289.8


Retained earnings



158,316



149,966



146,414


5.6


8.1


Accumulated other comprehensive income (loss)



(6,651)



56



606


(11,976.8)


(1,197.5)


Total stockholders' equity



352,777



350,693



198,682


0.6


77.6


Total liabilities and stockholders' equity


$

3,442,550


$

3,460,136


$

2,120,260


(0.5)


62.4

















Period-end common shares outstanding



19,850



19,808



11,752


0.2


68.9


Book value per common share


$

17.77


$

17.71


$

16.91


0.3


5.1


 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)





















For the Three Months Ended



For the Six Months Ended




June 30, 


June 30, 




2022


2021


% Change


2022


2021


% Change


INTEREST INCOME


















Interest and fees on loans


$

23,452


$

14,381


63.1

%

$

45,537


$

28,747


58.4

%

Interest on investment securities:


















Taxable



2,392



1,095


118.4



4,377



2,025


116.1


Interest on deposits with other banks



826



55


1,401.8



1,080



102


958.8


Total interest income



26,670



15,531


71.7



50,994



30,874


65.2




















INTEREST EXPENSE


















Interest on deposits



1,511



1,056


43.1



2,869



2,240


28.1


Interest on short-term borrowings





2


(100.0)



2



3


(33.3)


Interest on long-term borrowings



541



370


46.2



1,075



729



Total interest expense



2,052



1,428


43.7



3,946



2,972


32.8




















NET INTEREST INCOME



24,618



14,103


74.6



47,048



27,902


68.6


Provision for credit losses



200



650


(69.2)



800



1,075


(25.6)




















NET INTEREST INCOME AFTER PROVISION


















FOR CREDIT LOSSES



24,418



13,453


81.5



46,248



26,827


72.4




















NONINTEREST INCOME


















Service charges on deposit accounts



1,438



683


110.5



2,797



1,357


106.1


Trust and investment fee income



447



475


(5.9)



961



882


9.0


Interchange credits



1,253



1,036


20.9



2,291



1,906


20.2


Mortgage-banking revenue



1,096






2,963





Title Company revenue



426






749





Other noninterest income



1,173



709


65.4



2,118



1,315


61.1


Total noninterest income



5,833



2,903


100.9



11,879



5,460


117.6




















NONINTEREST EXPENSE


















Salaries and wages



8,898



4,262


108.8



18,460



8,404


119.7


Employee benefits



2,269



1,493


52.0



4,931



3,337


47.8


Occupancy expense



1,485



770


92.9



3,052



1,584


92.7


Furniture and equipment expense



411



412


(0.2)



840



719


16.8


Data processing



1,668



1,217


37.1



3,275



2,344


39.7


Directors' fees



210



154


36.4



400



303


32.0


Amortization of intangible assets



511



120


325.8



1,028



246


317.9


FDIC insurance premium expense



429



223


92.4



772



408


89.2


Other real estate owned, net



57



1


5,600.0



51



2


2,450.0


Legal and professional fees



811



648


25.2



1,448



1,164


24.4


Merger related expenses



241



377


(36.1)



971



377


157.6


Other noninterest expenses



3,104



1,199


158.9



5,198



2,487


109.0


Total noninterest expense



20,094



10,876


84.8



40,426



21,375


89.1




















Income before income taxes



10,157



5,480


85.3



17,701



10,912


62.2


Income tax expense



2,658



1,449


83.4



4,589



2,884


59.1




















NET INCOME


$

7,499


$

4,031


86.0


$

13,112


$

8,028


63.3




















Weighted average shares outstanding - basic



19,847



11,752


68.9



19,838



11,749


68.8


Weighted average shares outstanding - diluted



19,847



11,754


68.9



19,838



11,750


68.8




















Basic and diluted net income per common share


$

0.38


$

0.34


11.8


$

0.66


$

0.68


(2.9)




















Dividends paid per common share



0.12



0.12




0.24



0.24



 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

























For the Three Months Ended


For the Six Months Ended




June 30, 


June 30, 




2022


2021


2022


2021




Average


Yield/


Average


Yield/


Average


Yield/


Average


Yield/




balance


rate


balance


rate


balance


rate


balance


rate


Earning assets






















Loans (1), (2), (3)


$

2,217,139


4.25

%

$

1,444,684


4.00

%

$

2,188,236


4.20

%

$

1,447,767


4.01

%

Investment securities






















Taxable



546,252


1.75



286,121


1.53



538,676


1.64



257,130


1.59


Interest-bearing deposits



426,535


0.78



218,704


0.10



506,224


0.43



204,048


0.10


Total earning assets



3,189,926


3.36

%


1,949,509


3.20

%


3,233,136


3.19

%


1,908,945


3.27

%

Cash and due from banks



26,162





16,908





5,569





18,070




Other assets



218,353





109,457





224,219





106,251




Allowance for credit losses



(15,273)





(14,660)





(14,759)





(14,448)




Total assets


$

3,419,168




$

2,061,214




$

3,448,165




$

2,018,818
















































Interest-bearing liabilities






















Demand deposits


$

644,881


0.22

%

$

405,473


0.13

%

$

617,461


0.19

%

$

421,816


0.14

%

Money market and savings deposits



1,019,295


0.21



605,202


0.17



1,048,634


0.22



565,341


0.17


Certificates of deposit $100,000 or more



234,325


0.58



135,376


1.04



260,312


0.48



133,073


1.14


Other time deposits



221,714


0.54



143,821


0.90



198,828


0.55



144,367


1.00


Interest-bearing deposits



2,120,215


0.29



1,289,872


0.33



2,125,235


0.27



1,264,597


0.36


Securities sold under retail repurchase






















   agreements and federal funds purchased






3,123


0.26



1,377


0.29



2,683


0.23


Advances from FHLB - long-term



10,075


0.60






10,096


0.58





Subordinated debt



42,876


4.93



24,474


6.06



42,840


4.92



24,459


6.01


Total interest-bearing liabilities



2,173,166


0.38

%


1,317,469


0.43

%


2,179,548


0.37

%


1,291,739


0.46

%

Noninterest-bearing deposits



872,883





532,276





893,282





518,030




Accrued expenses and other liabilities



19,927





13,937





22,233





12,383




Stockholders' equity



353,192





197,532





353,102





196,666




Total liabilities and stockholders' equity


$

3,419,168




$

2,061,214




$

3,448,165




$

2,018,818


























Net interest spread





2.98

%




2.77

%




2.82

%




2.81

%

Net interest margin





3.10

%




2.91

%




2.94

%




2.96

%

______________________

(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 accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

 Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)
























2nd Quarter


1st Quarter


4th Quarter


3rd Quarter



2nd Quarter


Q2 2022


Q2 2022




2022


2022


2021


2021



2021


compared to


compared to




Q2 2022


Q1 2022


Q4 2021


Q3 2021



Q2 2021


Q1 2022


Q2 2021


PROFITABILITY FOR THE PERIOD





















Taxable-equivalent net interest income


$

24,656


$

22,469


$

20,652


$

15,623


$

14,141


9.7

%

74.4

%

Less: Taxable-equivalent adjustment



38



39



13



34



38


(2.6)



Net interest income



24,618



22,430



20,639



15,589



14,103


9.8


74.6


Provision for credit losses



200



600



(1,723)



290



650


(66.7)


(69.2)


Noninterest income



5,833



6,046



5,129



2,909



2,903


(3.5)


100.9


Noninterest expense



20,094



20,332



23,497



11,934



10,876


(1.2)


84.8


Income before income taxes



10,157



7,544



3,994



6,274



5,480


34.6


85.3


Income tax expense



2,658



1,931



1,271



1,657



1,449


37.6


83.4


Net income


$

7,499


$

5,613


$

2,723


$

4,617


$

4,031


33.6


86.0























Return on average assets



0.88

%


0.65

%


0.36

%


0.84

%


0.78

%

23

bp

10

bp

    Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)



0.94



0.76



1.07



0.94



0.86


18


8


Return on average equity



8.52



6.45



3.59



9.12



8.19


207


33


Return on average tangible equity - Non-GAAP (1)



11.41



9.40



13.06



11.12



9.89


201


152


Net interest margin



3.10



2.78



2.87



2.99



2.91


32


19


Efficiency ratio - GAAP



65.99



71.40



91.19



64.52



63.95


(541)


204


Efficiency ratio - Non-GAAP (1), (2)



63.44



66.93



60.13



60.92



60.90


(349)


254























PER SHARE DATA





















Basic and diluted net income per common share


$

0.38


$

0.28


$

0.16


$

0.39


$

0.34


35.7

%

11.8

%






















Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




Book value per common share at period end



17.77



17.73



17.71



17.15



16.91


0.2


5.1


Tangible book value per common share at period end - Non-GAAP (1)



14.26



14.19



14.12



15.55



15.29


0.5


(6.7)


Market value at period end



18.50



20.48



20.85



17.73



16.75


(9.7)


10.4


Market range:





















High



21.21



21.41



23.19



18.00



18.01


(0.9)


17.8


Low



17.91



19.34



17.50



16.35



16.10


(7.4)


11.2























AVERAGE BALANCE SHEET DATA





















Loans


$

2,217,139


$

2,135,734


$

1,887,126


$

1,487,281


$

1,444,684


3.8

%

53.5

%

Investment securities



546,252



531,017



468,724



334,205



286,121


2.9


90.9


Earning assets



3,189,926



3,253,549



2,842,097



2,071,505



1,949,509


(2.0)


63.6


Assets



3,419,168



3,477,481



3,037,262



2,184,448



2,061,214


(1.7)


65.9


Deposits



2,993,098



3,044,213



2,547,151



1,943,225



1,822,148


(1.7)


64.3


Stockholders' equity



353,192



353,011



301,095



200,881



197,532


0.1


78.8























CREDIT QUALITY DATA





















Net (recoveries) charge-offs


$

(573)


$

(166)


$

(142)


$

(147)


$

(125)


(245.2)

%

(358.4)

%






















Nonaccrual loans


$

2,693


$

2,848


$

2,004


$

3,457


$

3,947


(5.4)


(31.8)


Loans 90 days past due and still accruing



1,130



459



508



748



752


146.2


50.3


Other real estate owned



197



561



532



203



203


(64.9)


(3.0)


Total nonperforming assets


$

4,020


$

3,868


$

3,044


$

4,408


$

4,902


3.9


(18.0)























Accruing troubled debt restructurings (TDRs)


$

4,894


$

5,004


$

5,667


$

5,750


$

6,338


(2.2)


(22.8)























Total nonperforming assets and accruing TDRs


$

8,914


$

8,872


$

8,711


$

10,158


$

11,240


0.5


(20.7)























CAPITAL AND CREDIT QUALITY RATIOS





















Period-end equity to assets



10.25

%


10.07

%


10.14

%


8.92

%


9.37

%

18

bp

88

bp

Period-end tangible equity to tangible assets - Non-GAAP (1)



8.39



8.22



8.25



8.15



8.55


17


(16)























Annualized net (recoveries) charge-offs to average loans



(0.10)



(0.03)



(0.03)



(0.04)



(0.03)


(7)


(7)























Allowance for credit losses as a percent of:





















Period-end loans (3)



0.68



0.67



0.66



1.04



1.02


1


(34)


Period-end loans (4)



0.89



0.92



0.93



1.10



1.12


(3)


(23)


Nonaccrual loans



574.94



516.50



695.81



449.09



382.27


5,844


193


Nonperforming assets



385.15



380.30



458.08



352.20



307.79


485


77


Accruing TDRs



316.37



293.96



246.06



270.00



238.06


2,241


78


Nonperforming assets and accruing TDRs



173.69



165.80



160.07



152.84



134.23


789


39























As a percent of total loans:





















Nonaccrual loans



0.12



0.13



0.09



0.23



0.27


(1)


(15)


Accruing TDRs



0.22



0.23



0.27



0.38



0.43


(1)


(21)


Nonaccrual loans and accruing TDRs



0.34



0.36



0.36



0.62



0.70


(2)


(36)























As a percent of total loans+other real estate owned:





















Nonperforming assets



0.18



0.18



0.14



0.29



0.33



(15)


Nonperforming assets and accruing TDRs



0.39



0.41



0.41



0.68



0.76


(2)


(37)























As a percent of total assets:





















Nonaccrual loans



0.08



0.08



0.06



0.15



0.19



(11)


Nonperforming assets



0.12



0.11



0.09



0.19



0.23


1


(11)


Accruing TDRs



0.14



0.14



0.16



0.25



0.30



(16)


Nonperforming assets and accruing TDRs



0.26



0.25



0.25



0.44



0.53


1


(27)


__________________________

(1)     See the reconciliation table that begins on page 15.

(2)     This ratio excludes merger related expenses (Non-GAAP).

(3)     Includes all loans held for investment, including PPP loan balances for all periods shown.

(4)     For all periods shown, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)







































Q2 2022


Q2 2022



















compared to


compared to




Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


Q1 2022


Q2 2021


INTEREST INCOME





















Interest and fees on loans


$

23,452


$

22,085


$

20,564


$

15,484


$

14,381


6.2

%

63.1

%

Interest on investment securities:





















Taxable



2,392



1,985



1,663



1,318



1,095


20.5


118.4


Interest on deposits with other banks



826



254



169



97



55


225.2


1,401.8


Total interest income



26,670



24,324



22,396



16,899



15,531


9.6


71.7























INTEREST EXPENSE





















Interest on deposits



1,511



1,358



1,272



949



1,056


11.3


43.1


Interest on short-term borrowings





2



3



2



2


(100.0)


(100.0)


Interest on long-term borrowings



541



534



482



359



370


1.3


46.2


Total interest expense



2,052



1,894



1,757



1,310



1,428


8.3


43.7























NET INTEREST INCOME



24,618



22,430



20,639



15,589



14,103


9.8


74.6


Provision for credit losses



200



600



(1,723)



290



650


(66.7)


(69.2)























NET INTEREST INCOME AFTER PROVISION





















FOR CREDIT LOSSES



24,418



21,830



22,362



15,299



13,453


11.9


81.5























NONINTEREST INCOME





















Service charges on deposit accounts



1,438



1,359



1,234



805



683


5.8


110.5


Trust and investment fee income



447



514



522



477



475


(13.0)


(5.9)


Gains on sales and calls of investment securities









2






Interchange credits



1,253



1,038



1,043



1,016



1,036


20.7


20.9


Mortgage-banking revenue



1,096



1,867



948






(41.3)



Title Company revenue



426



323



247






31.9



Other noninterest income



1,173



945



1,135



609



709


24.1


65.4


Total noninterest income



5,833



6,046



5,129



2,909



2,903


(3.5)


100.9























NONINTEREST EXPENSE





















Salaries and wages



8,898



9,562



7,727



5,091



4,262


(6.9)


108.8


Employee benefits



2,269



2,662



2,271



1,654



1,493


(14.8)


52.0


Occupancy expense



1,485



1,567



1,263



843



770


(5.2)


92.9


Furniture and equipment expense



411



429



385



449



412


(4.2)


(0.2)


Data processing



1,668



1,607



1,487



1,170



1,217


3.8


37.1


Directors' fees



210



190



170



147



154


10.5


36.4


Amortization of intangible assets



511



517



381



107



120


(1.2)


325.8


FDIC insurance premium expense



429



343



362



245



223


25.1


92.4


Other real estate owned expenses, net



57



(6)



(2)



4



1


1,050.0


5,600.0


Legal and professional fees



811



637



150



428



648


27.3


25.2


Merger related expenses



241



730



7,615



538



377


(67.0)


(36.1)


Other noninterest expenses



3,104



2,094



1,688



1,258



1,199


48.2


158.9


Total noninterest expense



20,094



20,332



23,497



11,934



10,876


(1.2)


84.8























Income before income taxes



10,157



7,544



3,994



6,274



5,480


34.6


85.3


Income tax expense



2,658



1,931



1,271



1,657



1,449


37.6


83.4























NET INCOME


$

7,499


$

5,613


$

2,723


$

4,617


$

4,031


33.6


86.0























Weighted average shares outstanding - basic



19,847



19,828



17,180



11,752



11,752


0.1


68.9


Weighted average shares outstanding - diluted



19,847



19,828



17,180



11,752



11,754


0.1


68.9























Basic and diluted net income per common share


$

0.38


$

0.28


$

0.16


$

0.39


$

0.34


35.7


11.8























Dividends paid per common share



0.12



0.12



0.12



0.12



0.12




 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)



























































Average balance





























Q2 2022


Q2 2022





























compared to


compared to




Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


Q1 2022


Q2 2021




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)


$

2,217,139


4.25

%

$

2,135,734


4.20

%

$

1,887,126


4.33

%

$

1,487,281


4.14

%

$

1,444,684


4.00

%

3.8

%

53.5

%

Investment securities































Taxable



546,252


1.75



531,017


1.49



468,724


1.42



334,205


1.58



286,121


1.53


2.9


90.9


Interest-bearing deposits



426,535


0.78



586,798


0.18



486,247


0.14



250,019


0.15



218,704


0.10


(27.3)


95.0


Total earning assets



3,189,926


3.36

%


3,253,549


3.01

%


2,842,097


3.11

%


2,071,505


3.24

%


1,949,509


3.20

%

(2.0)


63.6


Cash and due from banks



26,162





(15,253)





22,625





19,453





16,908




(271.5)


54.7


Other assets



218,353





253,424





188,399





108,989





109,457




(13.8)


99.5


Allowance for credit losses



(15,273)





(14,239)





(15,859)





(15,499)





(14,660)




7.3


4.2


Total assets


$

3,419,168




$

3,477,481




$

3,037,262




$

2,184,448




$

2,061,214




(1.7)


65.9

































Interest-bearing liabilities































Demand deposits


$

644,881


0.22

%

$

589,737


0.16

%

$

494,081


0.14

%

$

462,950


0.14

%

$

405,473


0.13

%

9.4


59.0


Money market and savings deposits



1,019,295


0.21



1,075,791


0.23



1,001,115


0.26



644,330


0.18



605,202


0.17


(5.3)


68.4


Certificates of deposit $100,000 or more



234,325


0.58



286,587


0.40



174,268


0.49



136,059


0.71



135,376


1.04


(18.2)


73.1


Other time deposits



221,714


0.54



175,683


0.57



173,975


0.50



142,777


0.68



143,821


0.90


26.2


54.2


Interest-bearing deposits



2,120,215


0.29



2,127,798


0.26



1,843,439


0.27



1,386,116


0.27



1,289,872


0.33


(0.4)


64.4


Securities sold under retail repurchase agreements































    and federal funds purchased






2,770


0.29



3,972


0.30



2,718


0.29



3,123


0.26


(100.0)


(100.0)


Advances from FHLB - long-term



10,075


0.60



10,116


0.57



6,630


2.21








(0.4)


100.0


Subordinated debt



42,876


4.93



42,804


4.93



36,589


5.12



24,504


5.81



24,474


6.06


0.2


75.2


Total interest-bearing liabilities



2,173,166


0.38

%


2,183,488


0.35

%


1,890,630


0.37

%


1,413,338


0.37

%


1,317,469


0.43

%

(0.5)


65.0


Noninterest-bearing deposits



872,883





916,415





703,712





557,109





532,276




(4.8)


64.0


Accrued expenses and other liabilities



19,927





24,567





141,825





13,120





13,937




(18.9)


43.0


Stockholders' equity



353,192





353,011





301,095





200,881





197,532




0.1


78.8


Total liabilities and stockholders' equity


$

3,419,168




$

3,477,481




$

3,037,262




$

2,184,448




$

2,061,214




(1.7)


65.9

































Net interest spread





2.98

%




2.66

%




2.74

%




2.87

%




2.77

%





Net interest margin





3.10

%




2.78

%




2.87

%




2.99

%




2.91

%





_______________

(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 accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)









































YTD


YTD




Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


6/30/2022


6/30/2021

























The following reconciles return on average equity and return on average tangible equity (Note 1):














































Net Income


$

7,499


$

5,613


$

2,723


$

4,617


$

4,031


$

13,112


$

8,028


Net Income - annualized (A)


$

30,078


$

22,764


$

10,803


$

18,317


$

16,168


$

26,441


$

16,144

























Net income, excluding net amortization of intangible assets























    and merger related expenses


$

8,054


$

6,541


$

8,176


$

5,098


$

4,402


$

14,593


$

8,493


Net income, excluding net amortization of intangible assets and merger related expenses - annualized (B)


$

32,305


$

26,527


$

32,437


$

20,226


$

17,656


$

29,428


$

17,079

























Return on average assets excluding net amortization of intangible assets and merger related expenses - Non-GAAP



0.94

%


0.76

%


1.07

%


0.94

%


0.86

%


0.85

%


0.84

%
























Average stockholders' equity (C)


$

353,192


$

353,011


$

301,095


$

200,881


$

197,532


$

353,102


$

196,666


Less:  Average goodwill and other intangible assets



(70,057)



(70,711)



(52,692)



(18,942)



(19,053)



(70,382)



(19,115)


Average tangible equity (D)


$

283,135


$

282,300


$

248,403


$

181,939


$

178,479


$

282,720


$

177,551

























Return on average equity (GAAP)  (A)/(C)



8.52

%


6.45

%


3.59

%


9.12

%


8.19

%


7.49

%


8.21

%

Return on average tangible equity (Non-GAAP)  (B)/(D)



11.41

%


9.40

%


13.06

%


11.12

%


9.89

%


10.41

%


9.62

%
























The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):














































Noninterest expense (E)


$

20,094


$

20,332


$

23,497


$

11,934


$

10,876


$

40,426


$

21,375


Less:  Amortization of intangible assets



(511)



(517)



(381)



(107)



(120)



(1,028)



(246)


           Merger Expenses



(241)



(730)



(7,615)



(538)



(377)



(971)



(377)


Adjusted noninterest expense (F)


$

19,342


$

19,085


$

15,501


$

11,289


$

10,379


$

38,427


$

20,752

























Net interest income (G)



24,618



22,430



20,639



15,589



14,103



47,048



27,902


Add:  Taxable-equivalent adjustment



38



39



13



34



38



77



74


Taxable-equivalent net interest income (H)


$

24,656


$

22,469


$

20,652


$

15,623


$

14,141


$

47,125


$

27,976

























Noninterest income (I)


$

5,833


$

6,046


$

5,129


$

2,909


$

2,903


$

11,879



5,460


Less:  Investment securities (gains)









(2)








Adjusted noninterest income (J)


$

5,833


$

6,046


$

5,129


$

2,907


$

2,903


$

11,879


$

5,460

























Efficiency ratio (GAAP)  (E)/(G)+(I)



65.99

%


71.40

%


91.19

%


64.52

%


63.95

%


68.60

%


64.07

%

Efficiency ratio (Non-GAAP)  (F)/(H)+(J)



63.44

%


66.93

%


60.13

%


60.92

%


60.90

%


65.13

%


62.06

%
























The following reconciles book value per common share and tangible book value per common share (Note 1):














































Stockholders' equity (L)


$

352,777


$

351,864


$

350,693


$

201,607


$

198,682








Less:  Goodwill and other intangible assets



(69,787)



(70,299)



(70,956)



(18,883)



(18,991)








Tangible equity (M)


$

282,990


$

281,565


$

279,737


$

182,724


$

179,691































Shares outstanding (N)



19,850



19,843



19,808



11,752



11,752































Book value per common share (GAAP)  (L)/(N)


$

17.77


$

17.73


$

17.71


$

17.15


$

16.91








Tangible book value per common share (Non-GAAP) (M)/(N)


$

14.26


$

14.19


$

14.12


$

15.55


$

15.29






















































The following reconciles equity to assets and tangible equity to tangible assets (Note 1):














































Stockholders' equity (O)


$

352,777


$

351,864


$

350,693


$

201,607


$

198,682








Less:  Goodwill and other intangible assets



(69,787)



(70,299)



(70,956)



(18,883)



(18,991)








Tangible equity (P)


$

282,990


$

281,565


$

279,737


$

182,724


$

179,691































Assets (Q)


$

3,442,550


$

3,494,497


$

3,460,136


$

2,260,774


$

2,120,260








Less:  Goodwill and other intangible assets



(69,787)



(70,299)



(70,956)



(18,883)



(18,991)








Tangible assets (R)


$

3,372,763


$

3,424,198


$

3,389,180


$

2,241,891


$

2,101,269































Period-end equity/assets (GAAP)  (O)/(Q)



10.25

%


10.07

%


10.14

%


8.92

%


9.37

%







Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)



8.39

%


8.22

%


8.25

%


8.15

%


8.55

%







________________________

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.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/shore-bancshares-reports-second-quarter-and-first-half-financial-results-301595646.html

SOURCE Shore Bancshares, Inc.

Copyright CNW Group 2022

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