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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): January 26, 2023

 

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland 000-22345 52-1974638
(State or other jurisdiction of (Commission file number) (IRS Employer
incorporation or organization)   Identification No.)

 

18 E. Dover St., Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (410) 763-7800

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading Symbol Name of Each Exchange on Which
Registered
Common stock, par value $.01 per share SHBI Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 


 

Item 2.02. Result of Operation and Financial Condition.

 

On January 26, 2023, Shore Bancshares, Inc. (the “Company”) issued a press release setting forth the Company’s fourth quarter and year-to-date 2022 financial results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference

 

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.

 

2


 

EXHIBIT INDEX

 

Exhibit    
Number   Description
99.1   Press Release, dated January 26, 2023 (filed herewith)
104   Cover Page Interactive Data File (embedded within the inline XBRL document)

 

3


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SHORE BANCSHARES, INC.
   
Dated: January 26, 2023 By: /s/ Lloyd L. Beatty, Jr.
    Lloyd L. Beatty, Jr.
    President and Chief Executive Officer

 

4

 

 

 

EX-99.1 2 tm234508d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

18 E. Dover Street

Easton, Maryland 21601

Phone 410-763-7800

 

PRESS RELEASE

 

Shore Bancshares Reports 2022 Financial Results

 

Easton, Maryland (01/26/2023) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company”) reported net income of $8.407 million or $0.42 per diluted common share for the fourth quarter of 2022, compared to net income of $9.658 million or $0.49 per diluted common share for the third quarter of 2022, and net income of $2.723 million or $0.16 per diluted common share for the fourth quarter of 2021. Net income for the fiscal year of 2022 was $31.177 million or $1.57 per diluted common share, compared to net income for the fiscal year of 2021 of $15.368 million or $1.17 per diluted common share. Net income, excluding merger related expenses, for the fourth quarter of 2022 was $9.123 million or $0.46 per diluted common share, compared to net income, excluding merger related expenses, of $9.774 million or $0.49 per diluted common share for the third quarter of 2022 and net income, excluding merger related expenses, of $7.914 million or $0.46 per diluted common share for the fourth quarter 2021. Net income, excluding merger related expenses, for the fiscal year of 2022 was $32.728 million or $1.65 per diluted common share compared to net income for the fiscal year of 2021 of $21.237 million or $1.62 per diluted common share. On December 14, 2022, the Company and The Community Financial Corporation (“TCFC”) announced that they had entered into a merger agreement pursuant to which TCFC will be merged with and into the Company. The Company anticipates additional merger-related expenses due to the pending TCFC acquisition.

 

When comparing net income, excluding merger related expenses, for the fourth quarter of 2022 to the third quarter of 2022, net income decreased $651 thousand due to a decrease in net interest income of $372 thousand and an increase in noninterest expense of $1.3 million partially offset by an increase in noninterest income of $518 thousand and a decrease in provision for credit losses of $225 thousand. When comparing net income, excluding merger related expenses, for the fourth quarter of 2022 to the fourth quarter of 2021, net income increased $1.2 million primarily due to increases in net interest income of $6.3 million and noninterest income of $733 thousand offset by increases in noninterest expense of $4.2 million due to the acquisition of Severn Bank (“Severn”) in November of 2021.

 

“We are pleased to report our fourth quarter earnings and fiscal year 2022 financial results” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer. “In 2022, we experienced significant loan growth of just over 20% and successful integration of Severn. With the recent announcement of our pending merger with TCFC, we expect the future of the combined organizations to be very promising given our ability to help customers with higher loan limits, make greater investments in technology and increased career opportunities for employees.”

 

Balance Sheet Review

Total assets were $3.477 billion at December 31, 2022, a $17.1 million, or less than 1.0%, increase when compared to $3.460 billion at the end of 2021. During 2022, the Company shifted its asset mix by deploying cash and cash equivalents into higher yielding assets which consisted of loans and investment securities. As of December 31, 2022, the Company had 4 Paycheck Protection Program (“PPP’) loans totaling $187 thousand that were outstanding.

 

Total deposits decreased $16.5 million, or less than 1%, when compared to December 31, 2021. The decrease in total deposits was due to decreases in money market and savings accounts of $85.7 million, noninterest-bearing deposits of $65.5 million and time deposits of $35.2 million, partially offset by an increase in interest bearing checking accounts of $170.0 million.

 

Page 2 of 15

 

Total stockholders’ equity increased $13.6 million, or 3.9%, when compared to December 31, 2021, primarily due to current year earnings, partially offset by an increase in unrealized losses on available for sale securities of $9.1 million. At December 31, 2022, the ratio of total equity to total assets was 10.48% and the ratio of total tangible equity to total tangible assets was 8.67% compared to 10.14% and 8.25% at the end of 2021, respectively.

 

Review of Quarterly Financial Results

Net interest income was $26.9 million for the fourth quarter of 2022, compared to $27.3 million for the third quarter of 2022 and $20.6 million for the fourth quarter of 2021. The decrease in net interest income when compared to the third quarter of 2022 was primarily due to increases in interest expense on interest-bearing deposits of $2.0 million. In addition, the decrease in the average balance on deposits with other banks of $187.3 million resulted in a decrease in interest income of $802 thousand, partially offset by an increase in interest and fees on loans of $1.7 million and interest on investment securities of $759 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $140.0 million, or 6.0%. The decrease in interest on deposits at other banks was due to the utilization of cash to fund loan growth with higher yields. The increase in interest on taxable investment securities was driven by an increase in the rates of 33bps and an increase in the average balance within these securities of $43.1 million, or 7.0%.

 

The increase in net interest income when compared to the fourth quarter of 2021 was primarily due to increases in interest and fees on loans of $7.1 million, interest on taxable investment securities of $2.3 million and interest on deposits with other banks of $495 thousand, partially offset by expense increases in interest-bearing deposits of $3.3 million, short term borrowings of $69 thousand and long-term borrowings of $228 thousand.

 

The Company’s net interest margin decreased to 3.35% for the fourth quarter of 2022 from 3.38% for the third quarter of 2022 and increased compared to 2.87% for the fourth quarter of 2021. The decrease in net interest margin when compared to the third quarter of 2022 was primarily due to higher rates paid on interest bearing deposits and borrowings partially offset by higher yields on earning assets. The increase in net interest margin compared to the fourth quarter of 2021 was due to significantly higher volume as well as improved yields on all earning assets.

 

The provision for credit losses was $450 thousand for the three months ended December 31, 2022. The comparable amounts were $675 thousand and $(1.7) million for the three months ended September 30, 2022, and December 31, 2021, respectively. The decrease in the provision for credit losses during the fourth quarter of 2022 as compared to the prior quarters was primarily a result of eliminating pandemic related qualitative reserves in the fourth quarter of 2022. Net charge offs for the fourth quarter of 2022 were $84 thousand, compared to net recoveries of $119 thousand for the third quarter of 2022 and net recoveries of $142 thousand for the fourth quarter of 2021. The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.78% at December 31, 2022, compared to 0.84% at September 30, 2022, and 0.96% at December 31, 2021. The decline in the percentage of the allowance from the third quarter of 2022 was primarily due to eliminating pandemic related qualitative reserves. The decline in the percentage of the allowance from the fourth quarter of 2021 was primarily the result of lower historical loss experience as well as eliminating pandemic related qualitative reserves.

 

At December 31, 2022 and September 30, 2022, nonperforming assets were $4.0 million and $2.8 million, respectively. The balance of nonperforming assets increased primarily due to an increase in loans 90 days past due still accruing of $1.2 million at December 31, 2022 compared to September 30, 2022. When comparing the fourth quarter of 2022 to the fourth quarter of 2021, nonperforming assets increased $902 thousand, or 29.6%, primarily due to increases in loans 90 days past due and still accruing of $1.3 million, or 262.4% which was a result of growth and timing of matured loans. Accruing TDRs decreased $1.3 million, or 22.3%, compared to the fourth quarter of 2021. The ratio of nonperforming assets and accruing TDRs to total assets at December 31, 2022, and September 30, 2022 was 0.24% and 0.21% respectively, and was 0.25% at December 31, 2021. In addition, the ratio of accruing TDRs to total loans at December 31, 2022 was 0.17% compared to 0.19% at September 30, 2022 and 0.27% at December 31, 2021.

 

Total noninterest income for the fourth quarter of 2022 increased $518 thousand, or 9.7%, when compared to the third quarter of 2022 and increased $733 thousand, or 14.3%, when compared to the fourth quarter of 2021. The increase compared to the third quarter of 2022 was primarily due to increases in revenue associated with the mortgage division of $887 thousand, or 130.4%, partially offset by decreases in other banking fees of $206 thousand, or 6.5% and service charges on deposit accounts of $163 thousand, or 10.8%. The increase in noninterest income when compared to the fourth quarter of 2021 was primarily due to increases in revenue associated with the mortgage division of $619 thousand, or 65.3% and, service charges on deposit accounts of $112 thousand, or 9.1%.

 

Page 3 of 15

 

Total noninterest expense, excluding merger related expenses, for the fourth quarter of 2022 increased $1.3 million or 6.9%, when compared to the third quarter of 2022 and increased $4.2 million, or 26.1%, when compared to the fourth quarter of 2021. The increase in noninterest expense when compared to the third quarter of 2022 was primarily due to an increase in accruals on bonuses and group insurance in the fourth quarter. The increase from the fourth 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 and the addition of two new branches in 2022.

 

Review of 2022 Financial Results

Net interest income for 2022 was $101.3 million, an increase of $37.2 million, or 58.0%, when compared to 2021. The increase in net interest income was primarily due to an increase in total interest income of $43.7 million, or 62.2%, specifically interest and fees on loans of $34.3 million, or 53.0%. The improvement in interest and fees on loans was primarily due to the increase in the average balance of $725.2 million, or 46.2%, coupled with accretion income from acquired loans of $3.0 million for 2022. Taxable investment securities and interest on deposits with other banks increased $6.5 million and $2.8 million, respectively, partially offset by an increase in total interest expense of $6.5 million, or 107.7%. The increase in interest expense was primarily the result of an increase in the average balance of interest-bearing deposits of $684.5 million, or 47.5%. Interest on short term and long-term borrowings increased by $988 thousand due to short and long-term advances with the FHLB and junior subordinated debt acquired as part of the Severn acquisition. The long-term advances with the FHLB matured in October of 2022.

 

The provision for credit losses for 2022 and 2021 was $1.9 million and $(358) thousand, respectively. The increase in provision for credit losses was the result of an increase in loans held for investment in 2022 of $436.9 million. The ratio of the allowance to total loans decreased from 0.66% at December 31, 2021, to 0.65% at December 31, 2022. Excluding PPP loans and acquired loans, the ratio of the allowance for credit losses to period-end loans was 0.78% at December 31, 2022, lower than the 0.96% at December 31, 2021, primarily due to lower historical loss experience and the elimination of pandemic related qualitative factors.

 

Total noninterest income for 2022 increased $9.6 million, or 71.0%, when compared to the same period in 2021. The increase in noninterest income primarily consisted of revenue associated with the mortgage division of $4.3 million, service charges on deposit accounts of $2.3 million, revenue from Mid-Maryland Title of $1.1 million and other noninterest income of $1.2 million. The increase in other noninterest income was primarily due to increases in rental fee income of $1.3 million.

 

Total noninterest expense, excluding merger related expenses, for 2022 increased $29.9 million, or 62.0%, 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 and its operations and the addition of two new branches in 2022. In addition, during 2022 the Company recorded merger-related expenses of $1.2 million due to the acquisition of Severn and $935 thousand due to the pending merger with TCFC.

 

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.

 

Page 4 of 15

 

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 potential resurgence 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.

 

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

 

Page 5 of 15

 

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)

 

 

    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2022     2021     Change     2022     2021     Change  
PROFITABILITY FOR THE PERIOD                                                
Net interest income   $ 26,943     $ 20,639       30.5 %   $ 101,302     $ 64,130       58.0 %
Provision for credit losses     450       (1,723 )     126.1       1,925       (358 )     637.7  
Noninterest income     5,862       5,129       14.3       23,086       13,498       71.0  
Noninterest expense     21,000       23,497       (10.6 )     80,322       56,806       41.4  
Income before income taxes     11,355       3,994       184.3       42,141       21,180       99.0  
Income tax expense     2,948       1,271       131.9       10,964       5,812       88.6  
Net income   $ 8,407     $ 2,723       208.7     $ 31,177     $ 15,368       102.9  
                                                 
Return on average assets     0.97 %     0.36 %     61 bp     0.90 %     0.66 %     24 bp
Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)     1.09       1.07       2       0.99       0.95       4  
Return on average equity     9.22       3.59       563       8.76       6.86       190  
Return on average tangible equity - Non-GAAP (1), (2)     12.83       13.06       (23 )     11.96       11.34       62  
Net interest margin     3.35       2.87       48       3.15       2.94       21  
Efficiency ratio - GAAP     64.01       91.19       (2,718 )     64.57       73.18       (861 )
Efficiency ratio - Non-GAAP (1), (2)     59.59       60.13       (54 )     61.21       61.15       6  
                                                 
PER SHARE DATA                                                
Basic and diluted net income per common share   $ 0.42     $ 0.16       167.1 %   $ 1.57     $ 1.17       34.1 %
                                                 
Dividends paid per common share   $ 0.12     $ 0.12           $ 0.48     $ 0.48        
Book value per common share at period end     18.34       17.71       3.6                          
Tangible book value per common share at period end - Non-GAAP (1)     14.87       14.12       5.3                          
Market value at period end     17.43       20.85       (16.4 )                        
Market range:                                                
High     20.85       23.19       (10.1 )     21.41       23.19       (7.7 )
Low     17.04       17.50       (2.6 )     17.04       12.99       31.2  
                                                 
AVERAGE BALANCE SHEET DATA                                                
Loans   $ 2,467,324     $ 1,887,126       30.7 %   $ 2,293,627     $ 1,568,468       46.2 %
Investment securities     661,968       468,724       41.2       589,842       329,890       78.8  
Earning assets     3,206,591       2,842,097       12.8       3,220,672       2,185,123       47.4  
Assets     3,441,079       3,037,262       13.3       3,444,981       2,317,597       48.6  
Deposits     3,006,734       2,547,151       18.0       3,014,109       2,015,624       49.5  
Stockholders' equity     361,623       301,095       20.1       355,850       224,055       58.8  

 

Page 6 of 15

 

CREDIT QUALITY DATA                                                
Net (recoveries) /chargeoffs   $ 84     $ (142 )     159.2 %   $ (774 )   $ (414 )     (87.0 )%
                                                 
Nonaccrual loans   $ 1,908     $ 2,004       (4.8 )                        
Loans 90 days past due and still accruing     1,841       508       262.4                          
Other real estate owned     197       532       (63.0 )                        
Total nonperforming assets     3,946       3,044       29.6                          
Accruing troubled debt restructurings (TDRs)     4,405       5,667       (22.3 )                        
Total nonperforming assets and accruing TDRs   $ 8,351     $ 8,711       (4.1 )                        
                                                 
                                                 
CAPITAL AND CREDIT QUALITY RATIOS                                                
Period-end equity to assets     10.48 %     10.14 %     34 bp                        
Period-end tangible equity to tangible assets - Non-GAAP (1)     8.67       8.25       42                          
                                                 
Annualized net (recoveries) to average loans     0.01       (0.03 )     4       (0.03 )%     (0.03 )%      — bp
                                                 
Allowance for credit losses as a percent of:                                                
Period-end loans (3)     0.65       0.66       (1 )                        
Period-end loans (4)     0.78       0.96       (18 )                        
Nonaccrual loans     872.27       695.81       17,646                          
Nonperforming assets     421.77       458.08       (3,631 )                        
Accruing TDRs     377.82       246.06       13,176                          
Nonperforming assets and accruing TDRs     199.29       160.07       3,922                          
                                                 
As a percent of total loans:                                                
Nonaccrual loans     0.07       0.09       (2 )                        
Accruing TDRs     0.17       0.27       (10 )                        
Nonaccrual loans and accruing TDRs     0.25       0.36       (11 )                        
                                                 
As a percent of total loans+other real estate owned:                                                
Nonperforming assets     0.15       0.14       1                          
Nonperforming assets and accruing TDRs     0.33       0.41       (8 )                        
                                                 
As a percent of total assets:                                                
Nonaccrual loans     0.05       0.06       (1 )                        
Nonperforming assets     0.11       0.09       2                          
Accruing TDRs     0.13       0.16       (3 )                        
Nonperforming assets and accruing TDRs     0.24       0.25       (1 )                        

 

 

(1) See the reconciliation table that begins on page 14 of 15.
(2) This ratio excludes merger related expenses (Non-GAAP) on page 5.
(3) As of December 31, 2022 and December 31, 2021, these ratios include all loans held for investment, including PPP loans of $187 thousand and $27.6 million, respectively.
(4) As of December 31, 2022 and December 31, 2021, these ratios exclude PPP loans, acquired loans, and the associated purchase discount mark on the acquired loans from both Severn and Northwest.

 

Page 7 of 15

 

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

 

                December 31, 2022  
    December 31,     December 31,     compared to  
    2022     2021     December 31, 2021  
ASSETS                        
Cash and due from banks   $ 37,661     $ 16,919       122.6  
Interest-bearing deposits with other banks     17,838       566,694       (96.9 )
Cash and cash equivalents     55,499       583,613       (90.5 )
                         
Investment securities available for sale (at fair value)     83,587       116,982       (28.5 )
Investment securities held to maturity (at amortized cost)     559,455       404,594       38.3  
Equity securities, at fair value     1,233       1,372       (10.1 )
Restricted securities     11,169       4,159       168.6  
                         
Loans held for sale, at fair value     4,248       37,749       (88.7 )
                         
Loans held for investment     2,556,107       2,119,175       20.6  
Less: allowance for credit losses     (16,643 )     (13,944 )     19.4  
Loans, net     2,539,464       2,105,231       20.6  
                         
Premises and equipment, net     51,488       51,624       (0.3 )
Goodwill     63,266       63,421       (0.2 )
Other intangible assets, net     5,547       7,535       (26.4 )
Other real estate owned, net     197       532       (63.0 )
Mortgage servicing rights, at fair value     5,275       4,087       29.1  
Right of use assets, net     9,629       11,370       (15.3 )
Cash surrender value on life insurance     59,218       47,935       23.5  
Other assets     28,001       19,932       40.5  
Total assets   $ 3,477,276     $ 3,460,136       0.5  
                         
LIABILITIES                        
Noninterest-bearing deposits   $ 862,015     $ 927,497       (7.1 )
Interest-bearing deposits     2,147,769       2,098,739       2.3  
Total deposits     3,009,784       3,026,236       (0.5 )
                         
Securities sold under retail repurchase agreements           4,143       (100.0 )
Advances from FHLB - short-term     40,000              
Advances from FHLB - long-term           10,135       (100.0 )
Subordinated debt     43,072       42,762       0.7  
Total borrowings     83,072       57,040          
                         
Lease liabilities     9,908       11,567       (14.3 )
Accrued expenses and other liabilities     10,227       14,600       (30.0 )
Total liabilities     3,112,991       3,109,443       0.1  
                         
COMMITMENTS AND CONTINGENCIES                        
                         
STOCKHOLDERS' EQUITY                        
Common stock, par value $0.01; authorized 35,000,000 shares     199       198       0.5  
Additional paid in capital     201,494       200,473       0.5  
Retained earnings     171,613       149,966       14.4  
Accumulated other comprehensive (loss) income     (9,021 )     56       (16,208.9 )
Total stockholders' equity     364,285       350,693       3.9  
Total liabilities and stockholders' equity   $ 3,477,276     $ 3,460,136       0.5  
                         
Period-end common shares outstanding     19,865       19,808       0.3  
Book value per common share   $ 18.34     $ 17.71       3.6  

 

Page 8 of 15

 

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    2022     2021     % Change     2022     2021     % Change  
INTEREST INCOME                                                
Interest and fees on loans   $ 27,664     $ 20,564       34.5 %   $ 99,122     $ 64,795       53.0 %
Interest on investment securities:                                                
Taxable     3,945       1,663       137.2       11,507       5,006       129.9  
Tax-exempt     6             100.0       6             100.0  
Interest on deposits with other banks     664       169       292.9       3,210       368       772.3  
Total interest income     32,279       22,396       44.1       113,845       70,169       62.2  
                                                 
INTEREST EXPENSE                                                
Interest on deposits     4,554       1,272       258.0       9,983       4,461       123.8  
Interest on short-term borrowings     72       3       2,300.0       74       8       825.0  
Interest on long-term borrowings     710       482       47.3       2,486       1,570       58.3  
Total interest expense     5,336       1,757       203.7       12,543       6,039       107.7  
                                                 
NET INTEREST INCOME     26,943       20,639       30.5       101,302       64,130       58.0  
Provision for credit losses     450       (1,723 )     126.1       1,925       (358 )     637.7  
                                                 
NET INTEREST INCOME AFTER PROVISION                                                
FOR CREDIT LOSSES     26,493       22,362       18.5       99,377       64,488       54.1  
                                                 
NONINTEREST INCOME                                                
Service charges on deposit accounts     1,346       1,234       9.1       5,652       3,396       66.4  
Trust and investment fee income     401       522       (23.2 )     1,784       1,881       (5.2 )
Gains on sales and calls of investment securities                             2        
Interchange credits     1,280       1,043       22.7       4,812       3,964       21.4  
Mortgage-banking revenue     1,567       948       65.3       5,210       948       449.6  
Title Company revenue     194       247       (21.5 )     1,340       247       442.5  
Other noninterest income     1,074       1,135       (5.4 )     4,288       3,060       40.1  
Total noninterest income     5,862       5,129       14.3       23,086       13,498       71.0  
                                                 
NONINTEREST EXPENSE                                                
Salaries and wages     8,909       7,727       15.3       35,931       21,222       69.3  
Employee benefits     2,786       2,271       22.7       9,908       7,262       36.4  
Occupancy expense     1,694       1,263       34.1       6,242       3,690       69.2  
Furniture and equipment expense     648       385       68.3       2,018       1,553       29.9  
Data processing     1,856       1,487       24.8       6,890       5,001       37.8  
Directors' fees     222       170       30.6       839       620       35.3  
Amortization of intangible assets     460       381       20.7       1,988       734       170.8  
FDIC insurance premium expense     315       362       (13.0 )     1,426       1,015       40.5  
Other real estate owned, net     13       (2 )     750.0       65       4       1,525.0  
Legal and professional fees     636       150       324.0       2,840       1,742       63.0  
Merger related expenses     967       7,615       (87.3 )     2,098       8,530       (75.4 )
Other noninterest expenses     2,494       1,688       47.7       10,077       5,433       85.5  
Total noninterest expense     21,000       23,497       (10.6 )     80,322       56,806       41.4  
                                                 
Income before income taxes     11,355       3,994       184.3       42,141       21,180       99.0  
Income tax expense     2,948       1,271       131.9       10,964       5,812       88.6  
                                                 
NET INCOME   $ 8,407     $ 2,723       208.7     $ 31,177     $ 15,368       102.9  
                                                 
Weighted average shares outstanding - basic     19,862       17,180       15.6       19,847       13,119       51.3  
Weighted average shares outstanding - diluted     19,862       17,180       15.6       19,847       13,119       51.3  
                                                 
Basic and diluted net income per common share   $ 0.42     $ 0.16       167.1     $ 1.57     $ 1.17       34.1  
                                                 
Dividends paid per common share     0.12       0.12             0.48       0.48        

 

Page 9 of 15

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)

 

    For the Three Months Ended     For the Year Ended  
    December 31,     December 31,  
    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)   $ 2,467,324       4.45 %   $ 1,887,126       4.33 %   $ 2,293,627       4.33 %   $ 1,568,468       4.14 %
Investment securities                                                                
Taxable     661,519       2.39       468,724       1.42       589,729       1.95       329,890       1.52  
Tax-exempt (1)     449       6.24                   113       6.19              
Interest-bearing deposits     77,299       3.40       486,247       0.14       337,203       0.95       286,765       0.13  
Total earning assets     3,206,591       4.00 %     2,842,097       3.11 %     3,220,672       3.54 %     2,185,123       3.21 %
Cash and due from banks     29,358               22,625               18,158               19,838          
Other assets     221,599               188,399               221,592               127,704          
Allowance for credit losses     (16,469 )             (15,859 )             (15,441 )             (15,068 )        
Total assets   $ 3,441,079             $ 3,037,262             $ 3,444,981             $ 2,317,597          
                                                                 
Interest-bearing liabilities                                                                
Demand deposits   $ 670,424       1.31 %   $ 494,081       0.14 %   $ 638,105       0.61 %   $ 450,399       0.14 %
Money market and savings deposits     1,043,076       0.60       1,001,115       0.26       1,043,032       0.35       695,056       0.21  
Certificates of deposit $100,000 or more     217,051       0.79       174,268       0.49       239,927       0.57       144,209       0.84  
Other time deposits     205,293       0.62       173,975       0.50       204,536       0.56       151,429       0.78  
Interest-bearing deposits     2,135,844       0.85       1,843,439       0.27       2,125,600       0.47       1,441,093       0.31  
Securities sold under retail repurchase                                                                
   agreements and federal funds purchased                 3,972       0.30       683       0.29       3,017       0.27  
Advances from FHLB - short-term     7,391       3.86                   1,863       3.86              
Advances from FHLB - long-term     653       (6.08 )     6,630       2.21       7,701       0.45       1,671       0.60  
Subordinated debt     43,031       6.64       36,589       5.12       42,917       5.71       27,528       5.67  
Total interest-bearing liabilities     2,186,919       0.96 %     1,890,630       0.37 %     2,178,764       0.57 %     1,473,309       0.41 %
Noninterest-bearing deposits     870,890               703,712               888,509               574,531          
Accrued expenses and other liabilities     21,647               141,825               21,858               45,702          
Stockholders' equity     361,623               301,095               355,850               224,055          
Total liabilities and stockholders' equity   $ 3,441,079             $ 3,037,262             $ 3,444,981             $ 2,317,597          
                                                                 
Net interest spread             3.04 %             2.74 %             2.97 %             2.80 %
Net interest margin             3.35 %             2.87 %             3.15 %             2.94 %

 

 

(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.

 

Page 10 of 15

 

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)

 

    4th Quarter     3rd Quarter     2nd Quarter     1st Quarter     4th Quarter     Q4 2022     Q4 2022  
    2022     2022     2022     2022     2021     compared to     compared to  
    Q4 2022     Q3 2022     Q2 2022     Q1 2022     Q4 2021     Q3 2022     Q4 2021  
PROFITABILITY FOR THE PERIOD                                                        
Taxable-equivalent net interest income   $ 26,981     $ 27,350     $ 24,656     $ 22,469     $ 20,652       (1.3 )%     30.6 %
Less: Taxable-equivalent adjustment     40       35       38       39       13       14.3       207.7  
Net interest income     26,943       27,315       24,618       22,430       20,639       (1.4 )     30.5  
Provision for credit losses     450       675       200       600       (1,723 )     (33.3 )     126.1  
Noninterest income     5,862       5,344       5,833       6,046       5,129       9.7       14.3  
Noninterest expense     21,000       18,899       20,094       20,332       23,497       11.1       (10.6 )
Income before income taxes     11,355       13,085       10,157       7,544       3,994       (13.2 )     184.3  
Income tax expense     2,948       3,427       2,658       1,931       1,271       (14.0 )     131.9  
Net income   $ 8,407     $ 9,658     $ 7,499     $ 5,613     $ 2,723       (13.0 )     208.7  
                                                         
Return on average assets     0.97 %     1.11 %     0.88 %     0.65 %     0.36 %     (14 )bp     61 bp
Return on average assets excluding amortization of intangibles and merger related expenses - Non-GAAP (2)     1.09       1.17       0.94       0.76       1.07       (8 )     2  
Return on average equity     9.22       10.72       8.52       6.45       3.59       (150 )     563  
Return on average tangible equity - Non-GAAP (1)     12.83       13.98       11.41       9.40       13.06       (115 )     (23 )
Net interest margin     3.35       3.38       3.10       2.78       2.87       (3 )     48  
Efficiency ratio - GAAP     64.01       57.87       65.99       71.40       91.19       614       (2,718 )
Efficiency ratio - Non-GAAP (1), (2)     59.59       55.79       63.44       66.93       60.13       380       (54 )
                                                         
PER SHARE DATA                                                        
Basic and diluted net income per common share   $ 0.42     $ 0.49     $ 0.38     $ 0.28     $ 0.16       (13.6 )%     164.5 %
                                                         
Dividends paid per common share     0.12       0.12       0.12       0.12       0.12              
Book value per common share at period end     18.34       17.99       17.77       17.73       17.71       1.9       3.6  
Tangible book value per common share at period end - Non-GAAP (1)     14.87       14.50       14.26       14.19       14.12       2.6       5.3  
Market value at period end     17.43       17.32       18.50       20.48       20.85       0.6       (16.4 )
Market range:                                                        
High     20.85       20.50       21.21       21.41       23.19       1.7       (10.1 )
Low     17.04       17.29       17.91       19.34       17.50       (1.4 )     (2.6 )

 

Page 11 of 15

 

AVERAGE BALANCE SHEET DATA                                                        
Loans   $ 2,467,324     $ 2,327,279     $ 2,217,139     $ 2,135,734     $ 1,887,126       6.0 %     30.7 %
Investment securities     661,968       618,378       546,252       531,017       468,724       7.0       41.2  
Earning assets     3,206,591       3,210,233       3,189,926       3,253,549       2,842,097       (0.1 )     12.8  
Assets     3,441,079       3,444,365       3,419,168       3,477,481       3,037,262       (0.1 )     13.3  
Deposits     3,006,734       3,012,658       2,993,098       3,044,213       2,547,151       (0.2 )     18.0  
Stockholders' equity     361,623       357,383       353,192       353,011       301,095       1.2       20.1  
                                                         
CREDIT QUALITY DATA                                                        
Net (recoveries) / chargeoffs   $ 84     $ (119 )   $ (573 )   $ (166 )   $ (142 )     170.6 %     159.2 %
                                                         
Nonaccrual loans   $ 1,908     $ 1,949     $ 2,693     $ 2,848     $ 2,004       (2.1 )     (4.8 )
Loans 90 days past due and still accruing     1,841       644       803       459       508       185.9       262.4  
Other real estate owned     197       197       197       561       532             (63.0 )
Total nonperforming assets   $ 3,946     $ 2,790     $ 3,693     $ 3,868     $ 3,044       41.4       29.6  
                                                         
Accruing troubled debt restructurings (TDRs)   $ 4,405     $ 4,458     $ 4,894     $ 5,004     $ 5,667       (1.2 )     (22.3 )
                                                         
Total nonperforming assets and accruing TDRs   $ 8,351     $ 7,248     $ 8,587     $ 8,872     $ 8,711       15.2       (4.1 )
                                                         
CAPITAL AND CREDIT QUALITY RATIOS                                                        
Period-end equity to assets     10.48 %     10.36 %     10.25 %     10.07 %     10.14 %     12 bp     34 bp
Period-end tangible equity to tangible assets - Non-GAAP (1)     8.67       8.52       8.39       8.22       8.25       15       42  
                                                         
Annualized net (recoveries)  to average loans     0.01       (0.02 )     (0.10 )     (0.03 )     (0.03 )     3       4  
                                                         
Allowance for credit losses as a percent of:                                                        
Period-end loans (3)     0.65       0.68       0.68       0.67       0.66       (3 )     (1 )
Period-end loans (4)     0.78       0.84       0.89       0.92       0.96       (6 )     (18 )
Nonaccrual loans     872.27       835.15       574.94       516.50       695.81       3,712       17,646  
Nonperforming assets     421.77       583.41       419.25       380.30       458.08       (16,164 )     (3,631 )
Accruing TDRs     377.82       365.12       316.37       293.96       246.06       1,270       13,176  
Nonperforming assets and accruing TDRs     199.29       224.57       180.31       165.80       160.07       (2,528 )     3,922  
                                                         
As a percent of total loans:                                                        
Nonaccrual loans     0.07       0.08       0.12       0.13       0.09       (1 )     (2 )
Accruing TDRs     0.17       0.19       0.22       0.23       0.27       (2 )     (10 )
Nonaccrual loans and accruing TDRs     0.25       0.27       0.34       0.36       0.36       (2 )     (11 )
                                                         
As a percent of total loans+other real estate owned:                                                        
Nonperforming assets     0.15       0.12       0.16       0.18       0.14       3       1  
Nonperforming assets and accruing TDRs     0.33       0.30       0.38       0.41       0.41       3       (8 )
                                                         
As a percent of total assets:                                                        
Nonaccrual loans     0.05       0.06       0.08       0.08       0.06       (1 )     (1 )
Nonperforming assets     0.11       0.08       0.11       0.11       0.09       3       2  
Accruing TDRs     0.13       0.13       0.14       0.14       0.16             (3 )
Nonperforming assets and accruing TDRs     0.24       0.21       0.25       0.25       0.25       3       (1 )

 

 

(1) See the reconciliation table that begins on page 14.
(2) This ratio excludes merger related expenses (Non-GAAP) on page 10.
(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.

 

Page 12 of 15

 

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)

 

                                  Q4 2022     Q4 2022  
                                  compared to     compared to  
    Q4 2022     Q3 2022     Q2 2022     Q1 2022     Q4 2021     Q3 2022     Q4 2021  
INTEREST INCOME                                                        
Interest and fees on loans   $ 27,664     $ 25,924     $ 23,452     $ 22,085     $ 20,564       6.7 %     34.5 %
Interest on investment securities:                                                        
Taxable     3,945       3,186       2,392       1,985       1,663       23.8       137.2  
           Tax-exempt     6                               100.0       100.0  
Interest on deposits with other banks     664       1,466       826       254       169       (54.7 )     292.9  
Total interest income     32,279       30,576       26,670       24,324       22,396       5.6       44.1  
                                                         
INTEREST EXPENSE                                                        
Interest on deposits     4,554       2,561       1,511       1,358       1,272       77.8       258.0  
Interest on short-term borrowings     72                   2       3       100.0       2,300.0  
Interest on long-term borrowings     710       700       541       534       482       1.4       47.3  
Total interest expense     5,336       3,261       2,052       1,894       1,757       63.6       203.7  
                                                         
NET INTEREST INCOME     26,943       27,315       24,618       22,430       20,639       (1.4 )     30.5  
Provision for credit losses     450       675       200       600       (1,723 )     (33.3 )     126.1  
                                                         
NET INTEREST INCOME AFTER PROVISION                                                        
FOR CREDIT LOSSES     26,493       26,640       24,418       21,830       22,362       (0.6 )     18.5  
                                                         
NONINTEREST INCOME                                                        
Service charges on deposit accounts     1,346       1,509       1,438       1,359       1,234       (10.8 )     9.1  
Trust and investment fee income     401       421       447       514       522       (4.8 )     (23.2 )
Interchange credits     1,280       1,241       1,253       1,038       1,043       3.1       22.7  
Mortgage-banking revenue     1,567       680       1,096       1,867       948       130.4       65.3  
Title Company revenue     194       397       426       323       247       (51.1 )     (21.5 )
Other noninterest income     1,074       1,096       1,173       945       1,135       (2.0 )     (5.4 )
Total noninterest income     5,862       5,344       5,833       6,046       5,129       9.7       14.3  
                                                         
NONINTEREST EXPENSE                                                        
Salaries and wages     8,909       8,562       8,898       9,562       7,727       4.1       15.3  
Employee benefits     2,786       2,191       2,269       2,662       2,271       27.2       22.7  
Occupancy expense     1,694       1,496       1,485       1,567       1,263       13.2       34.1  
Furniture and equipment expense     648       533       411       429       385       21.6       68.3  
Data processing     1,856       1,759       1,668       1,607       1,487       5.5       24.8  
Directors' fees     222       217       210       190       170       2.3       30.6  
Amortization of intangible assets     460       499       511       517       381       (7.8 )     20.7  
FDIC insurance premium expense     315       339       429       343       362       (7.1 )     (13.0 )
Other real estate owned expenses, net     13       1       57       (6 )     (2 )     1,200.0       750.0  
Legal and professional fees     636       756       811       637       150       (15.9 )     324.0  
Merger related expenses     967       159       241       730       7,615       508.2       (87.3 )
Other noninterest expenses     2,494       2,387       3,104       2,094       1,688       4.5       47.7  
Total noninterest expense     21,000       18,899       20,094       20,332       23,497       11.1       (10.6 )
                                                         
Income before income taxes     11,355       13,085       10,157       7,544       3,994       (13.2 )     184.3  
Income tax expense     2,948       3,427       2,658       1,931       1,271       (14.0 )     131.9  
                                                         
NET INCOME   $ 8,407     $ 9,658     $ 7,499     $ 5,613     $ 2,723       (13.0 )     208.7  
                                                         
Weighted average shares outstanding - basic     19,862       19,852       19,847       19,828       17,180       0.1       15.6  
Weighted average shares outstanding - diluted     19,862       19,852       19,847       19,828       17,180       0.1       15.6  
                                                         
Basic and diluted net income per common share   $ 0.42     $ 0.49     $ 0.38     $ 0.28     $ 0.16       (13.6 )     164.5  
                                                         
Dividends paid per common share     0.12       0.12       0.12       0.12       0.12              

 

Page 13 of 15

 

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)

 

                                                                Average balance  
                                                                Q4 2022     Q4 2022  
                                                                compared to     compared to  
    Q4 2022     Q3 2022     Q2 2022     Q1 2022     Q4 2021     Q3 2022     Q4 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)   $ 2,467,324       4.45 %   $ 2,327,279       4.43 %   $ 2,217,139       4.25 %   $ 2,135,734       4.20 %   $ 1,887,126       4.33 %     6.0 %     30.7 %
Investment securities                                                                                                
Taxable     661,519       2.39       618,378       2.06       546,252       1.75       531,017       1.49       468,724       1.42       7.0       41.1  
Tax-exempt (1)     449       6.24                                                       100.0       100.0  
Interest-bearing deposits     77,299       3.40       264,576       2.20       426,535       0.78       586,798       0.18       486,247       0.14       (70.8 )     (84.1 )
Total earning assets     3,206,591       4.00 %     3,210,233       3.78 %     3,189,926       3.36 %     3,253,549       3.01 %     2,842,097       3.11 %     (0.1 )     12.8  
Cash and due from banks     29,358               31,724               26,162               (15,253 )             22,625               (7.5 )     29.8  
Other assets     221,599               218,163               218,353               253,424               188,399               1.6       17.6  
Allowance for credit losses     (16,469 )             (15,755 )             (15,273 )             (14,239 )             (15,859 )             4.5       3.8  
Total assets   $ 3,441,079             $ 3,444,365             $ 3,419,168             $ 3,477,481             $ 3,037,262               (0.1 )     13.3  
                                                                                                 
Interest-bearing liabilities                                                                                                
Demand deposits   $ 670,424       1.31 %   $ 646,399       0.66 %   $ 644,881       0.22 %   $ 589,737       0.16 %   $ 494,081       0.14 %     3.7       35.7  
Money market and savings deposits     1,043,076       0.60       1,034,580       0.35       1,019,295       0.21       1,075,791       0.23       1,001,115       0.26       0.8       4.2  
Certificates of deposit $100,000 or more     217,051       0.79       222,697       0.55       234,325       0.58       286,587       0.40       174,268       0.49       (2.5 )     24.6  
Other time deposits     205,293       0.62       215,014       0.51       221,714       0.54       175,683       0.57       173,975       0.50       (4.5 )     18.0  
Interest-bearing deposits     2,135,844       0.85       2,118,690       0.48       2,120,215       0.29       2,127,798       0.26       1,843,439       0.27       0.8       15.9  
Securities sold under retail repurchase agreements                                                                                                
    and federal funds purchased                                         2,770       0.29       3,972       0.30             (100.0 )
Advances from FHLB - short-term     7,391       3.86                                                       100.0       100.0  
Advances from FHLB - long-term     653       (6.08 )     10,035       0.63       10,075       0.60       10,116       0.57       6,630       2.21       (93.5 )     (90.2 )
Subordinated debt     43,031       6.64       42,953       6.33       42,876       4.93       42,804       4.93       36,589       5.12       0.2       17.6  
Total interest-bearing liabilities     2,186,919       0.96 %     2,171,678       0.60 %     2,173,166       0.38 %     2,183,488       0.35 %     1,890,630       0.37 %     0.7       15.7  
Noninterest-bearing deposits     870,890               893,968               872,883               916,415               703,712               (2.6 )     23.8  
Accrued expenses and other liabilities     21,647               21,336               19,927               24,567               141,825               1.5       (84.7 )
Stockholders' equity     361,623               357,383               353,192               353,011               301,095               1.2       20.1  
Total liabilities and stockholders' equity   $ 3,441,079             $ 3,444,365             $ 3,419,168             $ 3,477,481             $ 3,037,262               (0.1 )     13.3  
                                                                                                 
Net interest spread             3.04 %             3.18 %             2.98 %             2.66 %             2.74 %                
Net interest margin             3.35 %             3.38 %             3.10 %             2.78 %             2.87 %                

 

 

(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.

 

Page 14 of 15

 

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)

 

                                           
                                  YTD     YTD  
    Q4 2022     Q3 2022     Q2 2022     Q1 2022     Q4 2021     12/31/2022     12/31/2021  
The following reconciles return on average equity and return on average tangible equity (Note 1):                                                        
                                                         
Net Income   $ 8,407     $ 9,658     $ 7,499     $ 5,613     $ 2,723     $ 31,177     $ 15,368  
Net Income - annualized (A)   $ 33,354     $ 38,317     $ 30,078     $ 22,764     $ 10,803     $ 31,177     $ 15,368  
                                                         
Net income, excluding net amortization of intangible assets and merger related expenses   $ 9,463     $ 10,144     $ 8,054     $ 6,541     $ 8,176     $ 34,201     $ 22,279  
Net income, excluding net amortization of intangible assets and merger related expenses - annualized (B)   $ 37,543     $ 40,245     $ 32,305     $ 26,527     $ 32,437     $ 34,201     $ 22,279  
                                                         
Return on average assets excluding net amortization of intangible assets and merger related expenses - Non-GAAP     1.09 %     1.17 %     0.94 %     0.76 %     1.07 %     0.99 %     0.95 %
                                                         
Average stockholders' equity (C)   $ 361,623     $ 357,383     $ 353,192     $ 353,011     $ 301,095     $ 355,850     $ 224,055  
Less:  Average goodwill and other intangible assets     (69,077 )     (69,558 )     (70,057 )     (70,711 )     (52,692 )     (69,845 )     (27,535 )
Average tangible equity (D)   $ 292,546     $ 287,825     $ 283,135     $ 282,300     $ 248,403     $ 286,005     $ 196,520  
                                                         
Return on average equity (GAAP)  (A)/(C)     9.22 %     10.72 %     8.52 %     6.45 %     3.59 %     8.76 %     6.86 %
Return on average tangible equity (Non-GAAP)  (B)/(D)     12.83 %     13.98 %     11.41 %     9.40 %     13.06 %     11.96 %     11.34 %
                                                         
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):                                                        
                                                         
Noninterest expense (E)   $ 21,000     $ 18,899     $ 20,094     $ 20,332     $ 23,497     $ 80,322     $ 56,806  
Less:  Amortization of intangible assets     (460 )     (499 )     (511 )     (517 )     (381 )     (1,988 )     (734 )
           Merger Expenses     (967 )     (159 )     (241 )     (730 )     (7,615 )     (2,098 )     (8,530 )
Adjusted noninterest expense (F)   $ 19,573     $ 18,241     $ 19,342     $ 19,085     $ 15,501     $ 76,236     $ 47,542  
                                                         
Net interest income (G)     26,943       27,315       24,618       22,430       20,639       101,302       64,130  
Add:  Taxable-equivalent adjustment     40       35       38       39       13       155       121  
Taxable-equivalent net interest income (H)   $ 26,983     $ 27,350     $ 24,656     $ 22,469     $ 20,652     $ 101,457     $ 64,251  
                                                         
Noninterest income (I)   $ 5,862     $ 5,344     $ 5,833     $ 6,046     $ 5,129     $ 23,086       13,498  
Less:  Investment securities (gains)                                         (2 )
Adjusted noninterest income (J)   $ 5,862     $ 5,344     $ 5,833     $ 6,046     $ 5,129     $ 23,086     $ 13,496  
                                                         
Efficiency ratio (GAAP)  (E)/(G)+(I)     64.01 %     57.87 %     65.99 %     71.40 %     91.19 %     64.57 %     73.18 %
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)     59.59 %     55.79 %     63.44 %     66.93 %     60.13 %     61.21 %     61.15 %

 

Page 15 of 15

 

The following reconciles book value per common share and tangible book value per common share (Note 1):                                        
                                         
Stockholders' equity (L)   $ 364,285     $ 357,221     $ 352,777     $ 351,864     $ 350,693  
Less:  Goodwill and other intangible assets     (68,813 )     (69,288 )     (69,787 )     (70,299 )     (70,956 )
Tangible equity (M)   $ 295,472     $ 287,933     $ 282,990     $ 281,565     $ 279,737  
                                         
Shares outstanding (N)     19,865       19,858       19,850       19,843       19,808  
                                         
Book value per common share (GAAP)  (L)/(N)   $ 18.34     $ 17.99     $ 17.77     $ 17.73     $ 17.71  
Tangible book value per common share (Non-GAAP) (M)/(N)   $ 14.87     $ 14.50     $ 14.26     $ 14.19     $ 14.12  
                                         
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):                                        
                                         
Stockholders' equity (O)   $ 364,285     $ 357,221     $ 352,777     $ 351,864     $ 350,693  
Less:  Goodwill and other intangible assets     (68,813 )     (69,288 )     (69,787 )     (70,299 )     (70,956 )
Tangible equity (P)   $ 295,472     $ 287,933     $ 282,990     $ 281,565     $ 279,737  
                                         
Assets (Q)   $ 3,477,276     $ 3,446,804     $ 3,442,550     $ 3,494,497     $ 3,460,136  
Less:  Goodwill and other intangible assets     (68,813 )     (69,288 )     (69,787 )     (70,299 )     (70,956 )
Tangible assets (R)   $ 3,408,463     $ 3,377,516     $ 3,372,763     $ 3,424,198     $ 3,389,180  
                                         
Period-end equity/assets (GAAP)  (O)/(Q)     10.48 %     10.36 %     10.25 %     10.07 %     10.14 %
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)     8.67 %     8.52 %     8.39 %     8.22 %     8.25 %

 

 

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.