Shore Bancshares Reports 2021 Financial Results and Quarterly Dividend of $0.12 Per share

Rhea-AI Summary

Shore Bancshares (NASDAQ: SHBI) reported a net income of $2.723 million ($0.16 per diluted share) for Q4 2021, a decline from $4.617 million in Q3 2021, primarily due to $7.6 million in merger-related expenses from the acquisition of Severn. FY 2021 net income was $15.368 million ($1.17 per diluted share), slightly down from $15.730 million in 2020. Total assets rose to $3.460 billion, largely from the merger, with deposits increasing by 77.9%. Although net interest income rose to $20.6 million, the net interest margin fell to 2.87% due to excess liquidity impacting profitability.

Positive

• Net interest income increased by $5.1 million from Q3 2021 and $6.9 million from Q4 2020.
• Total assets grew by $1.5 billion (79.0%) compared to the previous year, primarily due to the Severn acquisition.
• Total deposits rose by $1.326 billion (77.9%) year-over-year.

Negative

• Net income decreased by $1.9 million from Q3 2021 due to merger-related expenses.
• Net income for 2021 dropped to $15.368 million from $15.730 million in 2020.
• Net interest margin declined to 2.87% from 3.08% in Q4 2020, driven by excess liquidity.

EASTON, Md., Feb. 14, 2022 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company") reported net income of $2.723 million or $0.16 per diluted common share for the fourth quarter of 2021, compared to net income of $4.617 million or $0.39 per diluted common share for the third quarter of 2021, and net income of $3.886 million or $0.32 per diluted common share for the fourth quarter of 2020. Net income, excluding merger related expenses for the fourth quarter of 2021 was $7.914 million or $0.46 per diluted common share. Net income for the fiscal year of 2021 was $15.368 million or $1.17 per diluted common share, compared to net income for the fiscal year of 2020 of $15.730 million or $1.27 per diluted common share. On October 31, 2021, the Company acquired Severn Bancorp, Inc. ("Severn"). Net income, excluding merger related expenses for 2021 was $21.237 million or $1.62 per diluted common share. For the fourth quarter and the fiscal year of 2021, the Company recorded $7.6 million and $8.5 million, respectively, in merger-related expenses.

When comparing net income for the fourth quarter of 2021 to the third quarter of 2021, net income decreased $1.9 million, the direct result of $7.6 million in merger related expenses in the fourth quarter of 2021. The Company reported increases in net interest income and noninterest income of $5.1 million and $2.2 million, respectively, coupled with a reversal of provision for credit losses for a decrease of $2.0 million. These improvements were partially offset by an increase in noninterest expense of $4.5 million, excluding merger-related expenses. When comparing net income for the fourth quarter of 2021 to the fourth quarter of 2020, net income decreased $1.1 million, due to merger related expenses of $7.6 million. The Company reported increases in net interest income and noninterest income of $6.9 million and $2.1 million, respectively, coupled with a reversal of provision for credit losses for a decrease of $2.8 million, partially offset by an increase in noninterest expense of $5.3 million, excluding merger related expenses. 

"We are pleased to announce our fourth quarter earnings and fiscal year 2021 results." said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer. "Our acquisition of Severn Bank continues to be a high priority as the process continues from the legal merger date of November 1, 2021, through the core processing conversion date of February 19, 2022. The integration has been well received and we are thrilled to have their outstanding team join us as we expand our footprint and strive to create value for our shareholders. In 2021, we experienced significant growth in both loans and deposits. Excess liquidity continues to put pressure on our margin, but that liquidity is well positioned to profit from the expected interest rate hikes in 2022." 

Balance Sheet Review

Total assets were $3.460 billion at December 31, 2021, a $1.5 billion, or 79.0%, increase when compared to $1.933 billion at the end of 2020.  The merger with Severn, added approximately $1.1 billion to total assets as of October 31, 2021. Excluding these acquired assets, total assets increased $384.7 million, or 19.9% when compared to the end of 2020. Of this growth the Company experienced increases in investment securities held to maturity of $214.6 million, interest-bearing deposits with other banks of $98.6 million, loans of $80.3 million and loans held for sale of $26.8 million, partially offset by a decrease in investment securities available for sale of $43.6 million.    

Total deposits increased $1.326 billion, or 77.9%, when compared to December 31, 2020.  The merger with Severn, added approximately $955.3 million to total deposits as of October 31, 2021. Excluding these deposits, total deposits increased $370.2 million, or 21.8%, when compared to the end of 2020. The significant movement within deposit accounts, excluding the deposits acquired from Severn, continues to be impacted by new account openings and municipal deposit inflows.  

Total stockholders' equity increased $155.7 million, or 79.8%, when compared to December 31, 2020, primarily due to the acquisition of Severn. At December 31, 2021, the ratio of total equity to total assets was 10.13% and the ratio of total tangible equity to total tangible assets was 8.25%.

Review of Quarterly Financial Results

Net interest income was $20.6 million for the fourth quarter of 2021, compared to $15.6 million for the third quarter of 2021 and $13.8 million for the fourth quarter of 2020. The increase in net interest income when compared to the third quarter of 2021 was primarily due to increases in interest and fees on loans of $5.1 million, interest on taxable investment securities of $345 thousand and interest on deposits with other banks of $72 thousand, partially offset by increases in expense on interest-bearing deposits of $323 thousand and borrowings of $123 thousand. The improvement in interest and fees on loans was due to an increase in the average balance of loans of $399.8 million, or 26.9%, combined with accretion income of approximately $628 thousand from the acquired Severn loans, which increased the average yield on loans for the quarter. The acquisition of loans from Severn had the most significant impact on the higher interest and fees on loans, but it was also complemented by significant organic loan growth of $39.7 million and forgiveness on PPP loans during the fourth quarter of 2021. The increase in interest on taxable investment securities was also primarily impacted by the acquisition of Severn with the addition of continued purchases of held to maturity securities during the fourth quarter of 2021, due to an excess liquidity position. The increase in interest expense on interest-bearing deposits was primarily due to higher rates paid on money market and savings deposits acquired from Severn, resulting in an increase of 10bps in the average rate paid on these deposits. The addition of a long-term advance from the Federal Home Loan Bank ("FHLB") and subordinated debt, acquired from Severn, resulted in $150 thousand of additional borrowing expense. The long-term advances from the FHLB, will mature in October of 2022 and management will keep the subordinated debt on the balance sheet due to its addition to capital. The increase in net interest income when comparing the fourth quarter of 2021 to the fourth quarter of 2020, was primarily due to increases in interest and fees on loans of $6.0 million, interest on taxable investment securities of $754 thousand and interest on deposits with other banks of $125 thousand, coupled with a decrease in interest expense on interest-bearing deposits of $81 thousand. These improvements to net interest income were partially offset by the addition of long-term advances from the FHLB and subordinated debt acquired from Severn, which were the primary cause of additional borrowing expense of $108 thousand.

The Company's net interest margin decreased to 2.87% for the fourth quarter of 2021 from 2.99% for the third quarter of 2021 and decreased from 3.08% for the fourth quarter of 2020. The decrease in net interest margin in the fourth quarter of 2021 when compared to the third quarter of 2021 and the fourth quarter of 2020, was primarily due to excess liquidity, which has been partially invested in lower yielding taxable investment securities. In addition, the acquired borrowings from Severn attributed to the decline in margin when compared to the third quarter of 2021 and the fourth quarter of 2020. Rates paid on interest-bearing deposits in the fourth quarter of 2021 compared to the third quarter of 2021, increased by 2bps, whereas the rates paid compared to the fourth quarter of 2020, declined 18bps. Absent excess liquidity of $400 million, we estimate our margin for the fourth quarter of 2021 would have been 3.34%.

The provision for credit losses was $(1.7) million for the three months ended December 31, 2021.  The comparable amounts were $290 thousand and $1.1 million for the three months ended September 30, 2021 and December 31, 2020, respectively. The reversal of provision expense in the fourth quarter of 2021 was related to reduced pandemic related qualitative factors associated with anticipated losses that failed to materialize in 2021. The ratio of the allowance for credit losses to period-end loans, excluding PPP loans and acquired loans, was 0.96% at December 31, 2021, compared to 1.10% at September 30, 2021 and 1.09% at December 31, 2020. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to September 30, 2021, was due to reduced pandemic qualitative factors previously mentioned. The decreased percentage of the allowance to total loans, excluding PPP loans and acquired loans, as compared to December 31, 2020, was primarily due to improved credit quality and pandemic related allocations prior to the end of 2020, which as mentioned, were significantly reduced during the fourth quarter of 2021. The Company reported net recoveries of $142 thousand in the fourth quarter of 2021, compared to net recoveries of $147 thousand in the third quarter of 2021 and net recoveries of $61 thousand for the fourth quarter of 2020.

At December 31, 2021 and September 30, 2021, nonperforming assets were $3.8 million and $4.4 million, respectively. The balance of nonperforming assets decreased primarily due to a decrease in nonaccrual loans of $671 thousand, or 19.4%. Accruing troubled debt restructurings ("TDRs") decreased $83 thousand, or 1.4%. Other real estate owned properties increased to $532 thousand for December 31, 2021, from $203 thousand at September 30, 2021, also attributable to the acquisition of Severn. When comparing December 31, 2021, to December 31, 2020, nonperforming assets decreased $2.4 million, or 38.9%, primarily due to decreases in nonaccrual loans of $2.7 million, or 48.9% and loans 90 days past due and still accruing of $296 thousand, or 36.8%. Accruing TDRs decreased $1.3 million, or 19.0%, and other real estate owned increased $532 thousand, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.27%, 0.44% and 0.68% at December 31, 2021, September 30, 2021 and December 31, 2020, respectively.  In addition, the ratio of accruing TDRs to total loans at December 31, 2021 was 0.27%, compared to 0.38% at September 30, 2021 and 0.48% at December 31, 2020.

Total noninterest income for the fourth quarter of 2021 increased $2.2 million, or 76.3%, when compared to the third quarter of 2021 and increased $2.1 million, or 68.3%, when compared to the fourth quarter of 2020. The increase compared to the third quarter of 2021 and the fourth quarter of 2020 was primarily due to the addition of revenue from the recently acquired mortgage division and Mid-Maryland Title, Co. ("Mid-MD") of Severn. The mortgage division added $948 thousand and Mid-MD attributed $247 thousand in the fourth quarter of 2021. Service charges on deposit accounts increased $429 thousand when compared to the third quarter of 2021 and $452 thousand when compared to the fourth quarter of 2020. In addition, rental income on premises acquired from Severn, added an additional $237 thousand when compared to the third quarter of 2021 and $242 thousand when compared to the fourth quarter of 2020.

Total noninterest expense, excluding merger related expenses, for the fourth quarter of 2021 increased $4.5 million, or 39.4%, when compared to the third quarter of 2021 and increased $5.3 million, or 50.5%, when compared to the fourth quarter of 2020. The increase in noninterest expense when compared to the third quarter of 2021 and the fourth quarter of 2020, was primarily due to increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and FDIC insurance premium expense, which were all significantly impacted by adding Severn and its operations in the fourth quarter of 2021.

Review of 2021 Financial Results

Net interest income for 2021 was $64.1 million, an increase of $11.5 million, or 21.9% when compared to 2020.  The increase was primarily due to higher interest income and fees on loans of $8.4 million and taxable investment securities of $2.0 million. Total interest expense decreased $1.0 million, due to the average rates paid on interest-bearing deposits which declined by 30bps, partially offset by the addition of subordinated debt in the third quarter of 2020 and the acquisition of subordinated debt from Severn. The Company's net interest margin decreased to 2.94% for 2021, compared to 3.27% for 2020. The primary factor impacting the net interest margin was the average yield on earnings assets which declined 50bps. Although the average yield on loans only increased 1bp, the average yield on investment in taxable securities declined 64bps, while the average yield on interest-bearing deposits with other banks declined 12bps. The Company had excess liquidity before adding $955.3 million in deposits in connection with the acquisition of Severn on October 31, 2021. Management believes that the excess liquidity is a temporary issue but will benefit from anticipated interest rate increases from the Federal Reserve in the near-term while continuing to seek alternative investments with favorable yields.    

The provision for credit losses for 2021 and 2020 was $(358) thousand and $3.9 million, respectively, while net recoveries were $414 thousand and net charge offs were $519 thousand, respectively.  The reversal in provision for credit losses was the result of recoveries in 2021 compared to charge-offs in 2020 and the alleviation of qualitative factors established in 2020 related to the pandemic. The ratio of allowance to total loans, excluding PPP loans and acquired loans, decreased from 1.09% at December 31, 2020, to 0.96% at December 31, 2021. The primary drivers for the decrease in the percentage of allowance for credit losses to total loans were improved credit quality and the reduced impact of qualitative factors related to the pandemic. Management will continue to evaluate the adequacy of the allowance for credit losses as changes within the Company's portfolio are known.

Total noninterest income for 2021 increased $2.7 million, or 25.6%, when compared to the same period in 2020. The increase in noninterest income primarily consisted of the addition of the mortgage division and Mid-MD title from Severn. As previously stated, the mortgage division added $948 thousand and Mid-MD attributed $247 thousand in 2021. In addition, the increase in noninterest income in 2021 included increases in debit card interchange fees of $958 thousand, service charges on deposit accounts of $557 thousand and trust and investment fee income of $323 thousand, partially offset by a decrease in the gains on sale of investment securities of $345 thousand.

Total noninterest expense for 2021, excluding merger related expenses, increased $9.9 million, or 25.7%, when compared to the same period in 2020. The increase was mainly the result of increases in salaries and wages, employee related benefits, occupancy expense, data processing, amortization of intangible assets and FDIC insurance premium expense, which were all significantly impacted by adding Severn and its operations in the fourth quarter of 2021. In addition, as previously mentioned, during 2021, the Company recorded merger-related expenses of $8.5 million due to the acquisition of Severn.   

Small Business Administration's Paycheck Protection Program ("PPP") and COVID related deferrals
As of December 31, 2021, the Company had 227 PPP loans totaling $27.6 million that were outstanding, inclusive of loans issued pre-merger and those acquired from Severn. The Company had no COVID related loan deferrals.

Shore Bancshares, Inc. Reports Quarterly Dividend of $0.12 Per Share
The Company announced that the Board of Directors has declared a quarterly common stock dividend in the amount of $0.12 per share, payable March 7, 2022, to stockholders of record on February 24, 2022.

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

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 Year Ended
		December 31,								December 31,
		2021			2020			Change		2021			2020			Change
PROFITABILITY FOR THE PERIOD
Net interest income		$	20,639		$	13,765		49.9	%	$	64,130		$	52,597		21.9	%
Provision for credit losses			(1,723)			1,050		(264.1)			(358)			3,900		(109.2)
Noninterest income			5,129			3,047		68.3			13,498			10,749		25.6
Noninterest expense			23,497			10,556		122.6			56,806			38,399		47.9
Income before income taxes			3,994			5,206		(23.3)			21,180			21,047		0.6
Income tax expense			1,271			1,320		(3.7)			5,812			5,317		9.3
Net income		$	2,723		$	3,886		(29.9)		$	15,368		$	15,730		(2.3)
Return on average assets			0.36	%		0.82	%	(46)	bp		0.66	%		0.92	%	(26)	bp
Return on average assets excluding merger expenses - Non-GAAP (2)			1.35			0.82		53			1.03			0.92		11
Return on average equity			3.59			7.82		(423)			6.86			7.95		(109)
Return on average tangible equity - Non-GAAP (1), (2)			13.88			8.88		500			11.34			9.04		230
Net interest margin			2.87			3.08		(21)			2.94			3.27		(33)
Efficiency ratio - GAAP			91.19			62.79		2,840			73.18			60.62		1,256
Efficiency ratio - Non-GAAP (1), (2)			60.13			61.91		(178)			61.15			59.97		118
PER SHARE DATA
Basic and diluted net income per common share		$	0.16		$	0.32		(50.0)	%	$	1.17		$	1.27		(7.9)	%
Dividends paid per common share		$	0.12		$	0.12		—		$	0.48		$	0.48		—
Book value per common share at period end			17.71			16.55		7.0
Tangible book value per common share at period end - Non-GAAP (1)			14.12			14.92		(5.4)
Market value at period end			20.85			14.60		42.8
Market range:
High			23.19			15.12		53.4			23.19			17.56		32.1
Low			17.50			10.25		70.7			12.99			7.63		70.2
AVERAGE BALANCE SHEET DATA
Loans		$	1,887,126		$	1,430,013		32.0	%	$	1,568,468		$	1,368,887		14.6	%
Investment securities			468,724			179,801		160.7			329,890			138,391		138.4
Earning assets			2,842,097			1,780,854		59.6			2,185,123			1,611,004		35.6
Assets			3,037,262			1,880,449		61.5			2,317,597			1,709,997		35.5
Deposits			2,547,151			1,646,980		54.7			2,015,624			1,487,921		35.5
Stockholders' equity			301,095			197,591		52.4			224,055			197,969		13.2
CREDIT QUALITY DATA
Net (recoveries) charge-offs		$	(142)		$	(61)		(132.8)	%	$	(414)		$	519		(179.8)	%
Nonaccrual loans		$	2,786		$	5,455		(48.9)
Loans 90 days past due and still accruing			508			804		(36.8)
Other real estate owned			532			—		—
Total nonperforming assets			3,826			6,259		(38.9)
Accruing troubled debt restructurings (TDRs) excluding acquired			5,667			6,997		(19.0)
Total nonperforming assets and accruing TDRs excluding acquired		$	9,493		$	13,256		(28.4)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			10.13	%		10.09	%	4	bp
Period-end tangible equity to tangible assets - Non-GAAP (1)			8.25			9.18		(93)
Annualized net (recoveries) charge-offs to average loans			(0.03)			(0.02)		(1)			(0.03)	%		0.04	%	(7)	bp
Allowance for credit losses as a percent of:
Period-end loans (3)			0.66			0.95		(29)
Period-end loans (4)			0.96			1.09		(13)
Nonaccrual loans			500.50			254.59		246
Nonperforming assets			364.45			221.89		143
Accruing TDRs excluding acquired			246.06			198.49		48
Nonperforming assets and accruing TDRs excluding acquired			146.89			104.77		42
As a percent of total loans:
Nonaccrual loans			0.13			0.38		(25)
Accruing TDRs excluding acquired			0.27			0.48		(21)
Nonaccrual loans and accruing TDRs excluding acquired			0.40			0.86		(46)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.18			0.43		(25)
Nonperforming assets and accruing TDRs excluding acquired			0.45			0.91		(46)
As a percent of total assets:
Nonaccrual loans			0.08			0.28		(20)
Nonperforming assets			0.11			0.32		(21)
Accruing TDRs excluding acquired			0.16			0.36		(20)
Nonperforming assets and accruing TDRs excluding acquired			0.27			0.68		(41)

____________________
(1)	See the reconciliation table that begins on page 14 of 15.
(2)	This ratio excludes merger related expenses (Non-GAAP).
(3)	As of December 31, 2021 and December 31, 2020, these ratios included all loans held for investment, including PPP loans of $27.6 million and $122.8 million, respectively.
(4)	As of December 31, 2021 and December 31, 2020, 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)
								December 31, 2021
		December 31,			December 31,			compared to
		2021			2020			December 31, 2020
ASSETS
Cash and due from banks		$	16,919		$	16,666		1.5	%
Interest-bearing deposits with other banks			566,694			170,251		232.9
Cash and cash equivalents			583,613			186,917		212.2
Investment securities available for sale (at fair value)			116,982			139,568		(16.2)
Investment securities held to maturity (at amortized cost)			404,594			65,706		515.8
Equity securities, at fair value			1,372			1,395		(1.6)
Restricted securities			4,159			3,626		14.7
Loans held for sale, at fair value			36,427			-		—
Loans			2,119,175			1,454,256		45.7
Less: allowance for credit losses			(13,944)			(13,888)		0.4
Loans, net			2,105,231			1,440,368		46.2
Premises and equipment, net			51,624			24,924		107.1
Goodwill			63,421			17,518		262.0
Other intangible assets, net			7,535			1,719		338.3
Other real estate owned, net			532			—		—
Mortgage servicing rights			4,087			—		—
Right of use assets, net			11,370			4,795		137.1
Other assets			69,469			46,779		48.5
Total assets		$	3,460,416		$	1,933,315		79.0
LIABILITIES
Noninterest-bearing deposits		$	1,059,963		$	509,091		108.2
Interest-bearing deposits			1,966,273			1,191,614		65.0
Total deposits			3,026,236			1,700,705		77.9
Securities sold under retail repurchase agreements			4,143			1,050		294.6
Advances from FHLB - short-term			—			—		—
Advances from FHLB - long-term			10,135			—		—
Subordinated debt			42,762			24,429		75.0
Total borrowings			57,040			25,479
Lease liabilities			11,567			4,874		137.3
Accrued expenses and other liabilities			14,880			7,238		105.6
Total liabilities			3,109,723			1,738,296		78.9
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares			198			118		67.8
Additional paid in capital			200,473			52,167		284.3
Retained earnings			149,966			141,205		6.2
Accumulated other comprehensive income			56			1,529		(96.3)
Total stockholders' equity			350,693			195,019		79.8
Total liabilities and stockholders' equity		$	3,460,416		$	1,933,315		79.0
Period-end common shares outstanding			19,808			11,783		68.1
Book value per common share		$	17.71		$	16.55		7.0

 

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,
		2021			2020			% Change		2021			2020			% Change
INTEREST INCOME
Interest and fees on loans		$	20,564		$	14,541		41.4	%	$	64,795		$	56,420		14.8	%
Interest on investment securities:
Taxable			1,663			910		82.7			5,006			2,997		67.0
Interest on deposits with other banks			169			44		284.1			368			260		41.5
Total interest income			22,396			15,495		44.5			70,169			59,677		17.6
INTEREST EXPENSE
Interest on deposits			1,272			1,355		(6.1)			4,461			6,440		(30.7)
Interest on short-term borrowings			3			1		200.0			8			5		60.0
Interest on long-term borrowings			482			374		28.9			1,570			635		—
Total interest expense			1,757			1,730		1.6			6,039			7,080		(14.7)
NET INTEREST INCOME			20,639			13,765		49.9			64,130			52,597		21.9
Provision for credit losses			(1,723)			1,050		(264.1)			(358)			3,900		(109.2)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			22,362			12,715		75.9			64,488			48,697		32.4
NONINTEREST INCOME
Service charges on deposit accounts			1,234			782		57.8			3,396			2,839		19.6
Trust and investment fee income			522			439		18.9			1,881			1,558		20.7
Gains on sales and calls of investment securities			—			—		—			2			347		—
Interchange credits			1,043			837		24.6			3,964			3,006		—
Mortgage-banking revenue			948			—		—			948			—		—
Title Company revenue			247			—		—			247			—		—
Other noninterest income			1,135			989		14.8			3,060			2,999		2.0
Total noninterest income			5,129			3,047		68.3			13,498			10,749		25.6
NONINTEREST EXPENSE
Salaries and wages			7,727			4,366		77.0			21,222			14,935		42.1
Employee benefits			2,271			1,715		32.4			7,262			6,461		12.4
Occupancy expense			1,263			745		69.5			3,690			2,919		26.4
Furniture and equipment expense			385			366		5.2			1,553			1,224		26.9
Data processing			1,487			1,093		36.0			5,001			4,288		16.6
Directors' fees			170			118		44.1			620			504		23.0
Amortization of intangible assets			381			126		202.4			734			533		37.7
FDIC insurance premium expense			362			138		162.3			1,015			485		109.3
Other real estate owned expenses, net			(2)			38		(105.3)			4			56		(92.9)
Legal and professional fees			150			662		(77.3)			1,742			2,296		(24.1)
Merger related expenses			7,615			—		—			8,530			—		—
Other noninterest expenses			1,688			1,189		42.0			5,433			4,698		15.6
Total noninterest expense			23,497			10,556		122.6			56,806			38,399		47.9
Income before income taxes			3,994			5,206		(23.3)			21,180			21,047		0.6
Income tax expense			1,271			1,320		(3.7)			5,812			5,317		9.3
NET INCOME		$	2,723		$	3,886		(29.9)		$	15,368		$	15,730		(2.3)
Weighted average shares outstanding - basic			17,180			12,004		43.1			13,119			12,380		6.0
Weighted average shares outstanding - diluted			17,180			12,005		43.1			13,119			12,381		6.0
Basic and diluted net income per common share		$	0.16		$	0.32		(50.0)		$	1.17		$	1.27		(7.9)
Dividends paid per common share			0.12			0.12		—			0.48			0.48		—

 

Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
(Dollars in thousands)
		For the Three Months Ended										For the Year Ended
		December 31,										December 31,
		2021					2020					2021					2020
		Average			Yield/		Average			Yield/		Average			Yield/		Average			Yield/
		balance			rate		balance			rate		balance			rate		balance			rate
Earning assets
Loans (1), (2), (3)		$	1,887,126		4.33	%	$	1,430,013		4.05	%	$	1,568,468		4.14	%	$	1,368,887		4.13	%
Investment securities
Taxable			468,724		1.42			179,801		2.02			329,890		1.52			138,391		2.16
Interest-bearing deposits			486,247		0.14			171,040		0.10			286,765		0.13			103,726		0.25
Total earning assets			2,842,097		3.11	%		1,780,854		3.47	%		2,185,123		3.21	%		1,611,004		3.71	%
Cash and due from banks			22,625					17,268					19,838					18,042
Other assets			188,399					95,684					127,704					92,575
Allowance for credit losses			(15,859)					(13,357)					(15,068)					(11,624)
Total assets		$	3,037,262				$	1,880,449				$	2,317,597				$	1,709,997
Interest-bearing liabilities
Demand deposits		$	494,081		0.14	%	$	420,582		0.18	%	$	450,399		0.14	%	$	343,848		0.26	%
Money market and savings deposits			925,301		0.28			459,237		0.20			675,979		0.21			434,781		0.27
Certificates of deposit $100,000 or more			174,268		0.49			128,642		1.45			144,209		0.84			129,150		1.70
Other time deposits			173,975		0.50			145,795		1.27			151,429		0.78			148,823		1.46
Interest-bearing deposits			1,767,625		0.29			1,154,256		0.47			1,422,016		0.31			1,056,602		0.61
Securities sold under retail repurchase
agreements and federal funds purchased			3,972		0.30			1,101		0.36			3,017		0.27			1,484		0.34
Advances from FHLB - long-term			6,630		2.21			—		—			1,671		0.48			3,934		2.87
Subordinated debt			36,589		5.12			24,420		6.09			27,528		5.70			8,617		6.06
Total interest-bearing liabilities			1,814,816		0.38	%		1,179,777		0.58	%		1,454,232		0.42	%		1,070,637		0.66	%
Noninterest-bearing deposits			779,526					492,724					593,608					431,319
Accrued expenses and other liabilities			141,825					10,357					45,702					10,072
Stockholders' equity			301,095					197,591					224,055					197,969
Total liabilities and stockholders' equity		$	3,037,262				$	1,880,449				$	2,317,597				$	1,709,997
Net interest spread					2.73	%				2.89	%				2.79	%				3.05	%
Net interest margin					2.87	%				3.08	%				2.94	%				3.27	%

____________________
(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)
		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			Q4 2021		Q4 2021
		2021			2021			2021			2021			2020			compared to		compared to
		Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			Q3 2021		Q4 2020
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income		$	20,652		$	15,623		$	14,141		$	13,836		$	13,799		32.2	%	49.7	%
Less: Taxable-equivalent adjustment			13			34			38			36			34		(61.8)		(61.8)
Net interest income			20,639			15,589			14,103			13,800			13,765		32.4		49.9
Provision for credit losses			(1,723)			290			650			425			1,050		(694.1)		(264.1)
Noninterest income			5,129			2,909			2,903			2,557			3,047		76.3		68.3
Noninterest expense			23,497			11,934			10,876			10,499			10,556		96.9		122.6
Income before income taxes			3,994			6,274			5,480			5,433			5,206		(36.3)		(23.3)
Income tax expense			1,271			1,657			1,449			1,435			1,320		(23.3)		(3.7)
Net income		$	2,723		$	4,617		$	4,031		$	3,998		$	3,886		(41.0)		(29.9)
Return on average assets			0.36	%		0.84	%		0.78	%		0.82	%		0.82	%	(48)	bp	(46)	bp
Return on average assets excluding merger expenses - Non-GAAP (2)			1.35			0.94			0.86			0.82			0.82		41		53
Return on average equity			3.59			9.12			8.19			8.28			7.82		(553)		(423)
Return on average tangible equity - Non-GAAP(1)			13.88			11.12			9.89			9.40			8.88		276		500
Net interest margin			2.87			2.99			2.91			3.00			3.08		(12)		(21)
Efficiency ratio - GAAP			91.19			64.52			63.95			64.19			62.79		2,667		2,840
Efficiency ratio - Non-GAAP (1), (2)			60.13			60.92			60.90			63.28			61.91		(79)		(178)
PER SHARE DATA
Basic and diluted net income per common share		$	0.16		$	0.39		$	0.34		$	0.34		$	0.32		(59.0)	%	(50.0)	%
Dividends paid per common share			0.12			0.12			0.12			0.12			0.12		—		—
Book value per common share at period end			17.71			17.15			16.91			16.69			16.55		3.3		7.0
Tangible book value per common share at period end - Non-GAAP (1)			14.12			15.55			15.29			15.06			14.92		(9.2)		(5.4)
Market value at period end			20.85			17.73			16.75			17.02			14.60		17.6		42.8
Market range:
High			23.19			18.00			18.01			18.10			15.12		28.8		53.4
Low			17.50			16.35			16.10			12.99			10.25		7.0		70.7
AVERAGE BALANCE SHEET DATA
Loans		$	1,887,126		$	1,487,281		$	1,444,684		$	1,450,883		$	1,430,013		26.9	%	32.0	%
Investment securities			468,724			334,205			286,121			227,816			179,801		40.3		160.7
Earning assets			2,842,097			2,071,505			1,949,509			1,867,930			1,780,854		37.2		59.6
Assets			3,037,262			2,184,448			2,061,214			1,975,951			1,880,449		39.0		61.5
Deposits			2,547,151			1,943,225			1,822,148			1,742,666			1,646,980		31.1		54.7
Stockholders' equity			301,095			200,881			197,532			195,791			197,591		49.9		52.4
CREDIT QUALITY DATA
Net (recoveries) charge-offs		$	(142)		$	(147)		$	(125)		$	—		$	(61)		3.4	%	(132.8)	%
Nonaccrual loans		$	2,786		$	3,457		$	3,947		$	4,880		$	5,455		(19.4)		(48.9)
Loans 90 days past due and still accruing			508			748			752			1,188			804		(32.1)		(36.8)
Other real estate owned			532			203			203			205			—		162.1		100.0
Total nonperforming assets		$	3,826		$	4,408		$	4,902		$	6,273		$	6,259		(13.2)		(38.9)
Accruing troubled debt restructurings (TDRs) excluding acquired		$	5,667		$	5,750		$	6,338		$	6,456		$	6,997		(1.4)		(19.0)
Total nonperforming assets and accruing TDRs		$	9,493		$	10,158		$	11,240		$	12,729		$	13,256		(6.5)		(28.4)
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets			10.13	%		8.92	%		9.37	%		9.61	%		10.09	%	121	bp	4	bp
Period-end tangible equity to tangible assets - Non-GAAP (1)			8.25			8.15			8.55			8.76			9.18		10		(93)
Annualized net (recoveries) charge-offs to average loans			(0.03)			(0.04)			(0.03)			—			(0.02)		1		(1)
Allowance for credit losses as a percent of:
Period-end loans (3)			0.66			1.04			1.02			0.98			0.95		(38)		(29)
Period-end loans (4)			0.96			1.10			1.12			1.11			1.09		(14)		(13)
Nonaccrual loans			500.50			449.09			382.27			293.30			254.59		5,141		246
Nonperforming assets			364.45			352.20			307.79			228.17			221.89		1,225		143
Accruing TDRs excluding acquired			246.06			270.00			238.06			221.70			198.49		(2,394)		48
Nonperforming assets and accruing TDRs excluding acquired			146.89			152.84			134.23			112.44			104.77		(595)		42
As a percent of total loans:
Nonaccrual loans			0.13			0.23			0.27			0.33			0.38		(10)		(25)
Accruing TDRs excluding acquired			0.27			0.38			0.43			0.44			0.48		(11)		(21)
Nonaccrual loans and accruing TDRs excluding acquired			0.40			0.62			0.70			0.78			0.86		(22)		(46)
As a percent of total loans+other real estate owned:
Nonperforming assets			0.18			0.29			0.33			0.43			0.43		(11)		(25)
Nonperforming assets and accruing TDRs excluding acquired			0.45			0.68			0.76			0.87			0.91		(23)		(46)
As a percent of total assets:
Nonaccrual loans			0.08			0.15			0.19			0.24			0.28		(7)		(20)
Nonperforming assets			0.11			0.19			0.23			0.31			0.32		(8)		(21)
Accruing TDRs excluding acquired			0.16			0.25			0.30			0.32			0.36		(9)		(20)
Nonperforming assets and accruing TDRs excluding acquired			0.27			0.44			0.53			0.63			0.68		(17)		(41)

___________________
(1)	See the reconciliation table that begins on page 14 of 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)
																	Q4 2021		Q4 2021
																	compared to		compared to
		Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			Q3 2021		Q4 2020
INTEREST INCOME
Interest and fees on loans		$	20,564		$	15,484		$	14,381		$	14,366		$	14,541		32.8	%	41.4	%
Interest on investment securities:
Taxable			1,663			1,318			1,095			931			910		26.2		82.7
Interest on deposits with other banks			169			97			55			47			44		74.2		284.1
Total interest income			22,396			16,899			15,531			15,344			15,495		32.5		44.5
INTEREST EXPENSE
Interest on deposits			1,272			949			1,056			1,184			1,355		34.0		(6.1)
Interest on short-term borrowings			3			2			2			1			1		50.0		200.0
Interest on long-term borrowings			482			359			370			359			374		34.3		28.9
Total interest expense			1,757			1,310			1,428			1,544			1,730		34.1		1.6
NET INTEREST INCOME			20,639			15,589			14,103			13,800			13,765		32.4		49.9
Provision for credit losses			(1,723)			290			650			425			1,050		(694.1)		(264.1)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES			22,362			15,299			13,453			13,375			12,715		46.2		75.9
NONINTEREST INCOME
Service charges on deposit accounts			1,234			805			683			674			782		53.3		57.8
Trust and investment fee income			522			477			475			407			439		9.4		18.9
Gains on sales and calls of investment securities			—			2			—			—			—		(100.0)		—
Interchange credits			1,043			1,016			1,036			869			837		2.7		24.6
Mortgage-banking revenue			948			—			—			—			—		—		—
Title Company revenue			247			—			—			—			—		—		—
Other noninterest income			1,135			609			709			607			989		86.4		14.8
Total noninterest income			5,129			2,909			2,903			2,557			3,047		76.3		68.3
NONINTEREST EXPENSE
Salaries and wages			7,727			5,091			4,262			4,142			4,366		51.8		77.0
Employee benefits			2,271			1,654			1,493			1,844			1,715		37.3		32.4
Occupancy expense			1,263			843			770			814			745		49.8		69.5
Furniture and equipment expense			385			449			412			307			366		(14.3)		5.2
Data processing			1,487			1,170			1,217			1,127			1,093		27.1		36.0
Directors' fees			170			147			154			149			118		15.6		44.1
Amortization of intangible assets			381			107			120			126			126		256.1		202.4
FDIC insurance premium expense			362			245			223			185			138		47.8		162.3
Other real estate owned expenses, net			(2)			4			1			1			38		(150.0)		(105.3)
Legal and professional fees			150			428			648			516			662		(65.0)		(77.3)
Merger related expenses			7,615			538			377			—			—		1,315.4		—
Other noninterest expenses			1,688			1,258			1,199			1,288			1,189		34.2		42.0
Total noninterest expense			23,497			11,934			10,876			10,499			10,556		96.9		122.6
Income before income taxes			3,994			6,274			5,480			5,433			5,206		(36.3)		(23.3)
Income tax expense			1,271			1,657			1,449			1,435			1,320		(23.3)		(3.7)
NET INCOME		$	2,723		$	4,617		$	4,031		$	3,998		$	3,886		(41.0)		(29.9)
Weighted average shares outstanding - basic			17,180			11,752			11,752			11,745			12,004		46.2		43.1
Weighted average shares outstanding - diluted			17,180			11,752			11,754			11,747			12,005		46.2		43.1
Basic and diluted net income per common share		$	0.16		$	0.39		$	0.34		$	0.34		$	0.32		(59.0)		(50.0)
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
																											Q4 2021		Q4 2021
																											compared to		compared to
		Q4 2021					Q3 2021					Q2 2021					Q1 2021					Q4 2020					Q3 2021		Q4 2020
		Average			Yield/		Average			Yield/		Average			Yield/		Average			Yield/		Average			Yield/
		balance			rate		balance			rate		balance			rate		balance			rate		balance			rate
Earning assets
Loans (1), (2), (3)		$	1,887,126		4.33	%	$	1,487,281		4.14	%	$	1,444,684		4.00	%	$	1,450,883		4.03	%	$	1,430,013		4.05	%	26.9	%	32.0	%
Investment securities
Taxable			468,724		1.42			334,205		1.58			286,121		1.53			227,816		1.63			179,801		2.02		40.3		160.7
Interest-bearing deposits			486,247		0.14			250,019		0.15			218,704		0.10			189,231		0.10			171,040		0.10		94.5		184.3
Total earning assets			2,842,097		3.11	%		2,071,505		3.24	%		1,949,509		3.20	%		1,867,930		3.34	%		1,780,854		3.47	%	37.2		59.6
Cash and due from banks			22,625					19,453					16,908					19,245					17,268				16.3		31.0
Other assets			188,399					108,989					109,457					103,010					95,684				72.9		96.9
Allowance for credit losses			(15,859)					(15,499)					(14,660)					(14,234)					(13,357)				2.3		18.7
Total assets		$	3,037,262				$	2,184,448				$	2,061,214				$	1,975,951				$	1,880,449				39.0		61.5
Interest-bearing liabilities
Demand deposits		$	494,081		0.14	%	$	462,950		0.14	%	$	405,473		0.13	%	$	438,340		0.14	%	$	420,582		0.18	%	6.7		17.5
Money market and savings deposits			925,301		0.28			644,330		0.18			605,202		0.17			510,881		0.18			459,237		0.20		43.6		101.5
Certificates of deposit $100,000 or more			174,268		0.49			136,059		0.71			135,376		1.04			130,745		1.26			128,642		1.45		28.1		35.5
Other time deposits			173,975		0.50			142,777		0.68			143,821		0.90			144,919		1.10			145,795		1.27		21.9		19.3
Interest-bearing deposits			1,767,625		0.29			1,386,116		0.27			1,289,872		0.33			1,224,885		0.39			1,154,256		0.47		27.5		53.1
Securities sold under retail repurchase agreements
and federal funds purchased			3,972		0.30			2,718		0.29			3,123		0.26			2,238		0.18			1,101		0.36		46.1		260.8
Advances from FHLB - long-term			6,630		2.21			—		—			—		—			—		—			—		—		100.0		100.0
Subordinated debt			36,589		5.12			24,504		5.81			24,474		6.06			24,443		5.96			24,420		6.09		49.3		49.8
Total interest-bearing liabilities			1,814,816		0.38	%		1,413,338		0.37	%		1,317,469		0.43	%		1,251,566		0.50	%		1,179,777		0.58	%	28.4		53.8
Noninterest-bearing deposits			779,526					557,109					532,276					517,781					492,724				39.9		58.2
Accrued expenses and other liabilities			141,825					13,120					13,937					10,813					10,357				981.0		1,269.4
Stockholders' equity			301,095					200,881					197,532					195,791					197,591				49.9		52.4
Total liabilities and stockholders' equity		$	3,037,262				$	2,184,448				$	2,061,214				$	1,975,951				$	1,880,449				39.0		61.5
Net interest spread					2.73	%				2.87	%				2.77	%				2.84	%				2.89	%
Net interest margin					2.87	%				2.99	%				2.91	%				3.00	%				3.08	%

____________________
(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
		Q4 2021			Q3 2021			Q2 2021			Q1 2021			Q4 2020			12/31/2021			12/31/2020
The following reconciles return on average equity and return on average tangible equity (Note 1):
Net Income		$	2,723		$	4,617		$	4,031		$	3,998		$	3,886		$	15,368		$	15,730
Net Income - annualized (A)		$	10,803		$	18,317		$	16,168		$	16,214		$	15,460		$	15,368		$	15,730
Net income, excluding net amortization of intangible assets
and merger related expenses		$	8,688		$	5,098		$	4,402		$	4,092		$	3,980		$	22,279		$	16,128
Net income, excluding net amortization of intangible assets - annualized (B) and merger related expenses		$	34,469		$	20,226		$	17,656		$	16,595		$	15,833		$	22,279		$	16,128
Average stockholders' equity (C)		$	301,095		$	200,881		$	197,532		$	195,791		$	197,591		$	224,055		$	197,969
Less:  Average goodwill and other intangible assets			(52,692)			(18,942)			(19,053)			(19,178)			(19,304)			(27,535)			(19,498)
Average tangible equity (D)		$	248,403		$	181,939		$	178,479		$	176,613		$	178,287		$	196,520		$	178,471
Return on average equity (GAAP)  (A)/(C)			3.59	%		9.12	%		8.19	%		8.28	%		7.82	%		6.86	%		7.95	%
Return on average tangible equity (Non-GAAP)  (B)/(D)			13.88	%		11.12	%		9.89	%		9.40	%		8.88	%		11.34	%		9.04	%
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)		$	23,497		$	11,934		$	10,876		$	10,499		$	10,556		$	56,806		$	38,399
Less:  Amortization of intangible assets			(381)			(107)			(120)			(126)			(126)			(734)			(533)
Merger Expenses			(7,615)			(538)			(377)			—			—			(8,530)			—
Adjusted noninterest expense (F)		$	15,501		$	11,289		$	10,379		$	10,373		$	10,430		$	47,542		$	37,866
Net interest income (G)			20,639			15,589			14,103			13,800			13,765			64,130			52,597
Add:  Taxable-equivalent adjustment			13			34			38			36			34			121			141
Taxable-equivalent net interest income (H)		$	20,652		$	15,623		$	14,141		$	13,836		$	13,799		$	64,251		$	52,738
Noninterest income (I)		$	5,129		$	2,909		$	2,903		$	2,557		$	3,047		$	13,498			10,749
Less:  Investment securities (gains)			—			(2)			—			—			—			(2)			(347)
Adjusted noninterest income (J)		$	5,129		$	2,907		$	2,903		$	2,557		$	3,047		$	13,496		$	10,402
Efficiency ratio (GAAP)  (E)/(G)+(I)			91.19	%		64.52	%		63.95	%		64.19	%		62.79	%		73.18	%		60.62	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)			60.13	%		60.92	%		60.90	%		63.28	%		61.91	%		61.15	%		59.97	%
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (L)		$	350,693		$	201,607		$	198,682		$	196,104		$	195,019
Less:  Goodwill and other intangible assets			(70,956)			(18,883)			(18,991)			(19,111)			(19,237)
Tangible equity (M)		$	279,737		$	182,724		$	179,691		$	176,993		$	175,782
Shares outstanding (N)			19,808			11,752			11,752			11,752			11,783
Book value per common share (GAAP)  (L)/(N)		$	17.71		$	17.15		$	16.91		$	16.69		$	16.55
Tangible book value per common share (Non-GAAP) (M)/(N)		$	14.12		$	15.55		$	15.29		$	15.06		$	14.92
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (O)		$	350,693		$	201,607		$	198,682		$	196,104		$	195,019
Less:  Goodwill and other intangible assets			(70,956)			(18,883)			(18,991)			(19,111)			(19,237)
Tangible equity (P)		$	279,737		$	182,724		$	179,691		$	176,993		$	175,782
Assets (Q)		$	3,460,416		$	2,260,774		$	2,120,260		$	2,039,631		$	1,933,315
Less:  Goodwill and other intangible assets			(70,956)			(18,883)			(18,991)			(19,111)			(19,237)
Tangible assets (R)		$	3,389,460		$	2,241,891		$	2,101,269		$	2,020,520		$	1,914,078
Period-end equity/assets (GAAP)  (O)/(Q)			10.13	%		8.92	%		9.37	%		9.61	%		10.09	%
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)			8.25	%		8.15	%		8.55	%		8.76	%		9.18	%

____________________

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.

 

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