Shore Bancshares, Inc. | 2014 Annual Report
Selected Financial Data
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS:
Interest income
Interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Noninterest income
Noninterest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
PER COMMON SHARE DATA:
Net income (loss) – basic
Net income (loss) – diluted
Dividends paid
Book value (at year end)
Tangible book value (at year end)
1
FINANCIAL CONDITION (at year end):
Loans
Assets
Deposits
Long-term debt
Stockholders’ equity
Years Ended December 31,
2014
2013
2012
2011
2010
$ 38,289
4,247
34,042
3,350
30,692
16,781
39,361
8,112
3,061
$ 5,051
$ 41,351
6,475
34,876
27,784
7,092
17,459
40,686
(16,135)
(6,501)
$ (9,634)
$ 0.46
0.46
-
11.13
10.08
$ (1.14)
(1.14)
-
12.19
10.31
$ 45,901
10,562
35,339
27,745
7,594
15,758
39,555
(16,203)
(6,565)
$ (9,638)
$ (1.14)
(1.14)
0.01
13.48
11.56
$ 50,852
11,088
39,764
19,470
20,294
17,318
39,167
(1,555)
(658)
$ (897)
$ (0.11)
(0.11)
0.09
14.34
12.37
$ 55,461
12,822
42,639
21,119
21,520
18,041
41,720
(2,159)
(492)
$ (1,667)
$ (0.20)
(0.20)
0.24
14.51
12.32
$ 710,746
1,100,402
949,004
-
140,469
$ 711,919
1,054,124
933,468
-
103,299
$ 785,082
1,185,807
1,049,273
-
114,026
$ 841,050
1,158,193
1,009,919
455
121,249
$ 895,404
1,130,311
979,516
932
122,513
PERFORMANCE RATIOS (for the year):
Return on average total assets
Return on average stockholders’ equity
Net interest margin
2
Efficiency ratio
Dividend payout ratio
Average stockholders’ equity to average total assets
ASSET QUALITY RATIOS (for the year):
Nonperforming assets to total assets
Nonperforming assets and accruing TDRs to total assets
Allowance for credit losses to average loans
Allowance for credit losses to nonaccrual loans
Allowance for credit losses to nonaccrual loans and TDRs
0.47%
4.04
3.43
77.45
-%
11.66
1.57%
3.09
1.09
57.14
25.53
(0.89)%
(8.64)
3.48
77.59
-
10.31
2.11%
4.58
1.40
59.10
24.25
(0.82)%
(8.07)
3.23
77.17
(0.88)
10.18
3.76%
8.18
1.96
43.84
18.00
(0.08)%
(0.74)
3.74
68.35
(81.82)
10.66
(0.15)%
(1.33)
4.02
68.75
(120.00)
11.05
5.48%
7.66
1.64
27.81
18.66
3.95%
6.16
1.57
39.26
23.25
1
Total stockholders’ equity, net of goodwill and other intangible assets, divided by the number of shares of common stock outstanding at year end.
2
Noninterest expense as a percentage of total revenue (net interest income plus total noninterest income). Lower ratios indicate improved productivity.
BANKING
INSURANCE
The Talbot Bank of Easton Maryland
Herbert L. Andrew, III, Chairman
The Avon-Dixon Agency, LLC
Elliott Wilson Insurance, LLC
Jack Martin & Associates, Inc.
Lloyd L. “Scott” Beatty, Jr.
James “Dick” Deerin, Jr.
Mark M. Freestate
Mary Ann Henker
Diana Johnson
William L. Lane Jr., Chairman
Edward “Ned” McDonald
Richard C. Trippe, Jr.
Morgan Wells
John H. Wilson
Officers
William L. Lane, Jr.
Executive Vice President
Mark M. Freestate
Executive Vice President
President and Chief Executive Officer
Richard C. Trippe, Jr.
President and Chief Executive Officer
Blenda W. Armistead
Lloyd L. “Scott” Beatty, Jr.
Carole Ann Clem
R. Michael Clemmer, Jr.
John W. Dillon
David A. Fike
Steve M. Shearer
Christopher F. Spurry
David P. Valliant
W. Moorhead Vermilye
Officers
Patrick M. Bilbrough
Laura P. Heikes
Senior Vice President
Branch Administration Officer
Kathleen Kurtz
Senior Vice President
Senior Credit Officer
Kevin W. Moran
Senior Vice President
Senior Lending Officer
CNB
Ann B. Collier
Mark M. Freestate
Thomas K. Helfenbein
James A. Judge
Clyde V. Kelly, III, Chairman
David W. Moore
Wm. Maurice Sanger
Jeffrey E. Thompson, Vice Chairman
Mary Ellen M. Valliant
Officers
Edward C. Allen
President and Chief Executive Officer
Charles E. Ruch, Jr.
Senior Vice President
Chief Credit Officer
Lynn Payne
Vice President and Chief Financial Officer
Dear Shareholders:
In reflection, 2014 was a year like no other, a significant turning point setting the course for our next era with our most
significant achievement, a successful capital raise of $31.2 million completed on May 21, 2014. Our attention to
strategy which began in 2013 has already shown favorable results and a reversal of the last few years of quarter losses.
Shore Bancshares, Inc. ends the year reporting a net income of $1.226 million or $0.10 per diluted common share for
the fourth quarter of 2014, compared to net income of $1.175 million or $0.14 per diluted common share for the fourth
quarter of 2013. The Company reported net income of $5.05 million or $0.46 per diluted share for fiscal year 2014,
compared to a net loss of $9.6 million or $(1.14) per diluted common share for fiscal year 2013.
As we focus our attention to the future growth of our company, we began the year by launching a Voice of Employee
Opinion Survey to help us understand and respond to the needs and concerns of our employees. The feedback from the
survey will be instrumental in helping us redefine our vision, value and story of the company and how we want to move
into the future. To further enhance our capital and cash liquidity positions, we benefited from the sale of Tri-State
General Insurance Agency on June 6, 2014, a wholesale insurance agency, for a net gain of $111 thousand as well as the
reduction of intangible assets of $2.7 million in exchange for cash. We determined that the Tri-State General business
model no longer met our strategic objectives and therefore the decision was made to sell this line of business.
We continue to support organic growth by re-engaging our business development efforts across all of our business
lines and by enhancing our client relationships to increase deposit penetration and multi-product usage. Internal
initiatives to help leverage the relationships across all of our companies are underway. In the fourth quarter we were
able to increase loans outstanding thereby reversing what had been a three year decline in loans.
To further improve the product and services offered to our banking clients, a complete review of our personal and
business deposit products was completed in August of 2014. The emphasis of this initiative was to standardize our
products and services across our two banks, while expanding convenience services to our clients who travel outside of
our traditional branch network by offering a mobile check deposit service.
In 2014 we hired new staff to further develop our Enterprise Risk Management program and deliver more robust
training and education opportunities to our employees.
Investing in our communities continues to be a major focus throughout all of our companies in 2014, as we help clients
and businesses grow in the counties we serve. Our employees not only give back in sharing their professional
experience and services, more importantly they give of themselves through volunteering their time at various local
non-profit organizations helping to serve the people and communities in which we live and work.
We are propelled by the milestones achieved during 2014 as we embrace our new company vision in 2015 - “Our
mission is your success,” with the emphasis on your success! On the facing pages of this report, we illustrate how our
employees, clients, communities and shareholders will benefit from our emphasis on “your success”.
We thank you, our shareholders, for your continuing support and investment in the future of our company.
Sincerely,
Lloyd L. “Scott” Beatty, Jr.
Christopher F. Spurry
Pictured: Chairman, Chris Spurry (left) honoring President and CEO, Scott Beatty (right)
for his accomplishments in 2014 during an all employee event.
Employees - Our employees will not want for opportunities.
At Shore Bancshares, the culture of our Company is extremely
important to us and as a result we devoted significant time and
energy to improve this in 2014, by focusing on our most important
assets “our employees” as well as our clients, communities and
shareholders.
In February of 2014, Shore Bancshares and its community of
companies began the year by initiating a Voice of Employee
Opinion Survey. Each employee was asked to respond to a series of
questions to help us understand the current environment of Shore
Bancshares as well as to understand employee points of view and
needs. The feedback from the surveys and meetings was used as the
foundation to help us in the next stage of our development by
redefining our vision, values and story to reflect the characteristics
we believe will make us more successful as we move ahead.
The next step in our organizational transformation is to ensure that
our performance goals align with our new vision, values and story.
By providing clarity on what “good” looks like in our employee’s
performance, we are making the appropriate adjustments to our
internal communications, learning, training and development
Photo: Employees celebrate at an all employee event.
practices and other business processes to create a winning culture with employee engagement.
At Shore Bancshares, we believe in creating an environment and culture that supports and fosters engagement and
opportunities for our employees. Employees are actively participating in focus groups and work streams to help us
transform our business strategies and to continuously help us improve our business. Our employees are the
foundation of who we are and we clearly appreciate the role they play in sustaining strong performance.
Shareholders - Our shareholders will not want for a return.
On May 21, 2014, we completed a very successful public
offering. The total net proceeds to Shore Bancshares,
Inc. from the public offering were $31.2 million.
We deployed $20 million of the proceeds to increase
the capital of The Talbot Bank of Easton, Maryland, a
bank subsidiary of the Company to satisfy regulatory
capital requirements stemming from the bank’s
Consent Order with the FDIC from May of 2013. By
down streaming this capital to The Talbot Bank, we
have positioned the bank to maintain a strong capital
position which will allow us to serve our local
communities for years to come. With the capital raise
we were able to gain support from prominent investors
who specialize in community banking reflecting the
confidence that these respected investors have in the
future of our Company. Other compelling investment
strategies of 2014 included investing in our credit
infrastructure, strengthening our noninterest revenue
sources, continual emphasis on our business development and a strategic plan that positions us for growth.
Photo: Shore Bancshares, Inc. Headquarters
The Company has been highly disciplined in expense control completing a branch rationalization study yielding
efficiencies in the staffing model as well as a branch closing to better leverage the expense base for growth. The same
activities have commenced in our insurance operations with greater emphasis on efficiency through the use of
technology and partnerships with third party companies to help drive insurance revenues.
Communities - Our communities will not want for our involvement.
We want our customers to understand the vital role that our
companies play in their respective communities. Our customers’
deposits fund economic growth in our communities and all loan
decisions are made locally. We truly reinvest in our communities
unlike the money center and regional banks. The additional capital
enables us to position our companies for growth, remain
independent, and be the leading banking, insurance and wealth
management services providers on the Delmarva Peninsula. What
this really means to our communities is that we are available to lend
money and provide services to both retail and commercial
customers across the communities in which we serve.
Shore Bancshares and its affiliates currently employ in excess of
300 people across its market in seven counties. Our employees are
actively involved in their respective communities. In 2014, the
employees of Shore Bancshares and its community of companies
amassed in excess of 16,000 hours of community service. Shore
Bancshares and its affiliates have historically played a vital role in
both the economic and quality of life in our communities and
our Company story highlights the importance this takes in the day to
day lives of our employees.
Photo: Brenda Wooden, Tred Avon Square Branch Manager,
The Talbot Bank, was the 2014 recipient of the NAACP
Dorothy Webb Black Community Service Award.
Clients - Our clients will not want for service.
Providing quality, safe and reliable products and services to our
customers is a high priority. In 2014, our banks and insurance
agency introduced new products and services to help the
growing needs of our personal and business customers. New
services include mobile check deposit, a return check
processing service for businesses, enhancements to
eStatements including electronic delivery of documents and an
electronic signature service allowing our insurance clients to
electronically sign and return documents securely to us.
In addition, our bank deposit products and service fees were
reviewed against our competitors, carefully evaluating them and
making adjustments as needed. Our bank, CNB opened a new
branch in Dover, Delaware at 800 S Governors Avenue on
January 21, 2015. Customers of The Talbot Bank and CNB now
have access to 20 locations across Maryland’s Eastern Shore and
Delaware. Lastly, the Avon Dixon Agency, through a
collaborative process with its insurance carrier, now has access
to superior excess liability coverage available only to clients of
Talbot Bank, CNB and Wye Financial & Trust.
At Shore Bancshares, we believe that focusing in these four
areas will help secure our future success. Investments made
here will improve the wellbeing of our clients, employees,
communities and shareholders.
Pictured from left to right: David Miller, President, All-Span, Inc.;
John Augustus, V.P.,Commercial Banking Officer, CNB; Herb Troyer,
V.P., Owner, All-Span, Inc.; J.J. Carter, V.P., Owner, All-Span, Inc.
Board of Directors
SHORE BANCSHARES, INC.
BANKING
INSURANCE
The Avon-Dixon Agency, LLC
Elliott Wilson Insurance, LLC
Jack Martin & Associates, Inc.
Lloyd L. “Scott” Beatty, Jr.
James “Dick” Deerin, Jr.
Mark M. Freestate
Mary Ann Henker
Diana Johnson
William L. Lane Jr., Chairman
Edward “Ned” McDonald
Richard C. Trippe, Jr.
Morgan Wells
John H. Wilson
Officers
Richard C. Trippe, Jr.
President and Chief Executive Officer
William L. Lane, Jr.
Executive Vice President
Mark M. Freestate
Executive Vice President
Blenda W. Armistead
Investor
David J. Bates
Investor
Lloyd L. “Scott” Beatty, Jr.
President and Chief Executive Officer
Shore Bancshares, Inc.
James A. Judge
Certified Public Accountant
Anthony Judge & Ware, LLC
Frank E. Mason, II
President and Chief Executive Officer
JASCO
David W. Moore
President and Chief Executive Officer
Milford Housing Development Corporation
Christopher F. Spurry
Chairman
President, Spurry and Associates, Inc.
W. Moorhead Vermilye
Senior Business Development Officer
The Talbot Bank
John H. Wilson
President, Coastal South of MD, Inc.
Officers
Lloyd L. “Scott” Beatty, Jr.
President and Chief Executive Officer
George S. Rapp
Vice President and Chief Financial Officer
W. David Morse
Secretary and Legal Counsel
Donna J. Stevens
Senior Vice President
Chief Operations Officer
Timothy J. Berrigan
Vice President and Chief Information Officer
Pamela J. Dill
Vice President and Chief Human Relations Officer
Debra H. Rich
Vice President and Chief Marketing & Project Officer
The Talbot Bank of Easton Maryland
Herbert L. Andrew, III, Chairman
Blenda W. Armistead
Lloyd L. “Scott” Beatty, Jr.
Carole Ann Clem
R. Michael Clemmer, Jr.
John W. Dillon
David A. Fike
Steve M. Shearer
Christopher F. Spurry
David P. Valliant
W. Moorhead Vermilye
Officers
Patrick M. Bilbrough
President and Chief Executive Officer
Laura P. Heikes
Senior Vice President
Branch Administration Officer
Kathleen Kurtz
Senior Vice President
Senior Credit Officer
Kevin W. Moran
Senior Vice President
Senior Lending Officer
CNB
Ann B. Collier
Mark M. Freestate
Thomas K. Helfenbein
James A. Judge
Clyde V. Kelly, III, Chairman
David W. Moore
Wm. Maurice Sanger
Jeffrey E. Thompson, Vice Chairman
Mary Ellen M. Valliant
Officers
Edward C. Allen
President and Chief Executive Officer
Charles E. Ruch, Jr.
Senior Vice President
Chief Credit Officer
Lynn Payne
Vice President and Chief Financial Officer
SHORE BANCSHARES, INC.
28969 Information Lane
Easton, MD 21601
410.763.7800
shorebancshares.com
BANKING
The Talbot Bank
of Easton, Maryland
18 E. Dover Street
Easton, MD 21601
410.822.1400
800.673.8258
talbot-bank.com
CNB
109 N. Commerce Street
Centreville, MD 21617
410.758.1600
877.758.1600
cnb-bank.com
INSURANCE
INVESTMENTS
Avon-Dixon Agency
106 N. Harrison Street
Easton, MD 21601
410.822.0506
800.242.8758
avondixon.com
Elliott Wilson Insurance
106 N. Harrison Street
Easton, MD 21601
410.820.7797
800.235.9885
elliottwilsonins.com
Jack Martin & Associates
135 Old Solomons Island Road
Annapolis, MD 21401
410.626.1000
800.497.5804
jackmartin.com
Wye Financial & Trust
16 N. Washington Street
Easton, MD 21601
410.763.8543
wyefinancialandtrust.com
TRANSFER AGENT
Broadridge Corporate
Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717
866.232.0392
720.358.3588
Investor Relations Contact:
Mr. George S. Rapp
410.822.3855
George.Rapp@SHBI.com
NASDAQ:SHBI
Shore Bancshares, Inc. | 2014 Annual Report
Our Story
Shore Bancshares is the largest financial holding company located on the Delmarva
Peninsula. With total assets in excess of a billion dollars we are large enough and strong
enough to provide a full complement of services – banking, insurance, wealth management
and brokerage.
So what makes us different? We care. We care about people and we care about your success.
Shore Bancshares is built around the character of our people and our communities. We are a
company built on integrity, dedicated to our clients, our employees, our communities and
our shareholders.
We care about our employees. We value their dedication and are committed to providing
opportunities for them to develop and succeed to their full potential.
We care about our clients and our communities. We value the relationships we’ve earned by
being trusted advisors and providers of financial services over the past 100 + years. We are
committed to continuing that legacy, to building long term relationships and to providing
exceptional service.
We care about our shareholders. We value their trust in us and we’re committed to providing
them a return on their investment.
Our commitment is critically important to the financial health of our communities. We
make good things happen because we are your neighbor. We know you by name. It’s not just
about the business of banking, insurance or investments. In addition to our economic
impact, annually, our employees provide over 16,000 hours of volunteer service. We care
about people and what’s important to you.
Our mission is your success.
shorebancshares.com NASDAQ:SHBI