Shore Bancshares Inc.
Annual Report 2016

Plain-text annual report

2016AnnuAl RepoRt Banking | insurance | investments Years Ended December 31 (Dollars in thousands, except per share data) 2016 2015 2014 2013 2012 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) Net income (loss) - basic Net income (loss) - diluted Dividends paid Book value (at year end) Tangible book value (at year end)1 Loans Assets Deposits Stockholders’ equity $ 40,652 2,403 38,249 1,848 36,401 16,645 37,147 15,899 6,261 $ 9,638 $ 0.76 0.76 0.14 12.18 11.16 $ 38,871 3,346 35,525 2,075 33,450 15,416 37,350 11,516 4,408 $ 7,108 $ 0.56 0.56 0.04 11.64 10.59 $ 38,289 4,247 34,042 3,350 30,692 16,781 39,361 8,112 3,061 $ 5,051 $ 0.46 0.46 - 11.13 10.08 $ 41,351 6,475 34,876 27,784 7,092 17,459 40,686 (16,135) (6,501) $ (9,634) $ 45,901 10,562 35,339 27,745 7,594 15,758 39,555 (16,203) (6,565) $ (9,638) $ (1.14) (1.14) - 12.19 10.31 $ (1.14) (1.14) 0.01 13.48 11.56 $ 871,525 1,160,271 997,489 154,299 $ 795,114 1,135,143 975,464 146,967 $ 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 Return on average total assets Return on average stockholders’ equity Net interest margin Efficiency ratio 2 Dividend payout ratio Average stockholder’s equity to average total assets 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 0.84% 6.32 3.56 67.43 18.42 13.36 0.99% 2.11 1.06 97.26 39.71 0.64% 4.93 3.43 73.21 7.14 13.04 1.44% 2.81 1.11 68.77 30.14 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 1Total Stockholders’ equity, net of goodwill and other intangible assets, divided by the number of shares of common stock outstanding at year end. 2Noninterest expense as a percentage of total revenue (net interest income plus total noninterest income). Lower ratios indicate improved productivity. 2 ShoRe BAncShAReS | AnnuAl RepoRt 2016 Results Of Operations:Per Common Share Data:Financial Condition (at year end):Performance Ratios (for the year):Asset Quality Ratios (for the year): Dear Shareholders: We closed 2016 on a high note, with reported net income of $9.638 million or $0.76 per diluted common share for the fiscal year compared to net income of $7.108 million or $0.56 per diluted common share for fiscal year 2015, an increase of $2.530 million or 35.6%. We attribute our success in 2016 to the consolidation of our subsidiary banks (CNB and The Talbot Bank) to form a common brand and new name, Shore United Bank; higher net interest income resulting from increased loan volume; and a decrease in provisions for credit losses. Each quarter finished strong which enabled us to return payment of quarterly cash dividends to our shareholders. We remain committed to our strategy for growth, staying focused on continuing this trend, and sharing the success with our shareholders, employees, and communities. Looking forward, we understand the importance of having a strong team who will help us achieve our strategic goals. In 2016-2017, we hired new leaders throughout our community of companies to help us with our mission. At Shore United Bank, we have a new Chief Retail Banking Officer who will support our Delaware and Maryland branches and a Market Executive to help us grow the east and south markets of Delaware, Maryland and Virginia. At Shore Bancshares Inc., we were successful in our search to hire a new Chief Human Resources Officer to replace a team member who retired after 42 years of service. Our investment subsidiary Wye Financial & Trust, has a new member on their team to help us cultivate wealth management and trust relationships in the Delaware market. We believe in building a solid platform through our people and our communities that will contribute and facilitate collaboration and growth. In addition to the net positive effect on our financials in 2016, our employees volunteered over 17,000 hours, donated more than 3,000 lbs. of food, and supported 275 plus organizations in the following categories; community development, youth and education, environment and agriculture, and health and human services. Another core strategic objective in 2016 was the creation of a common brand using colors, fonts, and a common logo, throughout our community of companies. Later this year, we will complete this goal when our insurance company Avon-Dixon Agency and its subsidiaries adopt these brand standards to further connect all of our companies with a consistent look. As we kick off a new year, we announced in January our intent to purchase three branches on the western shore of Maryland, to expand our footprint in Baltimore and Howard Counties. Later this year, we plan to open a new Loan Production Office in Worcester County, Maryland. We believe the purchase of these branches and our new Loan Production Office will generate growth in our net interest income while diversifying our loan portfolio. With the consolidation of our banks behind us and a new common brand name; strategic leaders in position to expand and serve our communities; and improved earnings and a strong balance sheet, we are confident that our company culture and the business climate ahead will propel us forward and drive success. In closing, we would be remiss if we did not thank you our shareholders and our board of directors for their continual support and guidance. We remain vigilant in looking for new opportunities that will further improve our Company’s value and the total return to shareholders. Sincerely, Lloyd L. “Scott” Beatty, Jr. President & CEO, Shore Bancshares, Inc. Christopher F. Spurry Board Chairman ShoRe BAncShAReS | AnnuAl RepoRt 2016 3 2016Annual Report Shore Star Award Winners Employees Recognized For Living The Company’s Vision And Values c o R p o R A t e v i S i o n o u R e m p l o y e e s W i l l n o t W A n t F o R o p p o R t u n i t i e s . At Shore Bancshares, we recognize and our community of companies were recognized by reward our employees for their actions their co-workers with a Spot Award. At the end that support our company’s vision and of each year, a committee reviews the Star Award values and help us achieve our strategic nominations and selects an employee who lives our goals through our Shore Star Recognition company’s vision for each stakeholder category; Program. We encourage all employees clients, employees, community, and shareholders, to participate in the program by living as well as an overall winner. In 2016, our Shore Star our vision and values each day and Award winners were (left to right): by acknowledging the hard work and exceptional achievements of their peers. Employees may submit a Robin O’Brien - oveRAll WinneR “Spot Award” to recognize an employee “on the spot” Lisa Rosengren – employeeS for exceeding expectations, or they may nominate an Wendy Tilghman – ShAReholdeRS employee who consistently goes above and beyond for Annette Mitchell – clientS a Shore Star Award. In 2016, 86 employees across Joyce Malik - community 4 ShoRe BAncShAReS | AnnuAl RepoRt 2016 Community Partnership With Salisbury University Mid-Atlantic Sales and Marketing Institute (MASMI) In February, we announced our support and partnership with Salisbury University’s Mid-Atlantic Sales and Marketing Institute (MASMI) program as a leading Silver Partner of the organization. As a MASMI partner, we have access to talented students who are prepared and focused in the profession of selling and sales management. We are also given the opportunity to assist in curriculum development and gain access to sales research conducted by the Perdue School faculty. COMMUNITY IMPACT 2016 With this partnership, we have the opportunity to participate in a senior sales class role play, attend private o u R C o m m u n i t i e s c o R p o R A t e v i S i o n W i l l n o t W A n t F o R o u R i n v o l v e m e n t . recruiting sessions, engage with qualified candidates at the University’s Sales Career Fair, and host an intern for the day program. “The partnership between Shore Bancshares and MASMI gives us the opportunity to help students as well as our companies when they are looking to hire qualified sales people to fill positions in banking, insurance, and investments,” said Lloyd L. “Scott” Beatty, Jr. president and chief executive officer 130 EMPLOYEE VOLUNTEERS 17,000+ VOLUNTEER HOURS at Shore Bancshares. 275+ ORGANIZATIONS SUPPORTED In November, we hosted eleven junior and senior sales and marketing students that were selected to 3,000+ LBS FOOD DONATED participate in the Intern for the Day Program. The students began their day by receiving an overview of our company’s structure and then they were directed to one of our company’s locations to shadow a sales team member for the day. Community COMMUNITY IMPACT 2016 Employee Volunteers 130 EMPLOYEE VOLUNTEERS 17,000+ VOLUNTEER HOURS 275+ ORGANIZATIONS SUPPORTED 3,000+ LBS FOOD DONATED 10,490 VOLUNTEER HOURS 1,827 VOLUNTEER HOURS ENVIRONMENT & AGRICULTURE 1,886 VOLUNTEER HOURS HEALTH & HUMAN SERVICES 2,847 VOLUNTEER HOURS 10,490 VOLUNTEER HOURS ShoRe BAncShAReS | AnnuAl RepoRt 2016 5 1,827 VOLUNTEER HOURS ENVIRONMENT & AGRICULTURE 1,886 VOLUNTEER HOURS HEALTH & HUMAN SERVICES 2,847 VOLUNTEER HOURS 2016Annual ReportCOMMUNITY DEVELOPMENTYOUTH & EDUCATIONCOMMUNITY DEVELOPMENTYOUTH & EDUCATION CNB and The Talbot Bank united as one; Shore United Bank c o R p o R A t e v i S i o n o u R s h A R e h o l d e R s W i l l n o t W A n t F o R A R e t u R n . Consistent with our strategic initiative to consolidate and integrate our two banking subsidiaries, we completed the merger of The Talbot Bank and CNB under the new name of Shore United Bank in July of 2016. The name and logo were carefully selected to reflect the historical connection between The Talbot Bank and CNB through Shore Bancshares and demonstrate the union of the same great people, products, and service from both banks. The new teal brand color is a combination of the original Talbot Bank and CNB logo colors and the sail is symbolic of our mission to help propel our clients forward and navigate toward their financial goals. Our holding company, Shore Bancshares, Inc. and our investment division, Wye Financial & Trust, have also adopted the sail and brand colors in their logo to further demonstrate our connection across our companies. Some of the obvious gains of this merger include the consolidation of processes and the change in regulations that now eliminate duplication efforts and costs related to regulatory compliance. The merger of our two banks makes us a stronger financial institution overall, increasing the bank’s asset size to $1.1 billion. The unification of these two banks also increases our legal lending limit to $18 million. With a larger legal lending limit, we are now able to be more competitive with national banks and other regional banks in our service area. Now, through a common brand name, we have created operational efficiencies, a consistent culture, and united branding under Shore United Bank. 6 ShoRe BAncShAReS | AnnuAl RepoRt 2016 BAnking To maximize our client experiences, we continue to explore and introduce alternative delivery channels. In 2016, we introduced Instant Issue Debit Cards, made enhancements to our Online Banking platform and began offering debit cards to our business clients. As we look to offer more convenience in our products and services, we focus even more on protecting our networks, computers, and customer data. With the recent increase and sophistication of cyber-fraud, protecting our clients’ privacy continues to be our highest priority. We are diligent in the monitoring of our systems and analysis of our risk assessments to continuously provide proactive solutions to secure our systems. Our internal information technology professionals provide information security training and testing, and website tips for clients to reduce their risk of loss due to cyber-fraud. Because we are committed to the success of our communities, we also offer opportunities outside of traditional banking solutions to serve and connect with our clients. In 2016, we kicked off a travel program, inviting our clients and prospects to travel with us to local events and tourist attractions they may not have had an opportunity to do on their own. We look forward to expanding this initiative in 2017. c o R p o R A t e v i S i o n o u R C l i e n t s W i l l n o t W A n t F o R s e R v C e . i inSuRAnce Avon-Dixon Agency finished strong in 2016, with $9 million in revenue and over $64 million in premiums sold. With a strong team of talented sales and service professionals in place, Avon-Dixon is looking to expand their individual benefits, trucking, commercial, and boat and yacht lines in 2017. In 2016, our insurance subsidiary Freestate and Son Insurance, a division of Avon-Dixon Agency, relocated from Lawyer’s Row to 4-H Park Road in Centreville, Maryland. A ribbon cutting ceremony was held to welcome clients to their new location. inveStmentS Our investment division, Wye Financial & Trust, welcomed three new staff members to their team in 2016, allowing us to expand our trust and investment services to the Delaware market. ShoRe BAncShAReS | AnnuAl RepoRt 2016 7 2016Annual Report W h A t ’ S o n t h e h o R i z o n i n 2 0 1 7 Expanding Our Footprint In January of 2017, we announced that our banking subsidiary, Shore United Bank, entered into a purchase and assumption agreement to acquire three branches located in the greater Baltimore, Maryland metropolitan area with approximately $214 million in deposits, $152 million of performing loans and $40 million of cash at that time from Northwest Bank, the bank subsidiary of Northwest Bancshares, Inc. (NASDAQ: NWBI). This acquisition will provide Shore United Bank with the opportunity to expand its footprint in Maryland by extending its branch network from the Eastern Shore to the greater Baltimore area communities of Elkridge, Owings Mills, and Arbutus. Subject to customary closing conditions, including the receipt of all necessary regulatory approvals, the acquisition is expected to be completed during the second quarter of 2017. Investing In Technology Looking forward to 2017, we have many good things happening. We will be uniting the websites for our banking, investment, and insurance divisions into one responsive website. Responsive design provides an optimal viewing experience across a wide range of devices. With more people using smartphones and tablets to conduct business online, it is important for us to invest in technology that will enhance our clients’ experience. 8 ShoRe BAncShAReS | AnnuAl RepoRt 2016 Consistent Branding In addition to the new website, the insurance division will also be introducing new logos in 2017, integrating the sail, font, and brand colors from our bank and investment logos which will connect our community of companies through consistent branding. W h A t ’ S o n t h e h o R i z o n i n 2 0 1 7 Growing Together As our companies continue to grow, so does our contractors broke ground on the new building need for more space. The Avon-Dixon Agency and Avon-Dixon celebrated with an official personal, business, marine, benefits and their ground breaking ceremony at their future office trucking division, Elliott Wilson Insurance, will site. The new building will allow sales and support be relocating from 106 N. Harrison Street in staff across all insurance lines to be located under Easton to 28640 Mary’s Court in Easton during one roof. Our insurance team is looking forward the second quarter of 2017. In October 2016, to supporting our clients in their new location. ShoRe BAncShAReS | AnnuAl RepoRt 2016 9 2016Annual Report i d R e C t o R s & o F F i C e R s | 2 0 1 6 - 2 0 1 7 S h o R e B A n c S h A R e S BoARd of diRectoRS ShoRe BAncShAReS & ShoRe united BAnk chAiRmAn of the BoARd Christopher F. Spurry Founder/Former Owner, Spurry & Associates, Inc. vice chAiRmAn of the BoARd Frank E. Mason, III President & Chief Executive Officer, JASCO pReSident & chief executive officeR ShoRe BAncShAReS, inc. Lloyd L. “Scott” Beatty, Jr. Blenda W. Armistead Investor David J. Bates Investor Michael R. Clemmer, Jr. President, Salisbury, Inc. David A. Fike President & Publisher, APG Media of Chesapeake James A. Judge Certified Public Accountant, Anthony Judge & Ware, LLC Clyde V. Kelly, III President & General Manager, Kelly Distributors David W. Moore President & Chief Executive Officer Milford Housing Development Corporation officeRS | ShoRe BAncShAReS pReSident & chief executive officeR Lloyd L. “Scott” Beatty, Jr. SenioR vice pReSident & chief finAnciAl officeR Edward C. Allen SenioR vice pReSident & chief opeRAting officeR Donna J. Stevens SecRetARy & geneRAl counSel W. David Morse vice pReSident & chief infoRmAtion officeR Timothy J. Berrigan vice pReSident & chief mARketing & pRoject officeR Debra H. Rich vice pReSident & chief humAn ReSouRceS officeR Marie DiDaniels officeRS | ShoRe united BAnk pReSident & chief executive officeR Patrick M. Bilbrough SenioR vice pReSident & chief finAnciAl officeR Edward C. Allen Jeffrey E. Thompson Managing Partner, Thompson & Richard, LLP SenioR vice pReSident & chief opeRAting officeR Donna J. Stevens W. Moorhead Vermilye Senior Business Development Officer, Shore United Bank John H. Wilson President & Chief Executive Officer Coastal South of Maryland, Inc. BoARd of diRectoRS | Avon-dixon Agency pReSident & chief executive officeR Richard C. Trippe, Jr. SenioR vice pReSident & chief cRedit officeR Charles E. Ruch, Jr. SenioR vice pReSident & chief lending officeR Michael T. Cavey SenioR vice pReSident & RetAil BAnking officeR Jennifer Joseph SenioR vice pReSident/ legAl counSel coRpoRAte SecRetARy W. David Morse Lloyd L. “Scott” Beatty, Jr. President & Chief Executive Officer, Shore Bancshares, Inc. officeRS | Avon-dixon Agency Clyde V. Kelly, III President & General Manager, Kelly Distributors pReSident & chief executive officeR Richard C. Trippe, Jr. David A. Fike President & Publisher, APG Media of Chesapeake John H. Wilson President & Chief Executive Officer Coastal South of Maryland, Inc. SecRetARy W. David Morse tReASuReR Edward C. Allen 10 ShoRe BAncShAReS | AnnuAl RepoRt 2016 BAnking ShoRe united BAnk 18 E. Dover Street Easton, MD 21601 410.822.1400 877.758.1600 ShoreUnitedBank.com ShoRe BAncShAReS heAdquARteRS 28969 Information Lane Easton, MD 21601 410.763.7800 95 MIDDLETOWN futuRe BRAncheS Owings Mills, Arbutus, Elkridge OWINGS MILLS ShoRe united BAnk Loan Production Office 651 N. Broad Street Suite 201 Middletown, DE 19709 inSuRAnce Avon-dixon Agency, llc 106 N. Harrison Street Easton, MD 21601 410.822.0506 800.242.8758 AvonDixon.com inveStmentS Wye finAnciAl & tRuSt 16 N. Washington Street Easton, MD 21601 410.763.8543 WyeFinancialandTrust.com ARBUTUS 95 ELKRIDGE 97 ANNAPOLIS Anne Arundel County Kent County CHESTERTOWN Queen Anne’s County CENTREVILLE MARYLAND CHESTER STEVENSVILLE GRASONVILLE HILLSBORO Caroline County DENTON ST. MICHAELS EASTON Talbot County CAMBRIDGE Dorchester County TILGHMAN ISLAND C H E S A P E A K E B A Y DOVER Kent County CAMDEN FELTON MILFORD DELAWARE Sussex County Wicomico County DELAWARE BAY POTOMAC RIVER inveStoR RelAtionS contAct: Edward Allen Edward.Allen@shbi.com 443.262.9319 tRAnSfeR Agent: Broadridge Corporate Issuer Solutions P.O.Box 1342 Brentwood, NY 11717 866.232.0392 720.358.3588 ATLANTIC OCEAN ShoRe BAncShAReS | AnnuAl RepoRt 2016 11 2016Annual Report 

Continue reading text version or see original annual report in PDF format above