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
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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
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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
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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.
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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
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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.
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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
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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
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2016Annual Report