Shore Bancshares Inc. Annual Report 2018

Plain-text annual report

Anne Anne Arundel Arundel County County Talbot County Wicomico Wicomico County County OCEAN OCEAN CITY CITY 2018 Annual Report Kent CountyKent CountySussex CountyCarolineCountyQueen Anne’sCountyDorchesterCountyKent CountyKent CountySussex CountyCarolineCountyQueen Anne’sCountyDorchesterCounty S�� F�� D�� (Dollars in thousands, except per share data) R�� O� C�� O��: Interest income Interest expense Net interest income Provision for credit losses Net interest income a�er provision for credit losses Noninterest income Noninterest expense Income before income taxes Income tax expense Net income R�� O� D�� O��: Noninterest income Noninterest expense Income before income taxes Income tax expense (beneﬁt) Net income P�� C�� S�� D��: Income from con�nuing opera�ons - basic Income from discon�nued opera�ons - basic Net income Income from con�nuing opera�ons - diluted Income from discon�nued opera�ons - diluted Net income Dividends paid Book value (at year end) Tangible book value (at year end)1 F�� C�� (at year end): Loans Assets Deposits Stockholders’ equity P�� R�� (for the year)2: Return on average total assets Return on average stockholders’ equity Net interest margin Eﬃciency ra�o3 Dividend payout ra�o Average stockholders’ equity to average total assets A�� Q�� R�� (for the year): Nonperforming assets to total assets Nonperforming assets and accruing TDRs to total assets Allowance for credit losses to loans Allowance for credit losses to nonaccrual loans Allowance for credit losses to nonaccrual loans and TDRs Years Ended December 31, 2018 2017 $ $ $ $ $ $ $ $ 55,907 5,272 50,635 1,674 48,961 9,013 36,831 21,143 5,380 15,763 22,077 7,920 14,157 4,923 9,234 1.24 0.72 1.96 1.24 0.72 1.96 0.32 14.37 12.77 $ $ $ $ $ $ $ $ 47,963 2,273 45,690 2,291 43,399 8,200 33,640 17,959 8,734 9,225 9,388 7,562 1,826 (211) 2,037 0.73 0.16 0.89 0.73 0.16 0.89 0.22 12.90 10.36 $ 1,195,355 1,483,076 1,212,341 183,185 $ 1,093,514 1,393,860 1,202,781 163,736 1.74 % 14.81 3.74 54.76 16.33 11.75 1.21 % 1.80 0.87 62.10 40.85 0.87 % 7.05 3.76 65.11 24.72 12.40 0.53 % 1.49 0.89 196.76 53.46 1Total Stockholders’ equity, net of goodwill and other intangible assets, divided by the number of shares of common stock outstanding at year end. 2Reﬂect the results of both continuing and discontinued operations. 3Noninterest expense as a percentage of total revenue (net interest income plus total noninterest income). Lower ratios indicate improved productivity. SHORE BANCSHARES | ANNUAL REPORT 2018 Dear Shareholders: 2018 was a signiﬁcant year for the Company, in terms of loan growth, core earnings and the divestiture of our retail insurance agency, Avon-Dixon, LLC (“Avon”). Our total loans increased $101.8 million or 9.3% and total deposits increased $9.6 million or less than 1%. The net proceeds from the sale of Avon amounted to $25.2 million, resulting in a net gain after tax of $8.2 million. Our decision to sell Avon was not made lightly. Over the last 10 years, insurance premiums stayed relatively constant while the value of insurance agencies increased dramatically. Because of high acquisition costs, we were not in a position to expand into new markets through the purchase of new agencies. After a great deal of thought and analysis, we concluded the sale of Avon would accomplish two goals. First, it will allow the agency the opportunity to grow, giving them access to many new insurance markets while becoming an anchor agency for a growing national insurance agency. Secondly, it will also allow our bank to grow. The proceeds from the sale of the agency provide a substantial increase in regulatory capital which we can now use to fund loan growth, expand our activities in some of our newer markets and support acquisition opportunities. We continue to explore new technology and processes to create efficiencies, enhance the banking experience for our clients, and differentiate ourselves from our competitors. In 2018, much work was completed to prepare for new digital services that we will be offering in 2019. Outside of expansion and new technologies, our employees continue to maintain the positive character of our company through their commitment to serve. In 2018, our employees volunteered over 7,000 hours to various non-proﬁt organizations and events throughout our markets. Looking forward, we remain committed to the success of our clients, ﬁlling in the gaps of our footprint and providing you with a favorable return. We thank you, our shareholders, for your continued support as well as our board of directors for their guidance as we set sail for a new year. Lloyd L. “Scott” Beatty, Jr. President & CEO, Shore United Bank & Shore Bancshares, Inc. Frank E. Mason, lll Board Chairman SHORE BANCSHARES | ANNUAL REPORT 2018 WHAT’S ON THE HORIZON? MOBILE CHANNELS TO HELP MANAGE YOUR LIFE We strive to meet the ﬁnancial needs of all demographics in our market areas which we do by offering traditional products while introducing new digital products that beneﬁt customers of all ages. As technology continues to advance, we continuously look for ways to leverage new developments to create efficiencies, improve processes, and make banking more convenient for our customers. Each year we see a steady increase in the number of customers performing transactions through our online and mobile banking services. Many of our customers are using mobile devices to make deposits, pay bills, transfer money and pay for purchases. Touch ID, a login method that only requires your ﬁngerprint, became available for both Apple and Android users in 2018. In December of 2018, nearly 30% of our mobile banking customers opted to use the ﬁngerprint method to log into their account over using their password. As more people rely on mobile devices to manage their life, we continue to explore options to enhance our clients’ banking experience without compromising account security. USER INCREASE SINCE JANUARY 2017 Mobile 73% Online 38% 10000 5000 Number of Users 0 20000 15000 14,628 12,107 16,699 9,175 7,154 5,304 January 2017 January 2018 January 2019 SHORE BANCSHARES | ANNUAL REPORT 2018 26,336 checks processed in 2018 using Mobile Check Deposit 232,678 bills were paid in 2018 through Online Bill Pay According to the January 30, 2019 Globe Newswire Report1, the global mobile wallet market accounted for $880.2 billion in 2017 and is expected to reach $9,352.2 billion by 2026. To meet the demand of digital commerce, we will introduce Apple, Samsung and Google Pay in the 2nd quarter of 2019. This new service will allow customers to store credit or debit card numbers in the respective app and pay for purchases through Shore United Bank using their phone or wearable device. 1(Jan. 30, 2019). Globe Newswire. Retrieved from: (https://globenewswire.com/news-release/2019/01 /30/1707681/0/en/Global-Mobile-Wallet-Market- Report-2017-2018-2026.html). While our banking services have become increasingly digital, we still strive to build a personal relationship with each customer. Our investment division, Wye Financial & Trust (Wye), has leveraged our internal referral program to match Shore United Bank clients with one of their ﬁnancial advisors. When branch staff listen to our clients and invest the time to have a deeper conversation, they often learn of additional ﬁnancial needs that can be best served by Wye. A referral is sent to the investment office with details to contact the customer. Qualiﬁed referrals and subsequent sales have steadily increased over the life of the program. Wye recognizes a winning branch each month cumulating with a champion branch of the year. Employees enjoy the friendly competition and our clients beneﬁt from exceptional customer service. TAP. TYPE. SEND! We are seeing a steady increase in the number of customers who prefer cashless transactions like debit cards and mobile wallets to make purchases, and person-to-person payment services that provide a quick and easy way to exchange money between friends. To keep up with customer expectations and the rapid advances in technology, we are investing in digital services to stand out from our competitors. In the ﬁrst quarter of 2019, we introduced a new person-to-person payment service, Pay Someone. Users who are enrolled in our mobile or online banking service can send money to friends and family even if the recipient does not have a Shore United Bank account. All you need is an email address or the mobile phone number of the person you want to pay. BUILDING RELATIONSHIPS Wye Financial & Trust team presents the winning trophy to Stevensville Branch Manager, Kerry Nagle ACCOUNT OPENING ON THE GO Consumer preferences are ever-changing. To open an account, they no longer want to make the trip to the bank or wait for a customer service representative. Instead they often prefer fast, easy and secure technology when opening an account. Later this year, we will introduce a new tablet-based deposit platform that will allow users to open deposit accounts in the branch or on-site at a customer’s location. The use of tablets will ease the account opening process for customers and create internal efficiencies. SHORE BANCSHARES | ANNUAL REPORT 2018 FINANCIAL LITERACY BEYOND THE CLASSROOM In recent years, ﬁnancial education has come to a halt in most schools. According to the 2018 Survey of the States1, more than half of the states do not require high school students to take an economics class and only 17 states require high school students to take a course in personal ﬁnance. Studies indicate that students without a ﬁnancial education are more likely to have ﬁnancial problems and low credit scores later in life. Economic growth has made it easier for people of all ages to obtain credit. If ﬁnancial education is absent during the formative years, consumers and banks may suffer the consequences from a lack of a sound ﬁnancial foundation. As a community bank, we believe it is important to help our local schools, senior centers and other organizations by providing ﬁnancial education through on-site programs and presentations. In 2018, our employees provided credit counseling and ﬁnancial literacy training to numerous students K-12, young adults, seniors and local homeless shelters. By providing ﬁnancial literacy to our communities we help individuals: Make ﬁnancial decisions with conﬁdence Understand options when choosing a mortgage, saving or paying down debt Negotiate and establish goals for investments Prevent identity theft and avoid online scams Differentiate between ﬁnancial dreams and reality and establish a budget Stress less and achieve more, ultimately improving quality of life 1(Jan. 30, 2019). Council for Economic Education. Retrieved from: https://www.councilforeconed.org/policy-and-advocacy/survey-of-the-states-2/). Youth/Education & Financial Literacy Community Development We feel strongly that helping others establish a strong ﬁnancial foundation is a valuable way to leverage our talents, skills and resources to make a positive impact in the communities we serve. Over 7,000 Volunteer Hours 2 0 1 8 30% 43% 21% 6% Health & Human Services Environment & Agriculture SHORE BANCSHARES | ANNUAL REPORT 2018 BOARD OF DIRECTORS SHORE BANCSHARES & SHORE UNITED BANK CHAIRMAN OF THE BOARD Frank E. Mason, III President & Chief Executive Officer, JASCO PRESIDENT & CHIEF EXECUTIVE OFFICER Lloyd L. “Scott” Beatty, Jr. Shore Bancshares, Inc. & Shore United Bank David J. Bates Investor Blenda W. Armistead Investor Christopher F. Spurry Executive Vice President, Spurry-Curren and Associates, Inc. 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 R. Michael Clemmer, Jr. President, Salisbury, Inc. David A. Fike Investor VICE PRESIDENT & CHIEF MARKETING & PROJECT OFFICER Debra H. Rich VICE PRESIDENT & CHIEF HUMAN RESOURCES OFFICER Marie DiDaniels 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 Jeffrey E. Thompson Managing Partner, Thompson & Richard, LLP John H. Wilson President & Chief Executive Officer Coastal South of Maryland, Inc. OFFICERS | SHORE UNITED BANK 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 SENIOR VICE PRESIDENT & CHIEF CREDIT OFFICER Charles E. Ruch, Jr. SENIOR VICE PRESIDENT & CHIEF LENDING OFFICER Michael T. Cavey SENIOR VICE PRESIDENT & CHIEF RETAIL BANKING OFFICER Jennifer Joseph SENIOR VICE PRESIDENT/LEGAL COUNSEL CORPORATE SECRETARY W. David Morse SHORE BANCSHARES | ANNUAL REPORT 2018 SHORE BANCSHARES HEADQUARTERS 28969 Information Lane Easton, MD 21601 410.763.7800 ShoreBancshares.com NASDAQ: SHBI BANKING SHORE UNITED BANK 18 E. Dover Street Easton, MD 21601 410.822.1400 877.758.1600 ShoreUnitedBank.com LOAN PRODUCTION OFFICES SHORE UNITED BANK 9748 Stephen Decatur Highway Unit 104 Ocean City, MD 21842 443.856.2100 ShoreUnitedBank.com 651 N. Broad Street, Suite 201 Middletown, DE 19709 302.449.6320 ShoreUnitedBank.com INVESTMENTS WYE FINANCIAL & TRUST 16 N. Washington Street Easton, MD 21601 410.763.8543 800.309.8124 WyeFinancialandTrust.com 1101 Maiden Choice Lane Baltimore, MD 21229 800.309.8124 WyeFinancialandTrust.com OWINGS MILLS ARBUTUS ELKRIDGE MIDDLETOWN CHESTERTOWN CENTREVILLE CHESTER GRASONVILLE HILLSBORO Anne Arundel County STEVENSVILLE DENTON ST. MICHAELS EASTON Talbot County CAMBRIDGE DOVER CAMDEN FELTON MILFORD Wicomico County OCEAN CITY ONLEY INVESTOR RELATIONS CONTACT: Edward C. Allen Edward.Allen@shbi.com 443.262.9319 TRANSFER AGENT: Broadridge Corporate Issuer Solutions 28969 Information Lane Easton, MD 21601 866.232.0392 720.358.3588 SHORE BANCSHARES | ANNUAL REPORT 2018 Kent CountyKent CountySussex CountyCarolineCountyQueen Anne’sCountyDorchesterCountySHOREBANCSHARES.COM | 410.763.7800 NASDAQ: SHBI

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