Shore Bancshares Inc. Annual Report 2019

Plain-text annual report

2019 ANNUAL REPORT 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 Income from con�nuing opera�ons R�� O� D�� O��: Noninterest income Noninterest expense (Loss) income before income taxes Income tax expense (beneﬁt) (Loss) income from discon�nued opera�ons P�� C�� S�� D��: Income from con�nuing opera�ons - basic Income (loss) from discon�nued opera�ons - basic Net income Income from con�nuing opera�ons - diluted Income (loss) 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, 2019 2018 $ $ $ $ $ $ $ $ 59,767 9,636 50,131 700 49,431 10,020 37,557 21,894 5,610 16,284 15 128 (113) (27) (86) 1.28 (0.01 ) 1.27 1.28 (0.01 ) 1.27 0.42 15.42 13.84 $ $ $ $ $ $ $ $ 55,907 5,272 50,635 1,674 48,961 9,013 36,831 21,143 5,380 15,763 20,077 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 $ 1,248,654 1,559,235 1,341,334 192,802 $ 1,195,355 1,483,076 1,212,341 183,185 1.08 % 8.52 3.54 62.64 33.07 12.69 0.77 % 1.25 0.84 99.22 58.08 1.74 % 14.81 3.74 54.76 16.33 11.75 1.21 % 1.80 0.87 62.10 40.85 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 2019 Dear Shareholders: Shore Bancshares (“the Company’s”) balance sheet experienced signiﬁcant growth during 2019 allowing us to eclipse the $1.5 billion asset mark. This was in a large part due to deposit growth, which experienced an increase of $129.0 million, or 10.6%. Stockholders’ equity also increased in 2019 over 2018 by $9.6 million or 5.2%. The increase in stockholders’ equity was enhanced by a positive trend in unrealized gains on our security portfolio and current year earnings. In addition, our earnings per share improved in part due to the execution of a stock buyback program initiated in the third quarter of 2019. The buyback program was authorized by the Board of Directors in April of 2019 permitting 5% of the Company’s common stock to be repurchased with a maximum amount of $10 million. The ﬁrst repurchase of the Company’s shares occurred in August and at December 31, 2019, the Company had repurchased 278,700 shares of its common stock. Additionally, the Company also increased its dividend to shareholders by 31.3%. Although 2019 was a modest year for net income, our proﬁtability was challenged as we experienced a ﬂattening yield curve and three interest rate cuts during the year which negatively impacted our net interest margin. Despite these obstacles, we managed to grow net income by $521 thousand and increase earnings per share from continuing operations from $1.24 in 2018 to $1.28 for 2019. During 2019 our focus was on loan growth, increasing noninterest income, managing our noninterest expenses and signiﬁcantly decreasing our borrowings. Loan originations remained strong throughout 2019 but was offset by some unexpected large payoffs and one large loan that closed 3 days after year-end. Noninterest income from continuing operations grew by $1 million year-over-year and our noninterest expense costs only increased by 2%. Our dependency on alternative funding sources, i.e. short-term FHLB borrowings decreased by $59.6 million. By reducing our borrowings, we helped stabilize our cost of funds and minimize compression to our net interest margin. In 2020 we continue to be innovative and opportunistic. In March of 2020, we opened a new de-novo branch in West Ocean City, Maryland to complement our Loan Production Office that opened in April of 2017. Our new branch will operate in a much smaller space, with new technology and a sleek new design much different than our existing branches. Giving back to the communities we serve continues to be a high priority to our employees and our Company. In 2019, our employees volunteered 6,759 hours to local organizations. In return, the Company invested over $298 thousand to help support non-proﬁt organizations throughout our footprint. In closing, we thank our board of directors, shareholders, employees and customers for your support and investment in Shore Bancshares. Sincerely, Lloyd L. “Scott” Beatty, Jr. President & CEO, Shore United Bank & Shore Bancshares, Inc. Frank E. Mason, lll Board Chairman SHORE BANCSHARES | ANNUAL REPORT 2019 WEBSITE VISITS 2019 1,350,792 We strive to keep our website as current, useful and accessible as possible. We are consistently updating information and improving the user experience on our site throughout the year. MOBILE BANKING USERS 10,768 With the ability to do just about anything right from your phone, banking with us is no exception. We spend ample time making sure our mobile services are comparable to those of mega banks. Our mobile banking users grew 23% over 2018 and we anticipate that number to continue to grow. PAY SOMEONE TRANSACTIONS 3,033 This past year we rolled out Pay Someone, a new person-to-person payment system. Our customers have quickly adopted this convenient online and mobile service and have successfully incorporated it into their ﬁnancial routine. SHORE BANCSHARES | ANNUAL REPORT 2019 3,231 SOCIAL MEDIA AUDIENCE Facebook page likes grew to 2,622 - a 23% increase over 2018. Instagram followers increased by 475%, to an accumulated 316 followers. Our LinkedIn follower count totaled at 277 and we have received 237 5-star reviews on Google, which equates to an average star rating of 4.7. 18,125 ONLINE BANKING USERS Each year, the number of customers who are utilizing our digital services grows and 2019 was no different. Our online banking customers increased by 13% over 2018. 948 ACCOUNTS USING DIGITAL WALLETS We began offering digital wallets in April giving our customers the ability to enroll their Shore United Bank debit card(s), which allows them to use their mobile device to make purchases at participating merchants. 30,560 MOBILE CHECK DEPOSITS Supporting our initiative to offer innovative digital services, our mobile check deposits increased by 16% over 2018. This allows customers to bank with us anytime no matter where they are! SHORE BANCSHARES | ANNUAL REPORT 2019 COMMUNITY COMMITMENT GIVINGTUESDAY SHORE UNITED BANK BRANCH MANAGERS WITH CHECKS IN HAND TO DONATE TO LOCAL NON-PROFIT ORGANIZATIONS At Shore United Bank, we stand for something beyond our products and services. We invest in organizations that are impactful and help support the communities we serve. Last year, our employees were actively involved in creating and selling Shore United Bank cookbooks to raise money to donate in honor of GivingTuesday. GivingTuesday is a global giving movement, where companies come together to give back to their local communities. Collectively, we donated over $7,000 to 23 different non-proﬁt organizations. Each of our locations chose a non-proﬁt organization to donate their cookbook proceeds to. Non-proﬁt organizations beneﬁting from this initiative included health and human service organizations, such as homeless shelters and food banks; youth and education organizations, such as schools and youth sports teams; and animal rescue organizations, such as shelters and clinics. 6,579 VOLUNTEER HOURS GIVING BACK 1,572-hours 645-hours 700-hours 353-hours 2,636-hours 44-hours 463-hours 166-hours 24% 10% 11% 5% Youth & Education Environmental & Agriculture Community Development Arts, Culture & Humanities 39% Faith & Public Service 1% Active Duty & Veterans 7% Health & Human Service 3% Animal & Humane Societies DOLLARS INVESTED BACK INTO THE COMMUNITY COMMUNITY $298,040 SHORE BANCSHARES | ANNUAL REPORT 2019 QUALIFIED REFERRALS WYE FINANCIAL & TRUST 4% increase over last year A qualiﬁed referral occurs when an employee identiﬁes a customer’s need and the customer accepts the invitation to meet with a ﬁnancial advisor of Wye Financial & Trust. FINANCIAL LITERACY PROGRAM MONEY MANAGEMENT 101 We believe it is important to help local schools, senior centers, and other organizations by providing ﬁnancial education through on-site programs and presentations. Year after year, our employees volunteer countless hours to provide credit counseling and ﬁnancial literacy training to people of all ages. In 2016, Shore United Bank began a partnership with His Hope Ministries, a local homeless shelter in Denton, Maryland to teach a six-week course on ﬁnancial literacy. This partnership, along with our involvement in other organizations, has inspired us to launch Money Management 101. This online program makes the ﬁnancial information that our employees review with many organizations accessible to everyone - to help us all make wiser ﬁnancial decisions with less stress and more conﬁdence! 5-STAR RATING FROM BAUERFINANCIAL, INC. For fourteen consecutive quarters, Shore United Bank has achieved a 5-Star Rating from BauerFinancial, Inc. for ﬁnancial strength and stability. 5-Star rated ﬁnancial institutions are considered superior and are listed on BauerFinancial’s “recommended” report. BauerFinancial star ratings classify each institution based upon a complex formula factoring in current and historical data. We not only excel in areas of capital adequacy, proﬁtability, asset quality but help our neighbors and local businesses grow our communities with prudent lending and innovative solutions, all without compromising our ﬁnancial health. BEST OF EASTERN SHORE WHAT’S UP? EASTERN SHORE MAGAZINE Our local lifestyle magazine, What’s Up Eastern Shore, sponsors an annual ‘Best of Eastern Shore’ reader’s poll. The ‘Best of’ title is an annual award recognizing the best businesses and services that Maryland’s Eastern Shore has to offer as voted by the magazine’s readers. Shore United Bank has won the title of Best Bank for four consecutive years along with titles for Best Customer Service and Best Mortgage Lender. Wye Financial & Trust has also won titles in the Best of Eastern Shore reader’s poll for Best Financial Advisor for the past four consecutive years. SHORE BANCSHARES | ANNUAL REPORT 2019 NEW INNOVATIVE BRANCH WITH SLEEK DESIGN Our newest branch to open Spring 2020! 12905-B OCEAN GATEWAY OCEAN CITY, MD 21842 For decades, banks have been wrestling with the question - what role will brick and mortar branches have in the future? Will digital banking services take over and customers no longer want or need to come into a branch? We determined that we need to continue to have a physical presence with less square footage, offering more technological advancements and a modern design. While some banks have opted to turn their branch space into cafes and lounges or eliminate transactions, we chose to create a welcoming space with technology, simplicity and style to showcase our full-service suite of products and services delivered by a team of experienced professionals. Our new branch in West Ocean City not only offers a more modern look in comparison to our existing branches, but it also includes technologies to create operational efficiencies. Cash recyclers will be used at this location providing a more secure place to store money and keep accurate accounting of cash. The new branch was strategically selected to meet the needs of local consumers and businesses and to complement our already established Loan Production office that opened in April of 2017. Ocean City, MD is in Worcester County and is one of the largest vacation spots on the East Coast bringing a large number of tourists and businesses to the area from Washington, D.C., Baltimore, Philadelphia and Delaware. This area of the lower Eastern Shore offers growth and new opportunities for the bank. Branch Remodel To Begin Q2 2020 - 212 Marlboro Avenue, Easton, Maryland SHORE BANCSHARES | ANNUAL REPORT 2019 BOARD OF DIRECTORS SHORE BANCSHARES & SHORE UNITED BANK CHAIRMAN OF THE BOARD Frank E. Mason, III President & Chief Executive Officer, JASCO OFFICERS | SHORE BANCSHARES PRESIDENT & CHIEF EXECUTIVE OFFICER Lloyd L. “Scott” Beatty, Jr. PRESIDENT & CHIEF EXECUTIVE OFFICER Lloyd L. “Scott” Beatty, Jr. EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER Edward C. Allen David J. Bates Investor Blenda W. Armistead Investor EXECUTIVE VICE PRESIDENT & CHIEF OPERATING OFFICER Donna J. Stevens EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL W. David Morse R. Michael Clemmer, Jr. President, Salisbury, Inc. OFFICERS | SHORE UNITED BANK David A. Fike Investor PRESIDENT & CHIEF EXECUTIVE OFFICER Lloyd L. “Scott” Beatty, Jr. James A. Judge Certiﬁed Public Accountant, Anthony Judge & Ware, LLC EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER Edward C. Allen Clyde V. Kelly, III President & General Manager, Kelly Distributors EXECUTIVE VICE PRESIDENT & CHIEF OPERATING OFFICER Donna J. Stevens David W. Moore President & Chief Executive Officer Milford Housing Development Corporation Jeffrey E. Thompson Managing Partner, Thompson & Richard, LLP EXECUTIVE VICE PRESIDENT/LEGAL COUNSEL CORPORATE SECRETARY W. David Morse EXECUTIVE VICE PRESIDENT & CHIEF CREDIT OFFICER Charles E. Ruch, Jr. EXECUTIVE VICE PRESIDENT & CHIEF LENDING OFFICER Michael T. Cavey EXECUTIVE VICE PRESIDENT & CHIEF RETAIL BANKING OFFICER Jennifer Joseph SENIOR VICE PRESIDENT & CHIEF INFORMATION OFFICER Timothy J. Berrigan SENIOR VICE PRESIDENT & CHIEF MARKETING & PROJECT OFFICER Debra H. Rich SENIOR VICE PRESIDENT & CHIEF HUMAN RESOURCES OFFICER Marie DiDaniels SHORE BANCSHARES | ANNUAL REPORT 2019 SHORE BANCSHARES HEADQUARTERS 18 E. Dover Street 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 DOVER CAMDEN FELTON MILFORD ST. MICHAELS EASTON Talbot County CAMBRIDGE Wicomico County OCEAN CITY ONLEY INVESTOR RELATIONS CONTACT: Edward C. Allen Edward.Allen@shbi.com 443.262.9319 TRANSFER AGENT: Broadridge Corporate Issuer Solutions 51 Mercedes Way Edgewood, NY 11717 866.232.0392 720.358.3588 SHORE BANCSHARES | ANNUAL REPORT 2019 Kent CountyKent CountySussex CountyCarolineCountyQueen Anne’sCountyDorchesterCountySHOREBANCSHARES.COM | 410.763.7800 NASDAQ: SHBI

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