Shore Bancshares(US:SHBI)2024-11-07 21:28Financial Performance - The Company's net income for Q3 2024 was $11.2 million or $0.34 per diluted common share, unchanged from Q2 2024, compared to a net loss of $9.7 million or $(0.29) per diluted common share in Q3 2023 due to the merger with TCFC [187]. - Net income for the first nine months of 2024 was $30.6 million or $0.92 per diluted common share, a significant increase from $738 thousand or $0.03 per diluted common share in the same period of 2023 [187]. - Net income for Q3 2024 was $11.2 million, or $0.34 diluted earnings per share, compared to a net loss of $9.7 million, or $(0.29) per share, in Q3 2023 [197]. - Net income for the nine months ended September 30, 2024, was $30.6 million, or diluted earnings per share of $0.92, compared to net income of $738 thousand, or diluted earnings per share of $0.03, for the same period in 2023 [215]. - For the nine months ended September 30, 2024, net income significantly rose to $30,607 thousand compared to $738 thousand for the same period in 2023 [13]. - The net income for the three months ended September 30, 2024, was $11.19 million, compared to a net loss of $9.74 million for the same period in 2023 [303]. Return on Assets and Equity - Return on Average Assets (ROAA) for Q3 2024 was reported at 0.77%, consistent with Q2 2024, while Non-GAAP ROAA, excluding certain expenses, was 0.90% compared to 0.91% in Q2 2024 [188]. - The return on average assets (ROAA) improved to 0.77% in Q3 2024 from (0.67)% in Q3 2023 [197]. - The company's ROAA, Non-GAAP ROAA, ROACE, and ROATCE for the nine months ended September 30, 2024, were 0.70%, 0.91%, 7.84%, and 12.83%, respectively, compared to 0.02%, 0.49%, 0.24%, and 6.27% for the same period in 2023 [215]. - The Company reported a Return on Average Common Equity (ROACE) of 8.41% for the three months ended September 30, 2024, up from -7.25% in the same period last year [303]. Interest Income and Expenses - Net interest income for Q3 2024 increased by $1.1 million to $43.3 million from $42.1 million in Q2 2024, with a net interest margin (NIM) increase of six basis points to 3.17% [189]. - Tax-equivalent net interest income for Q3 2024 was $43.3 million, down from $45.7 million in Q3 2023, primarily due to increased interest on deposits [199]. - Net interest income for the third quarter of 2024 was $43.3 million, down from $45.6 million in the third quarter of 2023, a decrease of 5.05% [208]. - The company's net interest margin (NIM) decreased to 3.17% in Q3 2024 from 3.35% in Q3 2023, a decline of 18 basis points [209]. - Net interest income increased by $32.8 million to $126.8 million for the nine months ended September 30, 2024, compared to $94.0 million for the same period in 2023, driven by a 42.3% increase in average loan balances [218]. - Total interest and dividend income for the nine months ended September 30, 2024, was $218.93 million, an increase of 53.16% from $142.94 million in 2023 [220]. Credit Losses and Allowances - The allowance for credit losses (ACL) was $58.7 million as of September 30, 2024, stable at 1.24% of loans, while nonperforming assets to total assets decreased to 0.27% [190]. - The provision for credit losses decreased significantly by 94.78% to $1.5 million in Q3 2024 from $28.2 million in Q3 2023 [198]. - Provision for credit losses decreased to $3.96 million in 2024 from $30.06 million in 2023, a reduction of 86.83% [217]. - The allowance for credit losses was $(58.5) million as of September 30, 2024, compared to $(46.7) million in the previous year [202]. - The allowance for credit losses (ACL) was $58.7 million, representing 1.24% of total portfolio loans as of September 30, 2024 [259]. Deposits and Funding - Total deposits rose to $5.23 billion at September 30, 2024, from $5.15 billion at June 30, 2024, with average noninterest-bearing deposits increasing to 30.55% of average funding [192]. - Total deposits decreased by $160.4 million, or 3.0%, to $5.23 billion at September 30, 2024, compared to December 31, 2023, primarily due to a decrease in demand deposits of $414.0 million [270]. - The Bank's use of wholesale funding increased slightly to $50.0 million, or 0.84% of total assets, as of September 30, 2024 [192]. - The Company's total interest-bearing deposits decreased by $473.8 million, or 11.48%, to $3.65 billion at September 30, 2024 [270]. - The average balance of noninterest-bearing deposits increased by $424.9 million, or 43.2%, from 25.9% of average funding for the nine months ended September 30, 2023, to 27.2% for the same period in 2024 [227]. Assets and Liabilities - Total assets increased to $5,810 million as of September 30, 2024, compared to $5,769 million in the previous year, reflecting a growth of 0.71% [202]. - Total interest-bearing liabilities were $3,663 million for Q3 2024, down from $3,863 million in Q3 2023, a decrease of 5.17% [204]. - Total interest-bearing liabilities increased to $3.84 billion for the nine months ended September 30, 2024, compared to $2.87 billion for the same period in 2023, reflecting a growth of 33.4% [224]. - Total assets decreased to $5.92 billion at September 30, 2024, a decline of $93.2 million, or 1.6%, from $6.01 billion at December 31, 2023 [234]. - Cash and cash equivalents totaled $183.6 million at September 30, 2024, down from $372.4 million at December 31, 2023 [235]. Noninterest Income and Expenses - Noninterest income for Q3 2024 was $7.3 million, down 51.37% from $15.0 million in Q3 2023 [198]. - Total noninterest income for Q3 2024 was $7.3 million, a decrease of $7.7 million from $15.0 million in Q3 2023, primarily due to lower trust and investment fee income [211]. - Total noninterest expense for Q3 2024 was $34.1 million, down $13.0 million from $47.2 million in Q3 2023, mainly due to one-time merger-related expenses incurred in 2023 [212]. - Total noninterest expense rose to $104.3 million for the nine months ended September 30, 2024, an increase of $14.6 million, or 16.3%, compared to the same period in 2023 [231]. Merger and Acquisition Impact - The merger with TCFC significantly impacted the company's financial performance, resulting in higher net interest income and a lower provision for credit losses [216]. - The Company completed the acquisition of The Community Financial Corporation (TCFC) on July 1, 2023, with a total transaction consideration of approximately $153.6 million, including the issuance of 13,201,693 shares valued at $11.56 each [25]. - The merger with TCFC aims to extend the branch network and secure dominant market share positions in Maryland, Virginia, and Delaware [25]. Cannabis Industry Exposure - Deposit and loan balances from cannabis industry customers were approximately $134.0 million (2.6% of total deposits) and $75.1 million (1.6% of total gross loans) as of September 30, 2024 [296]. - Interest income from cannabis-related customers for the nine months ended September 30, 2024, was approximately $2.9 million [296]. - The Company had not accrued any amount for potential legal actions related to its banking services for cannabis customers as of September 30, 2024 [295]. Risk Management and Asset Quality - Classified assets increased to $23.3 million or 0.39% of total assets, up from $14.9 million or 0.25% at December 31, 2023 [265]. - Nonperforming assets totaled $15.8 million or 0.27% of total assets, compared to $13.7 million or 0.23% at December 31, 2023 [266]. - The Bank's office CRE loan portfolio was $509.4 million, representing 10.8% of total loans of $4.73 billion as of September 30, 2024 [254]. - The average loan debt-service coverage ratio for the office CRE portfolio was 2.5x, with an average loan-to-value (LTV) of 50.0% [255]. - The bank has classified certain loans as doubtful, indicating that loss is not only possible but probable, necessitating nonaccrual status for these credits [57].