Shore Bancshares(SHBI) - 2025 Q1 - Quarterly Results

Financial Performance Overview The company reported strong Q1 2025 results with significant improvements in net income, profitability metrics, and asset quality Q1 2025 Financial Highlights The company reported strong Q1 2025 results with net income of $13.8 million ($0.41/share), up from both the prior quarter and the prior year, driven by record net interest income and stable expenses Key Financial Metrics | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income | $13.8 million | $13.3 million | $8.2 million | | Diluted EPS | $0.41 | $0.40 | $0.25 | | ROAA | 0.91% | 0.86% | 0.57% | | Net Interest Income | $46.0 million | $44.0 million | $41.1 million | | Net Interest Margin | 3.24% | 3.03% | 3.08% | - Asset quality remained stable, with nonperforming assets to total assets decreasing to 0.31% from 0.40% in Q4 2024, and the efficiency ratio improved to 63.64% from 64.21% in the previous quarter[6] CEO's Statement The CEO highlighted a good start to 2025, attributing the performance to record net interest income and stable expenses, with expectations for lower funding costs and increasing asset yields - Funding costs are expected to decline further as higher-cost seasonal municipal deposits roll off, while asset yields are expected to continue increasing[4] - Charlie Cullum was appointed as the new Chief Financial Officer, succeeding the retiring Todd Capitani[5] Financial Condition Analysis The company's financial condition at Q1 2025 shows a slight decrease in total assets, an increase in stockholders' equity, stable loan portfolio, and improved asset quality Balance Sheet Overview Total assets decreased by 0.9% to $6.18 billion at the end of Q1 2025 compared to Q4 2024, primarily due to a decrease in cash and cash equivalents, while total stockholders' equity increased by 2.1% to $552.5 million Balance Sheet Summary | Balance Sheet Item | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $6.18 billion | $6.23 billion | -0.9% | | Total Loans, net | $4.72 billion | $4.71 billion | +0.1% | | Total Deposits | $5.46 billion | $5.53 billion | -1.2% | | Total Stockholders' Equity | $552.5 million | $541.1 million | +2.1% | Loan Portfolio Analysis The total loan portfolio remained stable at $4.78 billion, with Commercial Real Estate (CRE) loans constituting the largest portion at 53.2% ($2.54 billion) Loan Portfolio Composition | Loan Type | Balance (March 31, 2025) | % of Total | | :--- | :--- | :--- | | Commercial real estate | $2,544.1 million | 53.2% | | Residential real estate | $1,325.9 million | 27.8% | | Construction | $366.2 million | 7.7% | | Commercial | $234.5 million | 4.9% | | Consumer & Credit Cards | $306.8 million | 6.4% | | Total Loans | $4,777.5 million | 100.0% | Commercial Real Estate (CRE) Portfolio The CRE portfolio totaled $2.54 billion, with the office CRE sub-portfolio at $501.5 million (10.5% of total loans) being well-diversified with a low average Loan-to-Value (LTV) of 49.00% - The office CRE portfolio of $501.5 million has an average LTV of 49.00% and an average debt-service coverage ratio of 1.8x[13] Office CRE LTV Distribution | Office CRE LTV Range | Loan Balance | % of Office CRE | | :--- | :--- | :--- | | <= 50% | $180.1 M | 35.9% | | 50%-60% | $114.9 M | 22.9% | | 60%-70% | $120.3 M | 24.0% | | 70%-80% | $75.6 M | 15.1% | | > 80% | $10.6 M | 2.1% | - Of the office CRE portfolio, 74.3% was secured by properties in rural or suburban areas, and 97.1% was secured by properties with five stories or less[16] Asset Quality Asset quality improved quarter-over-quarter, with nonperforming assets decreasing to $18.9 million, or 0.31% of total assets, down from 0.40% in Q4 2024 Asset Quality Metrics | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Nonperforming Assets | $18.9 million | $24.8 million | $16.4 million | | Nonperforming Assets / Total Assets | 0.31% | 0.40% | 0.28% | | ACL / Total Loans | 1.21% | 1.21% | 1.23% | - The $5.9 million decrease in nonperforming assets from Q4 2024 was primarily due to a commercial real estate nonaccrual loan and a decrease in repossessed marine assets[17] Deposits, Funding, and Liquidity Total deposits decreased by 1.2% to $5.46 billion from the previous quarter, mainly due to seasonal run-offs of municipal deposits, while the bank maintains a strong liquidity position - Total deposits decreased by $68.0 million, driven by a $125.6 million decrease in interest-bearing checking, partially offset by a $60.8 million increase in time deposits, primarily due to seasonal municipal run-offs[18] - The Bank's uninsured deposits were $940.6 million (17.2% of total deposits), or $775.6 million (14.2%) excluding deposits secured with pledged collateral[20] - At March 31, 2025, the Bank had approximately $1.35 billion of available liquidity, including cash, secured borrowing capacity, and unsecured lines of credit[20] Capital Adequacy Capital levels strengthened during the quarter, with the Tangible Common Equity to Tangible Assets ratio improving to 7.46% from 7.17% in Q4 2024, and all regulatory capital ratios remaining well above required minimums Company Capital Ratios | Capital Ratio (Company) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Tangible Common Equity Ratio | 7.46% | 7.17% | | Tier 1 Risk-Based Capital | 10.37% | 10.06% | | Total Risk-Based Capital | 12.52% | 12.18% | Results of Operations The company's Q1 2025 operations show record net interest income and margin expansion, an increase in provision for credit losses, and a decrease in noninterest income and expense Net Interest Income and Margin Net interest income (NII) for Q1 2025 increased by 4.6% quarter-over-quarter to a record $46.0 million, with the net interest margin (NIM) expanding significantly by 21 basis points to 3.24% Net Interest Performance | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $46.0 million | $44.0 million | +$2.0 million | | Net Interest Margin | 3.24% | 3.03% | +21 bps | | Core NIM | 3.02% | 2.85% | +17 bps | - The improvement in NIM was driven by a 17 bps increase in loan yields (excluding accretion) and a 10 bps decrease in funding costs compared to Q4 2024[6][23] Provision for Credit Losses The provision for credit losses was $1.0 million for Q1 2025, up from $0.8 million in Q4 2024, attributed to higher reserves for construction loan portfolio growth, partially offset by an improved economic outlook Provision and Charge-offs | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $1.0 million | $0.78 million | $0.41 million | | Net Charge-offs | $0.55 million | $1.3 million | $0.57 million | Noninterest Income Total noninterest income was $7.0 million, a decrease of $1.9 million from Q4 2024, primarily due to the absence of a prior quarter asset sale gain and a decrease in mortgage banking revenue Noninterest Income Summary | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Total Noninterest Income | $7.0 million | $8.9 million | -$1.9 million | | Mortgage Banking Revenue | $0.27 million | $0.81 million | -$0.53 million | Noninterest Expense Total noninterest expense decreased slightly by 0.6% to $33.7 million compared to Q4 2024, mainly due to lower salary and benefit costs, leading to an improved efficiency ratio of 63.64% Noninterest Expense and Efficiency | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Total Noninterest Expense | $33.7 million | $33.9 million | $36.7 million | | Efficiency Ratio (GAAP) | 63.64% | 64.21% | 76.93% | | Efficiency Ratio (Non-GAAP) | 59.76% | 60.28% | 62.37% | Detailed Financial Tables and Reconciliations This section provides comprehensive unaudited financial statements, detailed loan portfolio and asset quality data, and reconciliations of GAAP to non-GAAP financial measures Consolidated Financial Statements The report provides unaudited consolidated balance sheets, statements of income, and average balance sheets with yield/rate analysis for the five most recent quarters, offering a detailed view of the company's financial position and performance trends - Detailed Consolidated Balance Sheets are presented for the five quarters ending March 31, 2025[38][39] - Detailed Consolidated Statements of Income are presented for the five quarters ending March 31, 2025[40][41] - Detailed Consolidated Average Balance Sheets with yield/rate analysis are presented for Q1 2025, Q1 2024, and Q4 2024[43][44] Loan Portfolio and Asset Quality Details Detailed tables provide a breakdown of the loan portfolio by type and a summary of classified and nonperforming assets over the last five quarters, showing trends in portfolio composition and credit quality - A five-quarter summary of the loan portfolio composition by loan type is provided[59] - A five-quarter summary of classified assets (substandard, special mention) and nonperforming assets is provided[60] Reconciliation of GAAP and Non-GAAP Measures The company provides detailed reconciliations for its non-GAAP financial measures, including return on average tangible equity, non-GAAP efficiency ratio, tangible book value per share, and tangible equity to tangible assets ratio, to provide a clearer view of core operating performance - Reconciliations are provided for key non-GAAP metrics such as ROAA, ROATE, efficiency ratio, and tangible book value per share[48][50][51] - Detailed calculations for regulatory capital ratios for both the holding company and the bank are presented, reconciling from common equity to Tier 1 and Total Capital[56][57]