Shore Bancshares(SHBI) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Highlights Shore Bancshares achieved strong Q2 2025 performance with significant growth in net income and EPS, improved margins, efficiency, and stable asset quality - The President and CEO, James M. Burke, highlighted the company's steady performance improvement, noting the expansion of net income and margins, improved efficiency, and capital build-up; he also mentioned that while loan growth is constrained, rising asset yields are expected to support margins through 2025[5] Q2 2025 Key Performance Indicators | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $15.5 million | $13.8 million | $11.2 million | | Diluted EPS | $0.46 | $0.41 | $0.34 | | ROAA | 1.03% | 0.91% | 0.77% | | Net Interest Margin (NIM) | 3.35% | 3.24% | 3.11% | | Book Value per Share | $16.94 | $16.55 | $15.74 | | Efficiency Ratio | 60.83% | 63.64% | 66.23% | - Asset quality remained stable, with nonperforming assets to total assets at 0.33% for Q2 2025, a slight increase from 0.31% in Q1 2025 and 0.29% in Q2 2024; the allowance for credit losses (ACL) as a percentage of loans was flat at 1.21% compared to year-end 2024[6] Financial Condition Review (Balance Sheet) Total assets decreased to $6.04 billion due to deposit run-offs, while capital ratios remained strong with improved tangible common equity Assets and Capital Total assets decreased to $6.04 billion due to deposit reductions, while capital ratios remained robust with a 7.88% tangible common equity ratio - Total assets decreased by $192.9 million, or 3.1%, from December 31, 2024, primarily due to a $285.4 million decrease in interest-bearing deposits at other banks, driven by seasonal municipal deposit run-offs[7] Key Capital Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | Tangible Common Equity Ratio | 7.88% | | Tier 1 Risk-Based Capital Ratio | 10.51% | | Total Risk-Based Capital Ratio | 12.65% | Loan Portfolio Analysis The $2.60 billion CRE portfolio includes $484.3 million in office CRE, diversified with a low 48.41% average LTV - The office CRE loan portfolio was $484.3 million, or 10.0% of total loans, at June 30, 2025; this portfolio had an average loan debt-service coverage ratio of 1.8x and an average LTV of 48.41%[12] Office CRE Portfolio LTV Stratification (June 30, 2025) | LTV Range | Loan Count | Loan Balance ($ thousands) | % of Office CRE | | :--- | :--- | :--- | :--- | | <= 50% | 245 | 168,874 | 34.9% | | 50%-60% | 74 | 111,092 | 22.9% | | 60%-70% | 94 | 130,718 | 27.0% | | 70%-80% | 65 | 62,601 | 12.9% | | > 80% | 14 | 11,013 | 2.3% | | Total | 492 | 484,298 | 100.0% | - The Bank reported no charge-offs related to its office CRE portfolio during 2025; of the office CRE loans, only $2.5 million were classified as special mention or substandard at June 30, 2025[15] Asset Quality Asset quality remained stable with NPAs at $19.6 million (0.33% of total assets), a slight increase driven by CRE and consumer loans - Nonperforming assets were $19.6 million (0.33% of total assets) at June 30, 2025, compared to $18.9 million (0.31% of total assets) at March 31, 2025; the increase of $729 thousand was mainly due to commercial real estate and consumer loans[16] Deposits, Funding, and Liquidity Total deposits decreased to $5.31 billion due to seasonal outflows, while liquidity remained strong at $1.16 billion - Total deposits decreased by $214.4 million from December 31, 2024, primarily driven by seasonal municipal run-offs[17] - The Bank's uninsured deposits were $886.8 million, or 16.7% of total deposits; excluding deposits secured with pledged collateral, this figure was $768.7 million, or 14.5% of total deposits[19] - At June 30, 2025, the Bank had approximately $1.16 billion of available liquidity, comprising cash, secured borrowing capacity, and unsecured lines of credit[19] Stockholders' Equity Stockholders' equity increased by 4.5% to $565.2 million, driven by earnings and reduced comprehensive losses, improving the equity to assets ratio to 9.36% - Total stockholders' equity increased by $24.1 million, or 4.5%, compared to December 31, 2024, primarily due to current year earnings and a decrease in accumulated other comprehensive losses[20] Equity Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Equity to Total Assets | 9.36% | 8.68% | | Tangible Equity to Tangible Assets | 7.88% | 7.17% | Review of Financial Results Financial results showed strong sequential and year-over-year growth, with increased net interest income, noninterest income, and improved efficiency Quarterly Results (Q2 2025) Q2 2025 saw net interest income rise to $47.3 million, NIM expand to 3.35%, and noninterest income increase by $2.3 million, improving efficiency to 60.83% - Net interest income increased to $47.3 million in Q2 2025 from $46.0 million in Q1 2025; the Net Interest Margin (NIM) expanded by 11 bps to 3.35% during the same period[21][22] - The provision for credit losses was $1.5 million for Q2 2025, up from $1.0 million in Q1 2025, due to loan portfolio growth[23] - Total noninterest income for Q2 2025 was $9.3 million, a $2.3 million increase from Q1 2025, mainly due to a $780 thousand increase in mortgage banking revenue and a one-time credit card incentive[24] - Total noninterest expense rose by $663 thousand from Q1 2025 to $34.4 million, primarily due to higher salaries and employee benefits[25] Six-Month Results (H1 2025) H1 2025 net interest income grew 12.0% to $93.3 million, NIM improved to 3.30%, and noninterest expense decreased 2.9%, boosting efficiency to 62.19% - Net interest income for the first six months of 2025 was $93.3 million, a 12.0% increase from the same period in 2024[27] - The Net Interest Margin (NIM) increased to 3.30% for H1 2025 from 3.09% for H1 2024, driven by higher earning-asset balances and lower funding costs[28] - Total noninterest expense for H1 2025 decreased by $2.0 million (2.9%) compared to H1 2024, primarily due to the absence of a $4.3 million credit card fraud event that occurred in 2024[31] - The efficiency ratio for the first six months of 2025 improved significantly to 62.19%, compared to 71.42% for the same period in 2024[32] Financial Tables This section presents detailed unaudited financial tables, including highlights, balance sheets, income statements, and reconciliations of GAAP to non-GAAP measures - The report includes comprehensive unaudited financial tables covering profitability, per-share data, balance sheet details, income statements, credit quality, capital ratios, and reconciliations of non-GAAP measures[37][44][46] Financial Highlights Key financial metrics are presented quarterly and semi-annually, covering profitability, per-share data, interest spreads, and credit quality Consolidated Balance Sheets Details assets, liabilities, and stockholders' equity for the last five quarters, providing a snapshot of financial position Consolidated Statements of Income Outlines revenues and expenses for the last five quarters and H1 2025/2024, detailing the derivation of net income Consolidated Average Balance Sheets Provides average asset/liability balances, interest income/expense, and yields/rates for net interest margin analysis Reconciliation of GAAP and Non-GAAP Measures Reconciles GAAP financial measures to non-GAAP measures like tangible book value and non-GAAP efficiency ratio for transparency Loan Portfolio Summary Breaks down the loan portfolio by type for the last five quarter-ends, including commercial and residential real estate Classified and Nonperforming Assets Details classified and nonperforming assets over five quarters, providing insight into credit risk and asset quality Company Information and Forward-Looking Statements Overview of Shore Bancshares and a safe harbor statement regarding forward-looking statements and inherent risks - Shore Bancshares is a financial holding company headquartered in Easton, Maryland, and is the parent company of Shore United Bank, N.A.[33] - The report contains forward-looking statements based on management's current expectations, which involve inherent risks and uncertainties; these statements are not guarantees of future performance and actual results could differ materially[34]