Shore Bancshares(SHBI) - 2024 Q1 - Quarterly Report

Financial Performance - Net income for Q1 2024 was $8,184 thousand, up 26.69% from $6,457 thousand in Q1 2023[15]. - Net interest income for the three months ended March 31, 2024, was $41,135 thousand, an increase of 60.06% compared to $25,664 thousand for the same period in 2023[13]. - Noninterest income increased to $6,567 thousand for Q1 2024, compared to $5,334 thousand in Q1 2023, reflecting a growth of 23.14%[13]. - The efficiency ratio increased to 76.93% in Q1 2024 from 67.40% in Q1 2023, indicating higher operational expenses relative to revenues[207]. - The return on average assets ("ROAA") decreased to 0.57% in Q1 2024 from 0.75% in Q1 2023[207]. - The net interest margin ("NIM") remained stable at 3.08% for Q1 2024, compared to 3.18% for Q1 2023[207]. Asset and Deposit Changes - Total assets decreased to $5,825,704 thousand as of March 31, 2024, down from $6,010,918 thousand at December 31, 2023, representing a decline of approximately 3.08%[11]. - Total deposits decreased to $5,184,279 thousand as of March 31, 2024, down from $5,386,120 thousand at December 31, 2023, a reduction of approximately 3.74%[11]. - The company reported a decrease in noninterest-bearing deposits by $57,357,000 and interest-bearing deposits by $144,851,000, indicating a tightening of liquidity[23]. - Cash and cash equivalents at the end of the period were $114,560,000, down from $372,413,000 at the beginning of the period, reflecting a net decrease of $257,853,000[23]. Credit Quality and Losses - The provision for credit losses was $407 thousand for Q1 2024, a decrease from $1,213 thousand in Q1 2023, indicating improved credit quality[13]. - The total allowance for credit losses (ACL) was $57,336 million, with net charge-offs of $654 million for the three months ended March 31, 2024[91]. - Gross charge-offs for the three months ended March 31, 2024, totaled $538 thousand, with specific charge-offs of $227 thousand for prior loans, $58 thousand for 2020 loans, and $238 thousand for 2022 loans[81]. - Non-accrual loans totaled $12.776 million as of March 31, 2024, compared to $12.784 million as of December 31, 2023[70]. Acquisition and Market Presence - The acquisition of TCFC was completed for approximately $153.6 million, enhancing the company's market presence in Maryland, Virginia, and Delaware[36]. - The total purchase price for the acquisition of TCFC was $153.592 million, which included the fair value of common shares issued, cash consideration, and the fair value of converted restricted stock units[40]. - The identifiable assets acquired from TCFC totaled $2.412833 billion, with loans netting $1.765255 billion and total securities amounting to $454.468 million[40]. Capital and Regulatory Compliance - The Common Equity Tier 1 capital ratio as of March 31, 2024, is 8.91%, exceeding the regulatory minimum of 7.00%[129]. - The Tier 1 capital ratio is reported at 9.53% as of March 31, 2024, above the regulatory minimum of 8.50%[129]. - The total risk-based capital ratio stands at 11.68% as of March 31, 2024, surpassing the minimum requirement of 10.50%[129]. - The Company maintained compliance with all capital adequacy requirements as of March 31, 2024, with no conditions affecting its classification as well capitalized[126]. Operational Changes - The company plans to close two branches, with the Onley branch scheduled for closure on or about July 17, 2024, and the Westgate branch on or about September 30, 2024[180]. - The total amortization expense for the three months ended March 31, 2024, was $2.6 million, significantly higher than $0.4 million for the same period in 2023[102]. - The company will continue to review doubtful assets quarterly, indicating a proactive approach to managing potential losses[77]. Loan Portfolio and Risk Management - The company reported a total loan portfolio of $4.648725 billion as of March 31, 2024, with an allowance for credit losses on loans of $57.336 million[67]. - The residential real estate loans accounted for 32.59% of total loans, increasing from 32.11% as of December 31, 2023[67]. - The total amount of residential real estate loans reached $1,515,134 thousand, with pass loans constituting $1,506,161 thousand[81]. - The company has a strong focus on maintaining high credit quality in its mortgage-backed securities, which are guaranteed by U.S. government entities[60].