PR Newswire | Oct 22, 2020 04:16PM EDT

10/22 15:15 CDT

Shore Bancshares Reports Third Quarter and Nine-Month Results EASTON, Md., Oct. 22, 2020

EASTON, Md., Oct. 22, 2020 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company") reported income from continuing operations of $3.391 million or $0.27 per diluted common share for the third quarter of 2020, compared to income from continuing operations of $5.335 million or $0.43 per diluted common share for the second quarter of 2020, and income from continuing operations of $4.214 million or $0.33 per diluted common share for the third quarter of 2019. Income from continuing operations for the first nine months of 2020 was $11.844 million or $0.95 per diluted common share, compared to income from continuing operations of $12.270 million or $0.96 per diluted common share for the first nine months of 2019.

When comparing net income from continuing operations for the third quarter of 2020 to the second quarter of 2020, net income decreased $1.9 million, primarily due to an increase in noninterest expenses of $2.2 million. Net interest income increased $252 thousand in the third quarter when compared to the second quarter, which was more than offset by an increase in provision for credit losses of $500 thousand and a decrease in noninterest income of $188 thousand. When comparing income from continuing operations for the third quarter of 2020 to the third quarter of 2019, net income decreased $823 thousand due to an increase in noninterest expense of $447 thousand, coupled with an increase in provision for credit losses of $1.3 million, partially offset by an increase in net interest income of $603 thousand.

"The positive earnings and strategic moves by management in the third quarter furthered the Company's ability to achieve its core objectives," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer. "During the quarter, the Company issued and sold $25 million of fixed to floating rate subordinated notes due 2030 to further strengthen the Company's capital position and provided $1.5 million to its allowance for loan losses to position the Company to face the continuing adverse economic consequences of this pandemic, including any future deterioration in credit quality. COVID related loan deferrals were significantly reduced to approximately 1% of the outstanding loan balance as of September 30, 2020. Loan demand has remained strong throughout the third quarter with an annualized growth rate of 5%, which is anticipated to improve as we approach year-end. Lastly, we reinstated our common stock repurchase programto utilize some of our excess liquidity and to capitalize on purchasing our shares below tangible book value."

Ongoing response to COVID-19

EmployeesMany of our non-branch personnel have returned to our offices and continue to practice social distancing as the Company has implemented enhanced cleaning and disinfecting procedures across all locations. Most of our Company meetings have transitioned to telephonic or video conferencing. We suspended all unnecessary business-related travel, public events, and meetings with outside parties to promote the safety and well-being of our employees.

Banking LocationsAll our branch locations remain open, with normal hours of operation. We have re-opened our branch lobbies to the public with limits on the number of people allowed in the branch at any time. The drive-thru locations have expanded their capabilities to accommodate an array of transactions for our customers. We notified our customers of our changes in operations as well as promoted the use of online and mobile banking.

CustomersWe thank our customers for their commitment and understanding as we continue to find ways to serve them as safely and securely as possible. For our customers impacted by the pandemic, we have provided fee waivers and loan payment deferrals to assist them during this challenging time.

Loan DeferralsAs of September 30, 2020, the Company's outstanding COVID related loan deferral balance amounted to $12.9 million, or 0.91% of the total loan portfolio. The most significant deferrals by loan type or industry were as follows: other commercial of $6.4 million, hospitality of $4.7 million, residential 1-4 family rentals of $1.1 million, consumer loans of $435 thousand, restaurants of $220 thousand and retail stores of $160 thousand.

Small Business Administration's Paycheck Protection Program ("PPP")

We remain an SBA preferred lender and are actively participating in the PPP program. From the inception of the program through August 8, 2020, we provided loans for 1,488 small business customers totaling $126.7 million.

Share Repurchases

We reinstated our common stock repurchase program on September 1, 2020. During the third quarter of 2020, we repurchased approximately 310,800 shares of the Company's common stock.

DividendsWe currently expect to maintain our quarterly cash dividends based on our strong capital position.

Balance Sheet ReviewTotal assets were $1.828 billion at September 30, 2020, a $268.9 million, or 17.2%, increase when compared to $1.559 billion at the end of 2019. The increase was primarily due to the $175.3 million, or 14.0%, increase in gross loans, of which $126.7 million related to PPP loans. The increase in gross loans was funded by an increase in deposits of $252.8 million, or 18.8%.

Total deposits increased $252.8 million, or 18.8%, when compared to December 31, 2019. The increase in total deposits consisted of increases in the following categories: Interest-bearing checking accounts of $109.5 million, noninterest-bearing deposits of $108.7 million and savings and money market accounts of $37.3 million, partially offset by a decrease in time deposits of $2.7 million.

Total stockholders' equity increased $6.1 million, or 3.2%, when compared to the end of 2019. At September 30, 2020, the ratio of total equity to total assets was 10.88% and the ratio of total tangible equity to total tangible assets was 9.92%.

Total assets at September 30, 2020 increased $266.5 million, or 17.1%, when compared to total assets at September 30, 2019, primarily the result of loan growth of $188.9 million and increases in cash and cash equivalents of $53.1 million and investment securities of $9.9 million. In addition, other assets increased $16.9 million, primarily the result of purchasing additional bank owned life insurance ("BOLI") in the fourth quarter of 2019.

Total deposits at September 30, 2020 increased $268.6 million, or 20.3%, when compared to September 30, 2019. The increase in total deposits included growth within interest-bearing checking accounts of $123.2 million, noninterest-bearing deposits of $102.7 million, savings and money market accounts of $53.1 million and time deposits of $1.7 million. Brokered deposits of $12.1 million matured in 2019 and were not renewed.

Total stockholders' equity increased $4.9 million, or 2.5%, when compared to September 30, 2019.

Review of Quarterly Financial ResultsNet interest income was $13.3 million for the third quarter of 2020, compared to $13.0 million for the second quarter of 2020 and $12.7 million for the third quarter of 2019. The increase in net interest income when compared to the second quarter of 2020 was primarily due to increases in the average balances in loans of $32.4 million, taxable investment securities of $28.1 million and interest-bearing deposits with other banks of $69.8 million. These increases in the average balances on earning assets contributed $304 thousand to interest income over the second quarter, despite a decline in the weighted average yield on these assets of 26bps. In addition, the weighted average rate paid on interest-bearing deposits declined by 8bps in the third quarter when compared to the second quarter, reducing interest expense by $87 thousand. However, this decline was more than offset by the $142 thousand of additional interest expense related to subordinated debt issued during the third quarter. Net interest income increased when compared to the third quarter of 2019, primarily due to lower rates paid on interest bearing deposits of 44bps and the elimination of short and long-term advances from FHLB borrowings which reduced interest expense by a combined $935 thousand. Lower yields on earning assets of 66bps, specifically, taxable investment securities and interest-bearing deposits with other banks, reduced interest income by $330 thousand for the third quarter, partially offset by the increase in the average balance in loans of $171.3 million. The higher average balance on loans was driven by the $127.6 million of PPP loans funded in the second quarter of 2020 which had yet to be forgiven in accordance with SBA guidelines and had an average yield of 2.00% for the third quarter. The forgiveness of PPP loans which is anticipated in future quarters will have a positive impact on the net interest margin as these loans carry a much lower yield than our traditional loan portfolio. The Company's net interest margin decreased to 3.17% for the third quarter of 2020 from 3.41% in the second quarter of 2020 and down from 3.52% in the third quarter of 2019. The decline in net interest margin in the third quarter of 2020 when compared to the second quarter of 2020 and the third quarter of 2019, was significantly impacted by excess liquidity of approximately $100 million, which has yet to be fully invested. Without this excess liquidity the margin for the third quarter would have been 3.37%.

The provision for credit losses was $1.5 million for the three months ended September 30, 2020. The comparable amounts were $1.0 million and $200 thousand for the three months ended June 30, 2020 and September 30, 2019, respectively. The ratio of the allowance for credit losses to period-end loans was 0.90% at September 30, 2020. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.98% at September 30, 2020, higher than both the 0.86% at June 30, 2020 and the 0.84% at September 30, 2019. The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, and the increase in provision for loan losses as compared to both the prior periods were the result of new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic. The Company reported net recoveries in the third quarter of 2020 of $187 thousand, compared to net charge-offs of $288 thousand for the second quarter of 2020 and $67 thousand for the third quarter of 2019.

At September 30, 2020, nonperforming assets were $8.4 million, a decrease of $3.9 million, or 31.8%, when compared to June 30, 2020, primarily due to a decrease in nonaccrual loans of $4.7 million, or 40.2%. Other real estate owned remained at $38 thousand and accruing troubled debt restructurings ("TDRs") decreased $45 thousand, or less than 1% over the same time period. When comparing September 30, 2020 to September 30, 2019, nonperforming assets decreased $4.9 million, or 37.1%, primarily due to a decrease in nonaccrual loans of $5.6 million, or 44.4%. TDR's decreased $321 thousand, or 4.2%, and other real estate owned decreased $36 thousand, or 48.6%, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.86%, 1.14% and 1.34% at September 30, 2020, June 30, 2020 and September 30, 2019, respectively. In addition, the ratio of accruing TDRs to total loans at September 30, 2020 was 0.51%, compared to 0.52% at June 30, 2020 and 0.61% at September 30, 2019.

Total noninterest income for the third quarter of 2020 decreased $188 thousand, or 6.8%, when compared to the second quarter of 2020 and increased $52 thousand, or 2.1%, when compared to the third quarter of 2019. The decrease was primarily due to sales of available for sale securities at a gain of $347 thousand in the second quarter of 2020. Absent the sale of these securities, noninterest income would have increased $159 thousand, or 6.6%, for the third quarter of 2020, which was primarily the result of increases in loan fee income and service charges on deposit accounts. The increase in noninterest income from the third quarter of 2019 was due to additional income from BOLI purchased late in the fourth quarter of 2019, offset by lower service charges on deposit accounts.

Total noninterest expense from continuing operations for the third quarter of 2020 increased $2.2 million, or 28.3%, when compared to the second quarter of 2020 and increased $447 thousand, or 4.8%, when compared to the third quarter of 2019. The increase in noninterest expense when compared to the second quarter of 2020 was primarily related to higher salaries and wages, due to the significant volume of PPP loans originated in the second quarter which resulted in heightened deferrals of direct origination costs during the second quarter of 2020. The deferred origination costs are being amortized over the lives of the related PPP loans and will be accelerated upon forgiveness or repayment.The increase in noninterest expenses when compared to the third quarter of 2019 was primarily due to higher salaries and wages, employee benefits and data processing fees, partially offset by decreases in other real estate owned expenses and other loan expenses.

Review of Nine-Month Financial ResultsNet interest income for the first nine months of 2020 was $38.8 million, an increase of $1.5 million, or 3.9%, when compared to the first nine months of 2019. The increase was due to lower interest expense on interest-bearing deposits of $1.4 million and an aggregate decrease of $679 thousand related to the elimination of both short and long-term advances from the FHLB, partially offset by the addition of subordinated debt of $148 thousand. Although the average balance of total earning assets increased by $145 million, or 10.3%, primarily in loans and interest-bearing deposits with other banks of $128.7 million and $51.8 million, respectively, the interest income from these assets was impacted by lower yields due to below market rates on PPP loans and Federal Reserve interest rate cuts during 2020. In addition, the average balance of taxable investment securities declined $35.5 million, or 22.2%, which reduced interest income by $668 thousand. These significant swings in both the average balances and rates on both sides of the balance sheet resulted in a net interest margin of 3.35% for the first nine months of 2020 compared to 3.56% for the first nine months of 2019.

The provision for credit losses for the nine months ended September 30, 2020 and 2019 was $2.9 million and $500 thousand, respectively, while net charge-offs were $580 thousand and $405 thousand, respectively. The increase in provision for credit losses was the result of new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans increased to 0.98% at September 30, 2020 from 0.84% at December 31, 2019. As previously discussed, this ratio increased primarily due to the addition of qualitative factors in the analysis of the allowance for loan losses. The ratio of annualized net charge-offs to average loans was 0.06% for the first nine months of 2020 and 0.04% for the first nine months of 2019. Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as changes within the Company's portfolio are known.

Total noninterest income from continuing operations for the nine months ended September 30, 2020 increased $376 thousand, or 5.1%, when compared to the same period in 2019. The increase in noninterest income primarily consisted of increases in BOLI income, gains on sales of securities and other fees on bank services, partially offset by a decrease in service charges on deposit accounts.

Total noninterest expense from continuing operations for the nine months ended September 30, 2020 increased $131 thousand, or 0.5%, when compared to the same period in 2019. The increase was a result of higher costs related to employee benefits and higher data processing fees, which were almost entirely offset by decreases in salaries and wages due to the deferral of direct origination costs related to the origination of PPP loans, FDIC insurance premiums, other real estate owned expenses, and other loan related expenses. The deferred costs for salaries and wages are being recognized over the lives of the related loans as previously mentioned.

Shore Bancshares InformationShore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

Additional information is available at www.shorebancshares.com.

Forward-Looking StatementsThe statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board's target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Shore Bancshares, Inc.

Financial Highlights (Unaudited)

(Dollars in thousands, except per share data)



For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2020 2019 Change 2020 2019 Change

PROFITABILITY FOR THE PERIOD

Net interest $13,283 $12,680 4.8 % $38,832 $37,367 3.9 % income

Provision for 1,500 200 650.0 2,850 500 470.0 credit losses

Noninterest 2,581 2,529 2.1 7,702 7,326 5.1 income

Noninterest 9,831 9,384 4.8 27,843 27,712 0.5 expense

Income from continuing operations 4,533 5,625 (19.4) 15,841 16,481 (3.9) before income taxes

Income tax 1,142 1,411 (19.1) 3,997 4,211 (5.1) expense

Income from continuing $3,391 $4,214 (19.5) $11,844 $12,270 (3.5) operations



Loss from discontinued operations - (10) 100.0 - (113) 100.0 before income taxes

Income tax - (2) - - (27) 100.0 benefit

Loss from discontinued - (8) 100.0 - (86) 100.0 operations

Net income $3,391 $4,206 (19.4) $11,844 $12,184 (2.8)



From Continuing Operations:

Return on 0.76 % 1.10 %(34) bp 0.96 % 1.11 %(15) bpaverage assets

Return on 6.71 8.66 (195) 7.99 8.68 (69) average equity

Return on average 7.63 9.90 (227) 9.09 9.98 (89) tangible equity (1)

Net interest 3.17 3.52 (35) 3.35 3.56 (21) margin

Efficiency 61.97 61.70 27 59.83 62.01 (218) ratio - GAAP

Efficiency ratio - 61.05 60.58 47 59.26 60.81 (155) Non-GAAP (1)



PER SHARE DATA

Basic and diluted net income per common share

Income from continuing $0.27 $0.33 (18.2) % $0.95 $0.96 (1.0) % operations

Loss from discontinued - - - - (0.01) 100.0 operations

Net income $0.27 $0.33 (18.2) $0.95 $0.95 -



Dividends paid per common $0.12 $0.10 20.0 $0.36 $0.30 20.0 share

Book value per common share 16.28 15.22 7.0 at period end

Tangible book value per common share 14.69 13.66 7.5 at period end (1)

Market value 10.98 15.41 (28.7) at period end

Market range:

High 11.77 17.00 (30.8) 17.56 17.00 3.3

Low 9.14 14.90 (38.7) 7.63 14.00 (45.5)



AVERAGE BALANCE SHEET DATA

Loans $1,406,683 $1,235,374 13.9 % $1,348,362 $1,219,623 10.6 %

Investment 136,017 155,324 (12.4) 124,487 160,035 (22.2) securities

Earning assets 1,670,194 1,432,252 16.6 1,553,974 1,408,937 10.3

Assets 1,771,944 1,513,790 17.1 1,652,876 1,480,813 11.6

Deposits 1,548,072 1,280,057 20.9 1,434,515 1,243,472 15.4

Stockholders' 201,079 193,120 4.1 198,095 189,094 4.8 equity



CREDIT QUALITY DATA

Net (recoveries) $(187) $67 (379.1)% $580 $405 43.2 % charge-offs



Nonaccrual $6,966 $12,530 (44.4) loans

Loans 90 days past due and 1,373 712 92.8 still accruing

Other real 38 74 (48.6) estate owned

Total nonperforming 8,377 13,316 (37.1) assets

Accruing troubled debt 7,267 7,588 (4.2) restructurings (TDRs)

Total nonperforming $15,644 $20,904 (25.2) assets and accruing TDRs





CAPITAL AND CREDIT QUALITY RATIOS

Period-end equity to 10.88 % 12.42 %(154) bp assets

Period-end tangible equity to 9.92 11.29 (137) tangible assets (1)



Annualized net (recoveries) (0.05) 0.02 (7) 0.06 % 0.04 %2 bpcharge-offs to average loans



Allowance for credit losses as a percent of:

Period-end 0.90 0.85 5 loans (2)

Nonaccrual 183.42 83.30 10,012 loans

Nonperforming 152.52 78.39 7,413 assets

Accruing TDRs 175.82 137.56 3,826

Nonperforming assets and 81.67 49.93 3,174 accruing TDRs



As a percent of total loans:

Nonaccrual 0.49 1.01 (52) loans

Accruing TDRs 0.51 0.61 (10)

Nonaccrual loans and 1.00 1.63 (63) accruing TDRs



As a percent of total loans+other real estate owned:

Nonperforming 0.59 1.08 (49) assets

Nonperforming assets and 1.10 1.69 (59) accruing TDRs



As a percent of total assets:

Nonaccrual 0.38 0.80 (42) loans

Nonperforming 0.46 0.85 (39) assets

Accruing TDRs 0.40 0.49 (9)

Nonperforming assets and 0.86 1.34 (48) accruing TDRs

(1) See the reconciliation table on page 18 of 18.

As of 9/30/2020 and 6/30/2020, this ratio includes PPP loans of $126.7(2) million and $123.0 million, respectively. Excluding these loans, the ratio is 0.98% and 0.86% for 9/30/2020 and 6/30/2020.

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)



September 30, 2020

September 30, December 31, September 30, compared to

2020 2019 2019 December 31, 2019

ASSETS

Cash and due from $17,577 $18,465 $22,777 (4.8) %banks

Interest-bearing deposits with other 138,885 76,506 80,596 81.5 banks

Cash and cash 156,462 94,971 103,373 64.7 equivalents



Investment securities 139,349 122,791 138,911 13.5 available for sale (at fair value)

Investment securities held to 20,174 8,786 9,780 129.6 maturity

Equity securities, 1,396 1,342 1,339 4.0 at fair value

Restricted 3,626 4,190 4,655 (13.5) securities



Loans 1,423,965 1,248,654 1,235,035 14.0

Less: allowance for (12,777) (10,507) (10,438) 21.6 credit losses

Loans, net 1,411,188 1,238,147 1,224,597 14.0



Premises and 24,679 23,821 23,871 3.6 equipment, net

Goodwill 17,518 17,518 17,518 -

Other intangible 1,844 2,252 2,396 (18.1) assets, net

Other real estate 38 74 74 (48.6) owned, net

Right of use 4,769 4,771 4,908 (0.0) assets, net

Other assets 47,129 40,572 30,257 16.2



Total assets $1,828,172 $1,559,235 $1,561,679 17.2



LIABILITIES

Noninterest-bearing$465,304 $356,618 $362,557 30.5 deposits

Interest-bearing 1,128,817 984,716 962,934 14.6 deposits

Total deposits 1,594,121 1,341,334 1,325,491 18.8



Securities sold under retail 1,019 1,226 2,263 (16.9) repurchase agreements

Advances from FHLB - - 15,000 - - short-term

Advances from FHLB - 15,000 15,000 (100.0) - long-term

Subordinated debt 24,399 - - -

Total borrowings 25,418 16,226 32,263



Lease liabilities 4,840 4,792 4,923 1.0

Accrued expenses and other 4,912 4,081 5,039 20.4 liabilities

Total liabilities 1,629,291 1,366,433 1,367,716 19.2



COMMITMENTS AND CONTINGENCIES



STOCKHOLDERS' EQUITY

Common stock, par value $0.01; 122 125 127 (2.4) authorized 35,000,000 shares

Additional paid in 58,090 61,045 64,879 (4.8) capital

Retained earnings 138,765 131,425 128,924 5.6

Accumulated other comprehensive 1,904 207 33 819.8 income

Total stockholders' 198,881 192,802 193,963 3.2 equity



Total liabilities and stockholders' $1,828,172 $1,559,235 $1,561,679 17.2 equity



Period-end common 12,218 12,500 12,742 (2.3) shares outstanding

Book value per $16.28 $15.42 $15.22 5.6 common share

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)



For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2020 2019 % Change 2020 2019 % Change

INTEREST INCOME

Interest and $14,139$14,1000.3 %$41,879$41,3481.3 %fees on loans

Interest on investment securities:

Taxable 730 870 (16.1) 2,087 2,755 (24.2)

Interest on deposits with 33 223 (85.2) 216 499 (56.7) other banks

Total interest 14,902 15,193(1.9) 44,182 44,602(0.9) income



INTEREST EXPENSE

Interest on 1,470 2,288 (35.8) 5,085 6,439 (21.0) deposits

Interest on short-term 1 117 (99.1) 4 475 (99.2) borrowings

Interest on long-term 148 108 37.0 261 321 - borrowings

Total interest 1,619 2,513 (35.6) 5,350 7,235 (26.1) expense



NET INTEREST 13,283 12,6804.8 38,832 37,3673.9 INCOME

Provision for 1,500 200 650.0 2,850 500 470.0 credit losses



NET INTEREST INCOME AFTER PROVISION

FOR CREDIT 11,783 12,480(5.6) 35,982 36,867(2.4) LOSSES



NONINTEREST INCOME

Service charges on 647 990 (34.6) 2,057 2,952 (30.3) deposit accounts

Trust and investment fee 381 383 (0.5) 1,119 1,140 (1.8) income

Gains on sales and calls of - - - 347 - - investment securities

Other noninterest 1,553 1,156 34.3 4,179 3,234 29.2 income

Total noninterest 2,581 2,529 2.1 7,702 7,326 5.1 income



NONINTEREST EXPENSE

Salaries and 4,143 3,853 7.5 10,569 11,411(7.4) wages

Employee 1,489 1,299 14.6 4,746 3,621 31.1 benefits

Occupancy 774 697 11.0 2,174 2,056 5.7 expense

Furniture and equipment 294 263 11.8 858 821 4.5 expense

Data 1,114 972 14.6 3,195 2,801 14.1 processing

Directors' 132 140 (5.7) 386 342 12.9 fees

Amortization of intangible 125 144 (13.2) 407 461 (11.7) assets

FDIC insurance premium 132 - - 347 386 (10.1) expense

Other real estate owned - 133 (100.0) 18 426 (95.8) expenses, net

Legal and professional 447 495 (9.7) 1,634 1,655 (1.3) fees

Other noninterest 1,181 1,388 (14.9) 3,509 3,732 (6.0) expenses

Total noninterest 9,831 9,384 4.8 27,843 27,7120.5 expense



Income from continuing operations 4,533 5,625 (19.4) 15,841 16,481(3.9) before income taxes

Income tax 1,142 1,411 (19.1) 3,997 4,211 (5.1) expense



Income from continuing 3,391 4,214 (19.5) 11,844 12,270(3.5) operations



Loss from discontinued operations - (10) 100.0 - (113) 100.0 before income taxes

Income tax - (2) 100.0 - (27) 100.0 benefit



Loss from discontinued - (8) 100.0 - (86) 100.0 operations



NET INCOME $3,391 $4,206 (19.4) $11,844$12,184(2.8)



Weighted average shares 12,483 12,764(2.2) 12,506 12,771(2.1) outstanding - basic

Weighted average shares 12,483 12,769(2.2) 12,509 12,776(2.1) outstanding - diluted



Basic and diluted net income per common share

Income from continuing $0.27 $0.33 (18.2) $0.95 $0.96 (1.0) operations

Loss from discontinued - - - - (0.01)100.0 operations

Net income $0.27 $0.33 (18.2) $0.95 $0.95 -



Dividends paid per common 0.12 0.10 20.0 0.36 0.30 20.0 share

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

(Dollars in thousands)



For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Average Yield/ Average Yield/ Average Yield/ Average Yield/

balance rate balance rate balance rate balance rate

Earning assets

Loans (1), (2), (3)$1,406,6834.01 %$1,235,3744.54 %$1,348,3624.16 %$1,219,6234.55 %

Investment securities

Taxable 136,017 2.14 155,324 2.24 124,487 2.24 160,035 2.30

Interest-bearing 127,494 0.10 41,554 2.13 81,125 0.36 29,279 2.28 deposits

Total earning 1,670,1943.56 % 1,432,2524.22 % 1,553,9743.81 % 1,408,9374.24 %assets

Cash and due from 18,860 18,127 18,302 17,520 banks

Other assets 94,755 73,823 91,642 64,775

Allowance for (11,865) (10,412) (11,042) (10,419) credit losses

Total assets $1,771,944 $1,513,790 $1,652,876 $1,480,813





Interest-bearing liabilities

Demand deposits $370,922 0.19 %$252,386 0.70 %$318,083 0.30 %$242,364 0.66 %

Money market and 442,322 0.21 389,268 0.67 426,570 0.29 386,113 0.79 savings deposits

Brokered deposits - - 14,568 2.29 - - 19,144 2.40

Certificates of deposit $100,000 or 127,983 1.68 119,200 1.78 129,319 1.78 108,504 1.54 more

Other time deposits 148,223 1.42 149,708 1.49 149,841 1.52 145,381 1.28

Interest-bearing 1,089,4500.54 925,130 0.98 1,023,8130.66 901,506 0.96 deposits

Securities sold under retail repurchase

agreements and federal funds 1,575 0.25 1,434 1.38 1,613 0.33 964 1.66 purchased

Advances from FHLB - - 16,295 2.73 - - 23,070 2.68 - short-term

Advances from FHLB - - 15,000 2.86 5,255 2.87 15,000 2.86 - long-term

Subordinated debt 9,859 5.97 - - 3,310 5.97 - -

Total interest-bearing 1,100,8840.59 % 957,859 1.04 % 1,033,9910.69 % 940,540 1.03 %liabilities

Noninterest-bearing 458,622 354,927 410,702 341,966 deposits

Accrued expenses and other 11,359 7,884 10,088 9,213 liabilities

Stockholders' 201,079 193,120 198,095 189,094 equity

Total liabilities and stockholders' $1,771,944 $1,513,790 $1,652,876 $1,480,813 equity



Net interest spread 2.97 % 3.18 % 3.12 % 3.21 %

Net interest margin 3.17 % 3.52 % 3.35 % 3.56 %

All amounts are reported on a tax-equivalent basis computed using the(1) statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

Interest income on loans includes amortized loan fees, net of costs and(3) accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

(Dollars in thousands, except per share data)



3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter Q3 2020 Q3 2020

2020 2020 2020 2019 2019 compared to compared to

Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2020 Q3 2019

PROFITABILITY FOR THE PERIOD

Taxable-equivalent net interest $13,317 $13,068 $12,554 $12,808 $12,724 1.9 % 4.7 income

Less: Taxable-equivalent 34 37 36 44 44 (8.1) (22.7) adjustment

Net interest 13,283 13,031 12,518 12,764 12,680 1.9 4.8 income

Provision for 1,500 1,000 350 200 200 50.0 650.0 credit losses

Noninterest income 2,581 2,769 2,352 2,694 2,529 (6.8) 2.1

Noninterest 9,831 7,663 10,349 9,845 9,384 28.3 4.8 expense

Income from continuing 4,533 7,137 4,171 5,413 5,625 (36.5) (19.4) operations before income taxes

Income tax expense 1,142 1,802 1,053 1,399 1,411 (36.6) (19.1)

Income from continuing 3,391 5,335 3,118 4,014 4,214 (36.4) (19.5) operations



Loss from discontinued - - - - (10) - 100.0 operations before income taxes

Income tax benefit - - - - (2) - -

Loss from discontinued - - - - (8) - 100.0 operations



Net income $3,391 $5,335 $3,118 $4,014 $4,206 (36.4) (19.4)



From Continuing Operations:

Return on average 0.76 % 1.31 % 0.81 % 1.03 % 1.10 %(55) bp(34) assets

Return on average 6.71 10.79 6.45 8.24 8.66 (408) (195) equity

Return on average tangible equity 7.63 12.20 7.43 9.43 9.90 (457) (227) (1)

Net interest 3.17 3.41 3.48 3.47 3.52 (24) (35) margin

Efficiency ratio - 61.97 48.50 69.60 63.69 61.70 1,347 27 GAAP

Efficiency ratio - 61.05 48.58 68.46 62.58 60.58 1,247 47 Non-GAAP (1)



PER SHARE DATA

Basic and diluted net income per common share

Income from continuing $0.27 $0.43 $0.25 $0.32 $0.33 (37.2) % (18.2) operations

Loss from discontinued - - - - - - - operations

Net income $0.27 $0.43 $0.25 $0.32 $0.33 (37.2) (18.2)



Dividends paid per 0.12 0.12 0.12 0.12 0.10 - 20.0 common share

Book value per common share at 16.28 15.98 15.62 15.42 15.22 1.9 7.0 period end

Tangible book value per common 14.69 14.42 14.06 13.84 13.66 1.9 7.5 share at period end (1)

Market value at 10.98 11.09 10.85 17.36 15.41 (1.0) (28.7) period end

Market range:

High 11.77 12.40 17.56 17.90 17.00 (5.1) (30.8)

Low 9.14 8.00 7.63 15.01 14.90 14.3 (38.7)



AVERAGE BALANCE SHEET DATA

Loans $1,406,683 $1,374,324 $1,263,441 $1,246,355 $1,235,374 2.4 % 13.9

Investment 136,017 107,908 129,410 145,544 155,324 26.0 (12.4) securities

Earning assets 1,670,194 1,539,945 1,450,508 1,463,490 1,432,252 8.5 16.6

Assets 1,771,944 1,638,387 1,546,991 1,553,017 1,513,790 8.2 17.1

Deposits 1,548,072 1,427,063 1,327,162 1,334,047 1,280,057 8.5 20.9

Stockholders' 201,079 198,842 194,332 193,239 193,120 1.1 4.1 equity



CREDIT QUALITY DATA

Net (recoveries) $(187) $288 $479 $131 $67 (164.9) % (379.1) charge-offs



Nonaccrual loans $6,966 $11,649 $11,540 $10,590 $12,530 (40.2) (44.4)

Loans 90 days past due and still 1,373 604 721 1,326 712 127.3 92.8 accruing

Other real estate 38 38 38 74 74 - (48.6) owned

Total nonperforming $8,377 $12,291 $12,299 $11,990 $13,316 (31.8) (37.1) assets



Accruing troubled debt $7,267 $7,312 $7,444 $7,501 $7,588 (0.6) (4.2) restructurings (TDRs)



Total nonperforming $15,644 $19,603 $19,743 $19,491 $20,904 (20.2) (25.2) assets and accruing TDRs



CAPITAL AND CREDIT QUALITY RATIOS

Period-end equity 10.88 % 11.64 % 12.45 % 12.37 % 12.42 %(76) bp(154) to assets

Period-end tangible equity to 9.92 10.63 11.35 11.24 11.29 (71) (137) tangible assets (1)



Annualized net (recoveries) (0.05) 0.08 0.15 0.04 0.02 (13) (7) charge-offs to average loans



Allowance for credit losses as a percent of:

Period-end loans 0.90 0.79 0.81 0.84 0.85 11 5 (2)

Nonaccrual loans 183.42 95.20 89.93 99.22 83.30 8,822 10,012

Nonperforming 152.52 90.23 84.38 87.63 78.39 6,229 7,413 assets

Accruing TDRs 175.82 151.67 139.41 140.07 137.56 2,415 3,826

Nonperforming assets and 81.67 56.57 52.57 53.91 49.93 2,510 3,174 accruing TDRs



As a percent of total loans:

Nonaccrual loans 0.49 0.83 0.90 0.85 1.01 (34) (52)

Accruing TDRs 0.51 0.52 0.58 0.60 0.61 (1) (10)

Nonaccrual loans 1.00 1.35 1.49 1.45 1.63 (35) (63) and accruing TDRs



As a percent of total loans+other real estate owned:

Nonperforming 0.59 0.87 0.96 0.96 1.08 (28) (49) assets

Nonperforming assets and 1.10 1.39 1.55 1.56 1.69 (29) (59) accruing TDRs



As a percent of total assets:

Nonaccrual loans 0.38 0.68 0.73 0.68 0.80 (30) (42)

Nonperforming 0.46 0.71 0.78 0.77 0.85 (25) (39) assets

Accruing TDRs 0.40 0.43 0.47 0.48 0.49 (3) (9)

Nonperforming assets and 0.86 1.14 1.25 1.25 1.34 (28) (48) accruing TDRs

(1) See the reconciliation table on page 18 of 18.

As of 9/30/2020 and 6/30/2020, this ratio includes PPP loans of $126.7(2) million and $123.0 million, respectively. Excluding these loans, the ratio is 0.98% and 0.86% for 9/30/2020 and 6/30/2020.

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

(In thousands, except per share data)



Q3 2020 Q3 2020

compared to compared to

Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2020 Q3 2019

INTEREST INCOME

Interest and fees on $14,139$13,945$13,795$14,043$14,1001.4 %0.3 %loans

Interest on investment securities:

Taxable 730 638 719 827 870 14.4 (16.1)

Interest on deposits 33 11 172 295 223 200.0 (85.2) with other banks

Total interest 14,902 14,594 14,686 15,165 15,1932.1 (1.9) income



INTEREST EXPENSE

Interest on 1,470 1,556 2,059 2,287 2,288 (5.5) (35.8) deposits

Interest on short-term 1 1 2 6 117 - (99.1) borrowings

Interest on long-term 148 6 107 108 108 2,366.7 37.0 borrowings

Total interest 1,619 1,563 2,168 2,401 2,513 3.6 (35.6) expense



NET INTEREST 13,283 13,031 12,518 12,764 12,6801.9 4.8 INCOME

Provision for credit 1,500 1,000 350 200 200 50.0 650.0 losses



NET INTEREST INCOME AFTER PROVISION

FOR CREDIT 11,783 12,031 12,168 12,564 12,480(2.1) (5.6) LOSSES



NONINTEREST INCOME

Service charges on 647 544 866 958 990 18.9 (34.6) deposit accounts

Trust and investment 381 363 375 382 383 5.0 (0.5) fee income

Gains on sales and calls of - 347 - - - (100.0) - investment securities

Other noninterest 1,553 1,515 1,111 1,354 1,156 2.5 34.3 income

Total noninterest 2,581 2,769 2,352 2,694 2,529 (6.8) 2.1 income



NONINTEREST EXPENSE

Salaries and 4,143 2,130 4,296 4,002 3,853 94.5 7.5 wages

Employee 1,489 1,535 1,722 1,662 1,299 (3.0) 14.6 benefits

Occupancy 774 702 698 702 697 10.3 11.0 expense

Furniture and 294 247 317 286 263 19.0 11.8 equipment expense

Data 1,114 1,037 1,044 989 972 7.4 14.6 processing

Directors' 132 113 141 137 140 16.8 (5.7) fees

Amortization of 125 138 144 144 144 (9.4) (13.2) intangible assets

FDIC insurance 132 124 91 (42) - 6.5 - premium expense

Other real estate owned - - 18 (1) 133 - (100.0) expenses, net

Legal and professional 447 553 634 568 495 (19.2) (9.7) fees

Other noninterest 1,181 1,084 1,244 1,398 1,388 8.9 (14.9) expenses

Total noninterest 9,831 7,663 10,349 9,845 9,384 28.3 4.8 expense



Income from continuing operations 4,533 7,137 4,171 5,413 5,625 (36.5) (19.4) before income taxes

Income tax 1,142 1,802 1,053 1,399 1,411 (36.6) (19.1) expense



Income from continuing 3,391 5,335 3,118 4,014 4,214 (36.4) (19.5) operations



Loss from discontinued operations - - - - (10) - 100.0 before income taxes

Income tax - - - - (2) - 100.0 benefit



Loss from discontinued - - - - (8) - 100.0 operations





NET INCOME $3,391 $5,335 $3,118 $4,014 $4,206 (36.4) (19.4)



Weighted average shares 12,483 12,524 12,513 12,588 12,764(0.3) (2.2) outstanding - basic

Weighted average shares 12,483 12,525 12,518 12,593 12,769(0.3) (2.2) outstanding - diluted



Basic and diluted net income per common share

Income from continuing $0.27 $0.43 $0.25 $0.32 $0.33 (37.2) (18.2) operations

Loss from discontinued - - - - - - - operations

Net income $0.27 $0.43 $0.25 $0.32 $0.33 (37.2) (18.2)



Dividends paid per 0.12 0.12 0.12 0.12 0.10 - 20.0 common share

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

(Dollars in thousands)



Q3 2020 Q3 2020

compared to compared to

Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2020 Q3 2019

Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/

balance rate balance rate balance rate balance rate balance rate

Earning assets

Loans (1), (2), (3) 1,406,6834.01 %$1,374,3244.09 %$1,263,4414.40 %$1,246,3554.48 %$1,235,3744.54 %2.4 %13.9 %

Investment securities

Taxable 136,017 2.14 107,908 2.37 129,410 2.22 145,544 2.27 155,324 2.24 26.0 (12.4)

Interest-bearing 127,494 0.10 57,713 0.07 57,657 1.20 71,591 1.63 41,554 2.13 120.9 206.8 deposits

Total earning 1,670,1943.56 % 1,539,9453.82 % 1,450,5084.08 % 1,463,4904.12 % 1,432,2524.22 %8.5 16.6 assets

Cash and due from 18,860 18,167 17,874 20,382 18,127 3.8 4.0 banks

Other assets 94,755 90,981 89,154 79,586 73,823 4.1 28.4

Allowance for (11,865) (10,706) (10,545) (10,441) (10,412) 10.8 14.0 credit losses

Total assets $1,771,944 $1,638,387 $1,546,991 $1,553,017 $1,513,790 8.2 17.1



Interest-bearing liabilities

Demand deposits $370,922 0.19 %$298,568 0.20 %$284,176 0.56 %$284,193 0.76 %$252,386 0.70 %24.2 47.0

Money market and 442,322 0.21 426,963 0.23 410,252 0.46 397,662 0.51 389,268 0.67 3.6 13.6 savings deposits

Brokered deposits - - - - - - 8,135 2.15 14,568 2.29 - (100.0)

Certificates of deposit $100,000 or 127,983 1.68 130,582 1.81 129,408 1.85 126,411 1.85 119,200 1.78 (2.0) 7.4 more

Other time deposits 148,223 1.42 150,675 1.54 150,645 1.60 149,197 1.58 149,708 1.49 (1.6) (1.0)

Interest-bearing 1,089,4500.54 1,006,7880.62 974,481 0.85 965,598 0.94 925,130 0.98 8.2 17.8 deposits

Securities sold under retail repurchase agreements

and federal 1,575 0.25 2,030 0.20 1,235 0.65 1,889 1.26 17,729 2.64 (22.4) (91.1) funds purchased

Advances from FHLB - - - - - - - - - - - - - short-term

Advances from FHLB - - 824 2.93 15,000 2.87 15,000 2.86 15,000 2.86 (100.0) (100.0) - long-term

Subordinated debt 9,859 5.97 - - - - - - - - 100.0 100.0

Total interest-bearing 1,100,8840.59 % 1,009,6420.62 % 990,716 0.88 % 982,487 0.97 % 957,859 1.04 %9.0 14.9 liabilities

Noninterest-bearing 458,622 420,275 352,681 368,449 354,927 9.1 29.2 deposits

Accrued expenses and other 11,359 9,628 9,262 8,842 7,884 18.0 44.1 liabilities

Stockholders' 201,079 198,842 194,332 193,239 193,120 1.1 4.1 equity

Total liabilities and stockholders' $1,771,944 $1,638,387 $1,546,991 $1,553,017 $1,513,790 8.2 17.1 equity



Net interest spread 2.97 % 3.20 % 3.20 % 3.15 % 3.18 %

Net interest margin 3.17 % 3.41 % 3.48 % 3.47 % 3.52 %

All amounts are reported on a tax-equivalent basis computed using the(1) statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

Interest income on loans includes amortized loan fees, net of costs and(3) accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

and Non-GAAP Measures (Unaudited)

(In thousands, except per share data)



YTD YTD

Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 9/30/2020 9/30/2019



The following reconciles return on average equity and return on average tangible equity from continuing operations (Note 1):



Income from continuing $3,391 $5,335 $3,118 $4,014 $4,214 $11,844 $12,270 operations

Income from continuing $13,490 $21,457 $12,541 $15,925 $16,719 $15,821 $16,405 operations - annualized (A)



Net income, excluding net $3,484 $5,438 $3,225 $4,121 $4,321 $12,148 $12,614 amortization of intangible assets



Net income, excluding net amortization of $13,860 $21,872 $12,971 $16,350 $17,143 $16,227 $16,865 intangible assets - annualized (B)



Average stockholders' $201,079 $198,842 $194,332 $193,239 $193,120 $198,095 $189,094 equity (C)

Less: Average goodwill and other (19,430) (19,560) (19,702) (19,846) (19,991) (19,564) (20,136) intangible assets

Average tangible $181,649 $179,282 $174,630 $173,393 $173,129 $178,531 $168,958 equity (D)



Return on average equity (GAAP) (A) 6.71 % 10.79 % 6.45 % 8.24 % 8.66 % 7.99 % 8.68 %/(C)

Return on average tangible equity 7.63 % 12.20 % 7.43 % 9.43 % 9.90 % 9.09 % 9.98 %(Non-GAAP) (B)/ (D)



The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio from continuing operations (Note 2):



Noninterest $9,831 $7,663 $10,349 $9,845 $9,384 $27,843 $27,712 expense (E)

Less: Amortization of (125) (138) (144) (144) (144) (407) (461) intangible assets

Adjusted noninterest $9,706 $7,525 $10,205 $9,701 $9,240 $27,436 $27,251 expense (F)



Net interest 13,283 13,031 12,518 12,764 12,680 38,832 37,367 income (G)

Add: Taxable-equivalent 34 37 36 44 44 107 119 adjustment

Taxable-equivalent net interest $13,317 $13,068 $12,554 $12,808 $12,724 $38,939 $37,486 income (H)



Noninterest income$2,581 $2,769 $2,352 $2,694 $2,529 $7,702 7,326 (I)

Less: Investment - (347) - - - (347) - securities (gains)

Adjusted noninterest income$2,581 $2,422 $2,352 $2,694 $2,529 $7,355 $7,326 (J)



Efficiency ratio (GAAP) (E)/(G)+ 61.97 % 48.50 % 69.60 % 63.69 % 61.70 % 59.83 % 62.01 %(I)

Efficiency ratio (Non-GAAP) (F)/ 61.05 % 48.58 % 68.46 % 62.58 % 60.58 % 59.26 % 60.81 %(H)+(J)



The following reconciles book value per common share and tangible book value per common share (Note 1):



Stockholders' $198,881 $200,134 $195,694 $192,802 $193,963 equity (L)

Less: Goodwill and other (19,362) (19,488) (19,626) (19,770) (19,914) intangible assets

Tangible equity $179,519 $180,646 $176,068 $173,032 $174,049 (M)



Shares outstanding 12,218 12,526 12,525 12,500 12,742 (N)



Book value per common share $16.28 $15.98 $15.62 $15.42 $15.22 (GAAP) (L)/(N)

Tangible book value per common $14.69 $14.42 $14.06 $13.84 $13.66 share (Non-GAAP) (M)/(N)





The following reconciles equity to assets and tangible equity to tangible assets (Note 1):



Stockholders' $198,881 $200,134 $195,694 $192,802 $193,963 equity (O)

Less: Goodwill and other (19,362) (19,488) (19,626) (19,770) (19,914) intangible assets

Tangible equity $179,519 $180,646 $176,068 $173,032 $174,049 (P)



Assets (Q) $1,828,172 $1,719,524 $1,571,421 $1,559,235 $1,561,679

Less: Goodwill and other (19,362) (19,488) (19,626) (19,770) (19,914) intangible assets

Tangible assets $1,808,810 $1,700,036 $1,551,795 $1,539,465 $1,541,765 (R)



Period-end equity/ assets (GAAP) (O) 10.88 % 11.64 % 12.45 % 12.37 % 12.42 % /(Q)

Period-end tangible equity/ tangible assets 9.92 % 10.63 % 11.35 % 11.24 % 11.29 % (Non-GAAP) (P)/ (R)

Note 1: Management believes that reporting tangible equity and tangible assetsmore closely approximates the adequacy of capital for regulatory purposes.

Note 2: Management believes that reporting the non-GAAP efficiency ratio moreclosely measures its effectiveness of controlling cash-based operatingactivities.

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SOURCE Shore Bancshares, Inc.