Shore Bancshares, Inc. :SHBI-US: Earnings Analysis: Q2, 2017 By the Numbers : September 12, 2017

Shore Bancshares, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Shore Bancshares, Inc. – Sandy Spring Bancorp, Inc., Bay Bancorp, Inc., Howard Bancorp, Inc., Glen Burnie Bancorp, Wells Fargo & Company, M&T Bank Corporation and PNC Financial Services Group, Inc. (SASR-US, BYBK-US, HBMD-US, GLBZ-US, WFC-US, MTB-US and PNC-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 15.08 million, Net Earnings of USD 2.35 million.
  • Net interest income margins widened from 69.90% to 72.29% compared to the same period last year.
  • Net loan assets changed 26.18% compared to same period last year and 16.14% from previous period, total deposits changed 24.47% compared to same period last year and 19.44% from previous period.
  • Year-on-year change in operating cash flow of -40.20% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings grew despite decline in operating margins and pre-tax margins compared to same period last year.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 15.08 14.74 14.02 13.67 13.42
Revenue Growth (%YOY) 12.33 6.94 8.43 5.81 7.64
Earnings (mil) 2.35 2.8 2.5 2.41 2.27
Earnings Growth (%YOY) 3.52 13.82 15.35 26.3 39.64
Net Margin (%) 15.6 19 17.79 17.64 16.92
EPS 0.18 0.22 0.2 0.19 0.18
Return on Equity (%) 1.48 1.8 1.61 1.57 1.5
Return on Assets (%) 0.74 0.96 0.86 0.84 0.8

Access our Ratings and Scores for Shore Bancshares, Inc.

Market Share Versus Profits

Revenues History
Earnings History

SHBI-US‘s change in revenue this period compared to the same period last year of 12.33% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SHBI-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.30% and earnings by -16% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the year-on-year improvement in net interest income margins from 69.90% to 72.29%. However, the company’s loan loss provisions have prevented it from fully capitalizing on these net interest income margin improvements. SHBI-US‘s net interest income after provisions margin showed no improvement. Loan loss provisions as a percentage of net interest income were 8.94% this period, and 4.00% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 26.18% compared to the same period last year and 16.14% from the previous period. Total deposits changed 24.47% compared to the same period last year and 19.44% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SHBI-US‘s change in operating cash flow of -40.20% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating’s margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Shore Bancshares, Inc.

Company Profile

Shore Bancshares, Inc. operates as a bank holding company for the Talbot Bank of Easton and the Centreville National Bank of Maryland. The company operates through two segments: Community Banking and Insurance Products and Services. The Community Banking segment provides services to consumers and small businesses on the eastern shore of Maryland and in Delaware. Its activities include small business services, retail brokerage, trust services and consumer banking products and services. The Insurance Products and Services segment provides insurance products and services to businesses and consumers in the company’s market areas. Shore Bancshares was founded on March 15, 1996 and is headquartered in Easton, MD.

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