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Shore Bancshares Reinstates Buyback: Does it Look Attractive?

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In an effort to enhance shareholders’ value, Shore Bancshares (SHBI - Free Report) announced the reinstatement of its common stock repurchase program, which was earlier suspended on the wake of disruptions in business caused by the coronavirus pandemic.

Per the program, management is authorized to repurchase up to $10 million or approximately 5% of the total outstanding shares of the company's common stock. As of Aug 31, 2020, Shore Bancshares had $5.5 million remaining under the common stock buyback authority.

Repurchases can be executed either through the open market or privately-negotiated transactions, depending on the market conditions and other factors. The plan will expire on Dec 31, 2020, and can be terminated at any time without prior notice.

Lloyd L. "Scott" Beatty, Jr., president and chief executive officer, informed, "We are pleased to resume our stock repurchase program as we continue to maintain strong capital levels, minimal credit losses and solid operating results.”

Given a robust capital position as well as a lower debt-equity ratio compared with its peers, the company is expected to sustain its capital deployment activities. Hence, through consistent dividend payments, it is likely to continue enhancing shareholder value.

Last month, it announced a quarterly dividend of 12 cents per share. The dividend was paid out on Aug 31 to shareholders of record as of Aug 15.

However, let’s see whether it is worth considering the stock based on this dividend income. Deeper research into its fundamentals will help understand the risks and rewards.

The company’s return on equity indicates that it utilizes shareholders’ funds more efficiently than the industry. Its ROE of 8.53% compares favorably with 8.43% for the industry.

Further, the stock looks undervalued based on its price-to-book and price-to-earnings ratios, which are below the respective industry averages. It has a Value Score of A.

However, the coronavirus outbreak-related slowdown is expected to hurt the bank’s profitability for a couple of quarters. Also, margin pressure mainly due to the Federal Reserve’s accommodative monetary policy and near-zero interest rates is likely to persist in the near term.

Shares of Shore Bancshares have lost 33.1% over the past six months compared with the industry’s 25.7% decline.


Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few other finance stocks that have announced new/additional buyback authorizations in 2020 include Home Bancorp (HBCP - Free Report) , ESSA Bancorp (ESSA - Free Report) and MVB Financial (MVBF - Free Report) .

Home Bancorp announced a new share repurchase plan of up to 444,000 shares, which will commence after the completion of the 2019 plan.

ESSA Bancorp’s board of directors approved the repurchase of about 500,000 shares of the company’s common stock.

MVB Financial announced that it would repurchase up to $5 million worth of outstanding common stock.

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