Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill + Partners, L.P. 2014 East Coast Financial Services Conference
31 slides from Shore Bancshares's conference presentation, Nov 12, 2014
Slide 1: Sandler O'Neill 2014 East Coast Financial Services Conference
Nasdaq: SHBI Sandler O’Neill + Partners, L.P. 2014 East Coast Financial Services Conference November 12 – 14, 2014
Slide 2: Safe Harbor Regarding Forward-Looking Statements
Safe Harbor Regarding Forward - Looking Statements This presentation may contain “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Shore Bancshares, Inc. (the “Company”). Forward - looking statements often include the words “believes,
Slide 3: Management Team
Management Team Name Title/Function Entity Years in Banking Years with Company L . Lloyd “Scott” Beatty, Jr. President and Chief Executive Officer SHBI 22 9 George S. Rapp EVP and Chief Financial Officer SHBI 36 2 Patrick M. Bilbrough President and Chief Executive Officer Talbot Bank 18 3 Edward C.
Slide 4: Financial Summary
Financial Summary As of September 30, 2014 4 Total Assets: $ 1,096.3 million Gross Loans: $ 705.0 million Total Deposits: $ 940.7 million Total Shareholder’s Equity: $ 138.7 million Tangible Common Equity: $ 125.4 million Tangible Book value per Share: $ 9.94 Branches: Depository 18 Insurance and We
Slide 5: Strategic Direction
Strategic Direction 5 Focus on Driving Profitability Diversity of Revenues – No Mortgage Banking o Banking o Insurance o Service Charges o Wealth Management Improving Asset Quality Leverage Size and Existing Platform to Take Advantage of Market Dislocation Emphasis on Core Deposits/Funding
Slide 6: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies SHBI CNB ($483mm of Assets) Wye Financial & Trust 1 The Talbot Bank of Easton Maryland ($591mm of Assets) Dover Street Realty Inc. Avon - Dixon Agency LLC (Retail) 2 Jack Martin & Associates Inc. Mubell Finance LLC Elliott Wilson Insurance, LLC 1. Wye Financi
Slide 7: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies 7
Slide 8: Branch Map
24 locations 18 branches 6 non - bank offices 8 Branch Map Dover
Slide 9: Deposit Market Share: Delmarva Peninsula
Deposit Market Share: Delmarva Peninsula Market Rank Ticker Company Name City (HQ) HQ State Branches Total Deposits as of June 30, 2014 ($000) ’14 Market Share(%) 1 PNC PNC Financial Services Group Inc. Pittsburgh PA 46 2,066,629 17.85 2 MTB M&T Bank Corp. Buffalo NY 33 1,774,195 15.32 3 SHBI Shore
Slide 10: Competitors' Branch Proximity Report
Competitors ’ Branch Proximity Report Within 1 Mile Within 5 Miles Competing Branches Deposits in Competing Branches Competing Branches Deposits in Competing Branches Shore Bancshares, Inc . 18 930,670 Money Centers/Regionals 26 1,357,633 41 2,165,146 Community Banks 26 897,313 46 2,094,057 TOTALS 5
Slide 11: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of September 30, 2014 Loan Type Balance % of Total Construction $ 67,366 9.6% Residential Real Estate 276,441 39.2% Commercial Real Estate 297,847 42.2% Commercial 54,207 7.7% Consumer 9,181 1.3% Total $ 705,042 100.0% 11 Residential Real Estate 39.2% Co
Slide 12: Improving Credit Quality
Improving Credit Quality As of or for 3 Months Ended 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 9/30/2014 NON - PERFORMING ASSETS $36,474 Nonaccrual Loans $16,302 $36,238 $51,370 $18,147 $12,718 90+ or More Days Past Due 7,425 4,702 2,723 460 270 0 Other Real Estate Owned 2,572 3,702 9,3
Slide 13: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs (Dollars in thousands) December 31 , September 30 , 2009 2010 2011 2012 2013 2014 Construction $12,259 $28,175 $27,661 $37,029 $5,569 $10,403 Residential Real Estate 8,242 18,790 26,299 18,839 19,768 18,600 23,578 Commercial Real Estate 2,828 14,266 32,612 14,462 8,321 Com
Slide 14: Attractive Deposit Base
Attractive Deposit Base 14 (Dollar Value in Thousands) September 30, 2014 Deposit Type Quarterly Average Balance % of Total Cost Noninterest Bearing Demand $ 185,231 19.7% 0.00% Interest Bearing Demand 183,094 19.5% 0.14% Money Market & Savings 225,671 24.0% 0.12% CDs $100,000 or more 166,806 17.7%
Slide 15: Transaction Deposit Growth
Transaction Deposit Growth* 15 52% 55% 60% 64% 52% 45% 40% 36% 12/31/2011* 12/31/2012* 12/31/2013 9/30/14 Transaction Deposits Time Deposits *Excludes IND Program
Slide 16: Securities Portfolio
S ecurities Portfolio (Dollars in thousands) Amortized Cost G Gross Unrealized Gains G Gross Unrealized Losses E Estimated Fair Value Available - for - sale securities: September 30, 2014 U.S. Treasury $5,243 $8 $ - 0 - $5,251 U.S. Government Agencies 62,359 65 227 62,197 Mortgage - backed 155,462 5
Slide 17: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 3Q13 4Q13 1Q14 2Q14 3Q14 Interest income $10,182 $9,807 $9,455 $9,523 $9,686 Interest expense 1,354 1,237 1,132 1,076 1,050 Net interest income 8,828 8,570 8,323 8,447 8,636 Provision for credit losses 22,460 474 975 950 7
Slide 18: Pre Tax Pre Provision ROA
Pre Tax Pre Provision ROA 18 1.36 0.87 1.16 1.17 1.02* 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 3Q13 4Q13 1Q14 2Q14 3Q14 *Includes severance cost and equates to 10 BPs.
Slide 19: SHBI Net Interest Margin
SHBI Net Interest Margin 19 3.90% 4.02% 3.74% 3.23% 3.48% 3.38% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 2009 2010 2011 2012 2013 3Q 2014
Slide 20: Continued Focus on Fee Revenue
20 Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income 1 ) Q3 2014 is annualized. Dollars in thousands 24% 25% 26% 34% 32% 31% 68% 70% 70% 69% 67% 68% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 2009 2010 2011 2012 2013 3Q14 Net Interest income % Noninterest Inco
Slide 21: Key Ratios
SHBI Return on Average Assets 0.46% Return on Average Equity 3.61% Net Interest Margin 3.38% Non - interest Income/Operating Revenue 31.13% Noninterest Income/Average Assets 1.45% Noninterest Expense/Average Assets 3.56% Efficiency Ratio (Non - GAAP) (1) 77.33% Nonperforming Assets/Assets (Excluding
Slide 22: Capital Ratios
Capital Ratios 22 9.35% 9.16% 8.36% 8.41% 11.58% 11.81% 13.07% 13.80% 13.32% 11.34% 16.32% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 2010 2011 2012 2013 Q3 2014 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio 12.55% 12.05
Slide 23: Company Ownership as of 6/30/14
Company Ownership as of 6/30/14 Major Holders % of Ownership Wellington Management Company 9.48% FJ Capital Management LLC 3.95% Sandler O’Neill Asset Management LLC 3.91% Basswood Capital Management LLC 3.52% The Banc Funds Company LLC 3.26% Manulife Asset Management LLC Mendon Capital Advisors Cor
Slide 24: What Makes SHBI Unique?
What Makes SHBI Unique? ● Diversity of Revenue Sources - - without Mortgage ● Strong Capital Position ● Stable Net Interest Margin ● Strong Control of Operating Expenses ● Dominant independent financial services company in all markets within footprint 24
Slide 25: Compelling Investment Considerations
25 ● We are a very different Company now x Improved credit process x Continuing to build organizational depth x Revamped strategic plan positions for growth x Focused on creating sustainable competitive advantages x Strengthened noninterest revenue sources x Forging a sales culture with new branding
Slide 26: SHBI LTM Price Change (%)
SHBI-—LTM Price Change (%) Shore Bancshares, Inc. - Price Change (%) sul (or 25%) ok 8 2156 —s8P 500 Bank (10.97%) nasoae Bank (08 36) 25 Price Change (%) Thousands ‘Good things are happening here.
Slide 27: Addendum
ADDENDUM SHORE BANCSHARES, INC. ‘Good things are happening here™*
Slide 28: Peer Group Definition
Peer Group Definition 28 Publically traded banking c ompanies in MD, DC, VA, DE w ith total a ssets between $750M - $2B.
Slide 29: Peer Group
Peer Group 29 Company Name State Total Assets ($000) ROAA LTM (%) Total Equity/ Total Assets (%) Tangible Equity/ Tangible Assets (%) Risk - based Capital Ratio (%) Net Interest Margin (%) Noninterest Inc/ Operating Rev (%) Efficiency Ratio LTM (%) NPAs/ Assets (%) ROAE (%) 2014 Q2 2014 Q2 2014 Q2 2
Slide 30: Talent, depth, unique skills
30 Talent, depth, unique skills • L. Lloyd “Scott” Beatty, Jr ., 61, CPA, President & CEO of SHBI since June 2013, Director of SHBI since December 2000, Director of Talbot Bank since 1992. COO from 2006 until 2012 and named President and COO in 2012. Formerly COO, private equity firm Darby Overseas
Slide 31: Non-GAAP Financial Measures
Non - GAAP Financial Measures Dollars in thousands except per share amounts December 31 , Sept 30 , 2009 2010 2011 2012 2013 2014 Total Assets $1,156,516 $1,130,311 $1,158,193 $1,185,807 $1,054,124 $1,096,285 Less: Intangible Assets 21,360 18,518 16,662 16,270 15,974 13,295 Tangible Assets $1,135,15