Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill & Partners East Coast Financial Services Conference 2015
41 slides from Shore Bancshares's conference presentation, Nov 10, 2015
Slide 1: Sandler O'Neill East Coast Financial Services Conference
Sandler O’Neill & Partners, L.P. East Coast Financial Services Conference November 11, 2015
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 23 10 George S. Rapp Chief Financial Officer SHBI 38 2 Donna J. Stevens SVP and Chief Operating Officer SHBI 35 17 Patrick M. Bilbrough President an
Slide 4: Financial Summary
Financial Summary As of September 30, 2015 4 Total Assets: $ 1,117.8 million Gross Loans: $ 777.1 million Total Deposits: $ 959.4 million Total Shareholder’s Equity: $ 145.9 million Tangible Common Equity: $ 132.7 million Tangible Book value per Share: $ 10.51 Branches: Depository 18 Insurance and W
Slide 5: Strategic Direction
Strategic Direction 5 Focus on Driving Profitability Diversity of Revenues o Banking, Insurance, Service Charges, Wealth Management Improving Asset Quality Emphasis on Core Deposits/Funding Leverage Size and Existing Platform to Take Advantage of Market Dislocation Expand Footprint into
Slide 6: Strategic Direction
Strategic Direction ● Shore Bancshares has the opportunity to dominate the Delmarva ● Currently dominant independent locally headquartered company in our footprint ● SHBI is striving to be the bank and employer of choice on the Delmarva 6
Slide 7: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies SHBI CNB ($484,591mm of Assets) Wye Financial & Trust 1 The Talbot Bank of Easton Maryland ($612,210mm of Assets) Dover Street Realty Inc. Avon - Dixon Agency LLC (Retail) 2 Mubell Finance LLC 1. Wye Financial & Trust is a division of CNB 2. Freestate & Son,
Slide 8: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies 8
Slide 9: Branch Map
25 locations 18 branches 1 loan production office 6 non - bank offices 9 Branch Map
Slide 10: General Impact of Consolidation
General Impact of Consolidation 10 Unified policies and procedures; eliminate differences and streamline approval process Streamlined decisioning and meetings Specialist versus generalist
Slide 11: Departments Currently Consolidated
Departments Currently Consolidated 11 Deposit Operations Finance IT Marketing Human Resources Loan Operations
Slide 12: Departments to be Consolidated: Retail Sales/Branch Administration
Departments to be Consolidated 12 Retail Sales/Branch Administration Administrative Sales Manager Branch Operations and Security 18 branch locations
Slide 13: Departments to be Consolidated: Loan Administration
Departments to be Consolidated 13 Loan Administration Credit Administration (policy and procedure) Underwriting / Credit Analysis Business Bankers / Lenders Collections / Workout Documentation / Processing
Slide 14: Departments to be Consolidated: Compliance
Departments to be Consolidated 14 Compliance Impact as a result of increased asset size o Bank Secrecy Act (BSA) o Community Reinvestment Act (CRA) o Home Mortgage Disclosure Act o Flood / Escrow o Additional scrutiny of compliance management system Depth and continuity with combined strengths o
Slide 15: Consent Order Termination and Bank Consolidation Benefits
Consent Order Termination and Bank Consolidation Benefits 15 Reduced FDIC Assessment Reduced Professional Expenses Personnel Reduction IT/Systems Directors & Officers Insurance Director Fees Total $2 Million Annual Savings Current Reduced Expense Annualized – $1.2 Million
Slide 16: Selected SHBI Market Highlights
Selected SHBI Market Highlights ▪ Household income for entire franchise is $ 74,104 in MD and $ 61,777 in DE vs. $55,551 for the US. ▪ Projected HH income change ( 2016 - 2021) is 4.45% for MD, and 6.76% for DE ▪ Projected 5 - year population growth rate ( 2016 - 2021) in overall market = 3.90% for
Slide 17: Deposit Market Share: SHBI Market
Deposit Market Share: SHBI Market Market Rank Ticker Company Name City (HQ) HQ State Branches Total Deposits as of September 30, 2015 ($000) ’15 Market Share(%) 1 SHBI Shore Bancshares Inc. Easton MD 18 936,286 16.55 2 PNC PNC Financial Services Group Inc. Pittsburgh PA 14 858,587 15.18 3 MTB M&T Ba
Slide 18: 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 . 18 936,286 Money Centers/Regionals 29 2,001,206 40 2,603,455 Community Banks 21 875,197 34 1,401,811 TOTALS 5
Slide 19: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of September 30, 2015 Loan Type Balance % of Total Construction $86,548 11.1% Residential Real Estate 303,137 39.0% Commercial Real Estate 323,160 41.6% Commercial 57,129 7.4% Consumer 7,088 0.9% Total $ 777,062 100.0% 19 Residential Real Estate 39.0% Co
Slide 20: Improving Credit Quality
Improving Credit Quality 9/30/2015 12/31/2014 12/31/2013 12/31/12 NON - PERFORMING ASSETS Nonaccrual Loans $13,143 $13,467 $18,147 $36,474 90+ or More Days Past Due 4 87 270 460 Other Real Estate Owned 2,884 3,691 3,779 7,659 Total Non - Performing Assets 16,031 17,245 22,196 44,593 Performing TDRs
Slide 21: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 9/30/15 12/31/2014 12/31/2013 12/31/2012 Construction $11,766 $10,068 $5,569 $37,029 Residential Real Estate 10,753 10,486 19,768 18,839 Commercial Real Estate 6,768 9,358 14,462 32,612 Commercial 165 188 1,137 715 Consumer 126 127 48 92 Total 29,578 30,227 40,984 89,287 O
Slide 22: 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, 2015 U.S. Treasury $ 5,111 $12 $ --- $5,123 U.S. Government Agencies 65,707 207 160 65,754 Mortgage - backed 147,629
Slide 23: Attractive Deposit Base
Attractive Deposit Base 23 (Dollar Value in Thousands) September 30, 2015 Deposit Type Quarterly Average Balance % of Total Cost Noninterest Bearing Demand $ 214,684 22.5% 0.00% Interest Bearing Demand 184,471 19.3 0.13 Money Market & Savings 242,830 25.5 0.14 CDs $100,000 or more 148,617 15.6 0.92
Slide 24: Transaction Deposit Growth
Transaction Deposit Growth* 67% 65% 60% 59% 56% 33% 35% 40% 41% 44% 9/30/2015 12/31/2014 12/31/2013 12/31/2012* 12/31/2011* Transaction Deposits Time Deposits *Excludes IND Program 24
Slide 25: Deposit Composition Transition
Deposit Composition Transition 17% 18% 19% 13% 18% 23% 27% 22% 26% 43% 42% 32% 0% 20% 40% 60% 80% 100% Sept. 2011 Sept. 2013 Sept. 2015 Interest Checking Non-Interest Checking MMDA & Savings Time Deposits Transaction Deposits Time Deposits Time Deposits Time Deposits MMDA & Savings MMDA & Savings MM
Slide 26: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 3Q15 2Q15 1Q15 4Q14 3Q14 Interest income $9,837 $9,542 $9,445 $9,625 $9,686 Interest expense 827 859 906 989 1,050 Net interest income 9,010 8,683 8,539 8,636 8,636 Provision for credit losses 410 540 650 650 775 Nonintere
Slide 27: Pre Tax Pre Provision ROA
Pre Tax Pre Provision ROA 1.26% 1.17% 1.09% 0.93%* 1.02% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 3Q15 2Q15 1Q15 4Q14 3Q14 *Includes severance cost and equates to 10 BPs. 27
Slide 28: SHBI Net Interest Margin
SHBI Net Interest Margin 28 3.43% 3.43% 3.43% 3.35% 3.30% 3.32% 3.34% 3.36% 3.38% 3.40% 3.42% 3.44% 3Q15 2Q15 1Q15 4Q14
Slide 29: Interest Rate Sensitivity
Interest Rate Sensitivity 29 9/30/2015 - 200 +200 % in Net Interest Income (13.4)% 2.19% % in Value of Capital 3.58% 13.87% 2014 - 200 +200 +200 % in Net Interest Income (13.3)% 1.9% % in Value of Capital 3.6% 14.8%
Slide 30: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income 1) Q3 2015 is annualized 2) Excludes wholesale insurance operation Dollars in thousands 24% 25% 26% 34% 32% 31% 73% 72% 72% 74% 73% 27% 28% 28% 26% 27% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 3Q15 2014 2013
Slide 31: Key Ratios
SHBI Return on Average Assets 0.68% Return on Average Equity 5.23% Net Interest Margin 3.43% Non - interest Income/Operating Revenue 27.23% Non - interest Income/Average Assets 1.41% Non - interest Expense/Average Assets 3.36% Efficiency Ratio Bank Only (Non - GAAP) (1) 67.99% Nonperforming Assets/A
Slide 32: Capital Ratios
Capital Ratios 32 12.02% 11.70% 8.41% 8.36% 15.40% 15.27% 10.09% 12.05% 16.45% 16.36% 11.34% 13.32% 15.40% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 3Q15 YE 2014 YE 2013 YE 2012 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital R
Slide 33: Company Ownership as of 9/30/15
Company Ownership as of 9/30/15 Major Holders % of Ownership Wellington Management Company 8.46% Maltese Capital Management LLC 5.15% FJ Capital Management LLC 4.99% Banc Funds Company LLC 4.38% Manulife Asset Management LLC 3.40% Mendon Capital Advisors Corporation/RMB Capital Management 3.13% Eliz
Slide 34: 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 34
Slide 35: Compelling Investment Considerations
35 ● 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 36: SHBI LTM Price Change
SHBI-LTM Price Change (%) Price Change (%) ‘Thousands = Price Change (%) SHORE BANCSHARES, INC. ‘Good things are happening here.™
Slide 37: Addendum
ADDENDUM SHORE BANCSHARES, INC. Good things are happening here.
Slide 38: Peer Group Definition
Peer Group Definition 38 Publically traded banking c ompanies in MD, DC, VA, DE w ith total a ssets between $750M - $2B.
Slide 39: Peer Group
Peer Group 39 Company Name State Total Assets ($000) ROAA LTM (%) Total Equity/ Total Assets (%) Tangible Equity/ Tangible Assets (%) Tier 1 Capital Ratio (%) Net Interest Margin (%) Noninterest Inc/ Operating Rev (%) Efficiency Ratio LTM (%) NPAs/ Assets (%) ROAE (%) 2015Q3 2015 Q3 2015 Q3 2015 Q3
Slide 40: Talent, depth, unique skills
40 Talent, depth, unique skills • Lloyd L. “Scott” Beatty, Jr ., 62, 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 41: Non-GAAP Financial Measures
Non - GAAP Financial Measures September 30, 2015 December 31, 2014 2013 2012 2011 2010 Total Assets $1,117,813 $1,100,402 $1,054,124 $1,185,807 $1,158,193 $1,130,311 Less: Intangible Assets 13,162 13,262 15,974 16,270 16,662 18,518 Tangible Assets $1,104,651 $1,087,140 $1,038,150 $1,169,537 $1,141,5
Shore Bancshares — Sandler O'Neill & Partners East Coast Financial Services Conference 2015 on 6ix