Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Non-Deal Roadshow (March 2016)
40 slides from Shore Bancshares's roadshow presentation, Mar 14, 2016
Slide 1: Sandler O'Neill & Partners Midwest Road Show March 14-16, 2016
Sandler O’Neill & Partners, L.P. Midwest Road Show March 14 – 16, 2016
Slide 2: Safe Harbor Regarding Forward-Looking Statements
Safe Harbor Regarding Forward - Looking Statements 2 2 2 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 “bel
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 24 11 George S. Rapp Chief Financial Officer SHBI 39 3 Donna J. Stevens SVP and Chief Operating Officer SHBI 35 18 Patrick M. Bilbrough President an
Slide 4: Financial Summary
Financial Summary As of December 31, 2015 Total Assets: $ 1,135.1 million Gross Loans: $ 795.1 million Total Deposits: $ 975.5 million Total Shareholder’s Equity: $ 147.0 million Tangible Common Equity: $ 133.8 million Tangible Book value per Share: $ 10.59 Branches: Depository 18 Insurance and Weal
Slide 5: Strategic Direction
Strategic Direction Focus on Driving Profitability Diversity of Revenues o Banking, Insurance, Service Charges, Wealth Management Marketing Strategy to Combine our Brands Across the Company Footprint Emphasis on Core Deposits/Funding Leverage Size and Existing Platform to Take Advantage of
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 ($488.2 million of Assets) Wye Financial & Trust 1 The Talbot Bank of Easton Maryland ($622.1 million 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
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 Branch Map 9
Slide 10: General Impact of Consolidation
General Impact of Consolidation Unified policies and procedures; eliminate differences and streamline approval process Streamlined decisioning and meetings Specialist versus generalist 10
Slide 11: Departments Currently Consolidated
Departments Currently Consolidated Deposit Operations Finance IT Marketing Human Resources Loan Operations 11
Slide 12: Departments to be Consolidated: Retail Sales/Branch Administration
Departments to be Consolidated Retail Sales/Branch Administration Administrative Sales Manager Branch Operations and Security 18 branch locations 12
Slide 13: Departments to be Consolidated: Loan Administration
Departments to be Consolidated Loan Administration Credit Administration (policy and procedure) Underwriting / Credit Analysis Business Bankers / Lenders Collections / Workout Documentation / Processing 13
Slide 14: Departments to be Consolidated: Compliance
Departments to be Consolidated 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 of C
Slide 15: Consent Order Termination and Bank Consolidation Benefits
Consent Order Termination and Bank Consolidation Benefits 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 15
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 13 858,587 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 1,722,762 38 2,288,893 Community Banks 21 830,177 34 1,356,791 TOTALS 5
Slide 19: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of December 31, 2015 Loan Type Balance % of Total Construction - 1 - 4 family residential - Other $ 85,632 15,258 70,374 10.8% Residential Real Estate - Secured by 1 - 4 family - revolving - Secured by 1 - 4 family - closed end - Secured by multifamily r
Slide 20: Improving Credit Quality
Improving Credit Quality 12/31/2015 12/31/2014 12/31/2013 12/31/12 NON - PERFORMING ASSETS Nonaccrual Loans $12,093 $13,467 $18,147 $36,474 90+ or More Days Past Due 7 87 270 460 Other Real Estate Owned 4,252 3,691 3,779 7,659 Total Non - Performing Assets 16,352 17,245 22,196 44,593 Performing TDRs
Slide 21: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 12/31/15 12/31/2014 12/31/2013 12/31/2012 Construction $11,598 $10,068 $5,569 $37,029 Residential Real Estate 7,945 10,486 19,768 18,839 Commercial Real Estate 7,762 9,358 14,462 32,612 Commercial 161 188 1,137 715 Consumer 129 127 48 92 Total 27,595 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: December 31, 2015 U.S. Treasury $ 5,078 $1 $ --- $5,079 U.S. Government Agencies 49,630 89 190 49,529 Mortgage - backed 156,939 639
Slide 23: Attractive Deposit Base
Attractive Deposit Base (Dollar Value in Thousands) December 31, 2015 Deposit Type Quarterly Average Balance % of Total Cost Noninterest Bearing Demand $ 234,164 23.9% 0.00% Interest Bearing Demand 190,237 19.4 0.13 Money Market & Savings 255,975 26.2 0.14 CDs $100,000 or more 139,663 14.3 0.80 Othe
Slide 24: Transaction Deposit Growth
Transaction Deposit Growth* 70% 65% 60% 59% 56% 30% 35% 40% 41% 44% 12/31/15 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 16% 19% 21% 13% 18% 23% 27% 23% 26% 44% 40% 30% 0% 20% 40% 60% 80% 100% Dec. 2011 Dec. 2013 Dec. 2015 Interest Checking Non-Interest Checking MMDA & Savings Time Deposits Transaction Deposits Time Deposits Time Deposits Time Deposits MMDA & Savings MMDA & Savings MMDA
Slide 26: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 4Q15 3Q15 2Q15 1Q15 4Q14 Interest income $10,047 $9,837 $9,542 $9,445 $9,625 Interest expense 754 827 859 906 989 Net interest income 9,293 9,010 8,683 8,539 8,636 Provision for credit losses 475 410 540 650 650 Noninteres
Slide 27: Pre Tax Pre Provision ROA
Pre Tax Pre Provision ROA 1.39% 1.26% 1.17% 1.09% 0.93% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 4Q15 3Q15 2Q15 1Q15 4Q14 27
Slide 28: SHBI Net Interest Margin
SHBI Net Interest Margin 3.45% 3.43% 3.43% 3.43% 3.35% 3.00% 3.05% 3.10% 3.15% 3.20% 3.25% 3.30% 3.35% 3.40% 3.45% 3.50% 4Q15 3Q15 2Q15 1Q15 4Q14 28
Slide 29: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income 1) Excludes wholesale insurance operation Dollars in thousands 24% 25% 26% 34% 32% 31% Trust and Investment Fee Income 10.5% Other Non - interest Income 17.2% Retail Insurance Agency Commission 53.7% Service Charges on Deposit
Slide 30: Key Ratios
SHBI Return on Average Assets 0.75% Return on Average Equity 5.85% Net Interest Margin 3.45% Non - interest Income/Operating Revenue (YTD) 28.40% Non - interest Income/Average Assets (YTD) 1.36% Non - interest Expense/Average Assets (YTD) 3.28% Efficiency Ratio Bank Only (Non - GAAP) (1) 68.84% Nonp
Slide 31: Capital Ratios
Capital Ratios 11.93% 11.70% 8.41% 8.36% 15.60% 15.27% 10.09% 12.05% 16.67% 16.36% 11.34% 13.32% 15.60% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% YE 2015 YE 2014 YE 2013 YE 2012 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital R
Slide 32: Company Ownership as of 12/31/15
Company Ownership as of 12/31/15 Major Holders % of Ownership Wellington Management Company 9.21% Maltese Capital Management LLC 5.49% Basswood Capital Management LLC 5.07% FJ Capital Management LLC 4.90% Banc Funds Company LLC 4.72% Manulife Asset Management LLC 3.71% Mendon Capital Advisors Corpor
Slide 33: 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 33
Slide 34: Compelling Investment Considerations
● We are a very different Company now x Improved credit process x Entirely new Management Team at Bank and Holding Company 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
Slide 35: SHBI LTM Price Change (%)
SHBI-LTM Price Change (%) Shore Bancshares, Inc. - Price Change (%) sei e22aT%) s4P 500 Bank 48.778) nsec Bank 0 69%) x SHORE BANCSHARES, INC. ‘Good things are happening here.™
Slide 36: Addendum
ADDENDUM StORE BANCSHARES, INC. i —
Slide 37: Peer Group Definition
Peer Group Definition Publically traded banking c ompanies in MD, DC, VA, DE w ith total a ssets between $750M - $2B. 37
Slide 38: Peer Group
Peer Group 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 (%) 2015Q4 2015 Q4 2015 Q4 2015 Q4 MRQ
Slide 39: Talent, depth, unique skills
Talent, depth, unique skills • Lloyd L. “Scott” Beatty, Jr ., 63, 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 Inv
Slide 40: Non-GAAP Financial Measures
Non - GAAP Financial Measures December 31, 2015 December 31, 2014 2013 2012 2011 2010 Total Assets $1,135,143 $1,100,402 $1,054,124 $1,185,807 $1,158,193 $1,130,311 Less: Intangible Assets 13,142 13,262 15,974 16,270 16,662 18,518 Tangible Assets $1,122,001 $1,087,140 $1,038,150 $1,169,537 $1,141,53