Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill 2018 East Coast Financial Services Conference
28 slides from Shore Bancshares's conference presentation, Nov 7, 2018
Slide 1: Sandler O'Neill 2018 East Coast Financial Services Conference
KBW 2017 COMMUNITY BANK SANDLER O’NEILL 2018 EAST COAST FINANCIAL SERVICES CONFERENCE NOVEMBER 6 - 8, 2018
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 25 12 Edward C. Allen SVP and Chief Financial Officer SHBI, Bank 41 7 Donna J. Stevens SVP and Chief Operating Officer SHBI, Bank 38 20 Patrick M. Bi
Slide 4: Financial Summary
Financial Summary As of September 30, 2018 Total Assets: $ 1.474 billion Gross Loans: $ 1.181 billion Total Deposits: $ 1.182 billion Total Shareholder’s Equity: $ 171.4 million Tangible Common Equity: $ 139.7 million Tangible Book value per Share: $ 10.96 Branches: Holding Company 1 Depository 21 I
Slide 5: Strategic Direction
Strategic Direction Market Expansion ▪ LPO’s and Strategic Branching ▪ Acquire Banks Contiguous to our Existing Markets ▪ Leverage Back Office Capability ▪ Additions to Staff Were Primarily Production ● Striving to be the Bank and Employer of Choice on the Delmarva ▪ Dominant Independent Locally H
Slide 6: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies SHBI Shore United Bank ($1.47 billion of Assets) Wye Financial Trust (1) Avon - Dixon Agency LLC (Retail) 2 (Gross Revenue 2018 YTD $7,415,663) Mubell Finance LLC NOTE: Reorganized Company Structure to reduce number of entities, regulatory agencies and associ
Slide 7: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies 7
Slide 8: Shore Bancshares, Inc. Locations
@ SHORE BANCSHARES, INC. Headquarters 28969 Information Lane Easton, MD 21601 410.763.7800 BANKING INSURANCE @ Shore United Bank @ Avon-Dixon Agency, LLC 18 E. Dover Street 28640 Marys Court Easton, MD 21601 Easton, MD 21601 410.822.1400 410.822.0506 877.758.1600 800.242.8758 shoreunitedbank.com avo
Slide 9: Geographical Diversification
Geographical Diversification 2017 Market Expansion Provides Opportunities In • C&I Loans • Core Deposits • M&A • Baltimore Branches • Acquired 3 Branches • Local Seasoned Market Manager & Experienced Lender • Lower Shore • Local Seasoned Market Executive • Ocean City, MD LPO - Local Top C&I Lender -
Slide 10: Selected SHBI Market Highlights
Selected SHBI Market Highlights ▪ Median Household income for entire franchise is $81,294 in MD, $66,322 in DE, $71,167 in VA, vs. $61,045 for the US. ▪ Projected HH income change (2018 - 2023) is 6.98% for MD, and 7.18% for DE, and 5.80% for VA ▪ Projected 5 - year population growth rate (2018 - 20
Slide 11: Deposit Market Share: SHBI Market
Deposit Market Share: SHBI Market Market Rank Ticker Company Name City (HQ) HQ State Branches 2017 Total Deposits 2017 ($000) ’17 Market Share(%) 1 BAC Bank of America Corp. Charlotte NC 41 5,862,663 18.98 2 MTB M&T Bank Corp. Buffalo NY 54 4,988,771 16.15 3 PNC PNC Financial Services Group Inc. Pit
Slide 12: 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. 21 1,346,948 Money Centers/Regionals 51 3,053,044 236 39,303,754 Community Banks 21 853,450 41 2,109,708 TOTALS
Slide 13: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of September 30, 2018 Loan Type Balance % of Total Construction - 1 - 4 family residential - Other $ 126,313 12,009 114,304 10.7% Residential Real Estate - Secured by 1 - 4 family - revolving - Secured by 1 - 4 family - closed end - Secured by multifamil
Slide 14: Improving Credit Quality
Improving Credit Quality 9/30/2018 9/30/2017 9/30/2016 NON - PERFORMING ASSETS Nonaccrual Loans $ 7,362 $ 6,289 $11,490 90+ or More Days Past Due 3 5 64 Other Real Estate Owned 1,518 1,809 2,197 Total Non - Performing Assets 8,883 8 ,103 13,751 Performing TDRs (Yield 4.15%) 8,933 13,493 13,273 Total
Slide 15: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 9/30/2018 9/30/2017 9/30/2016 Construction $ 3,104 $ 6,986 $ 9,555 Residential Real Estate 6,932 7,195 7,986 Commercial Real Estate 5,935 5,265 7,145 Commercial 324 341 41 Consumer 3 0 100 Total $ 16,298 $ 19,787 $ 24,827 OREO 1,518 1,809 2,197 Total NPAs & TDRs $ 17,816 $
Slide 16: Securities Portfolio
Securities Portfolio (Dollars in thousands) Amortized Cost G Gross Unrealized Gains/(Losses) E Estimated Fair Value Available - for - sale securities: September 30, 2018 U.S. Government Agencies $ 42,411 $ (865) $ 41,546 Mortgage - backed 130,807 (4,678) 126,129 Total $ 173,218 $ (5,543) $ 167,675 H
Slide 17: Attractive Deposit Base
Attractive Deposit Base (Dollar Value in Thousands) September 30, 2018 Deposit Type Quarterly Balance % of Total Cost Noninterest Bearing Demand $ 331,766 28.1% 0.00% Interest Bearing Demand 214,898 18.2 0.26 Money Market & Savings 370,367 31.3 0.13 CDs $100,000 or more 96,498 8.2 0.58 Other Time 14
Slide 18: Transaction Deposit Growth
Transaction Deposit Growth 78% 77% 73% 20% 23% 27% 9/30/2018 9/30/2017 9/30/2016 Transaction Deposits Time Deposits 18
Slide 19: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 3Q18 2Q18 1Q18 4Q17 3Q17 Interest income 14,236 13,674 13,103 12,968 $12,937 Interest expense 1,289 1,041 774 599 611 Net interest income 12,947 12,633 12,329 12,369 12,326 Provision for credit losses 307 418 489 545 345 N
Slide 20: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income * Numbers are as of 9/30 Dollars in thousands 24% 25% 26% 34% 32% 31% Trust and Investment Fee Income 8.4% Other Non - interest Income 22.1% Retail Insurance Agency Commission 49.5% Service Charges on Deposits 20.0% 20 $0 $10,
Slide 21: Key Ratios as of September 30, 2018
YTD 9/30/18 12/31/17 12/31/16 Return on Average Assets 1.21 % 0.87 % 0.84% Return on Average Equity 10.31 7.05 6.32 Net Interest Margin 3.79 3.76 3.56 Non - interest Income/Operating Revenue (NII) 37.40 38.99 43.52 Non - interest Income/Average Assets (1) 1.30 1.38 1.46 Non - interest Expense/Averag
Slide 22: Capital Ratios (Bank Only)
Capital Ratios (Bank Only) 9.62%% 9.44% 10.88% 11.79% 11.45% 13.84% 12.71% 12.36% 14.86% 11.79% 11.45% 13.84% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 9/30/2018 YE 2017 YE 2016 Tier 1 Leverage Ratio Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio Common Equity Tier 1
Slide 23: Institutional Ownership as of 06/30/18
Institutional Ownership as of 06/30/18 Major Holders % of Ownership Wellington Management Company 6.69% Blackrock Inc. 5.60% Basswood Capital Management LLC Banc Funds Company LLC 5.34% 4.44% Vanguard Group Inc. 4.26% Manulife Asset Management 4.13% Dimensional Fund Advisors LP 3.11% Renaissance Tec
Slide 24: Compelling Investment Considerations
• Exceptional Cost of Funds • Strategic plan positioned for organic growth and acquisitions • Focused on creating sustainable competitive advantages • Strengthened noninterest revenue sources • Driving a sales culture with both a commercial and retail focus while maintaining our credit discipline Co
Slide 25: SHBI LTM Price Change (%)
SHBI-LTM Price Change (%) Shore Bancshares, Inc. | Stock Chart NASDAQ:SHBI (MI Key: 1027751; SPCIO Key: 622444) Period: 1 Year Metrio: Price Change (%) Frequency: Daily ‘Pree changes) ‘vous Not? Jan arts tay 18 wenn Sop 18 —— NASDAG:SHBI:-4.33% @ NASDAG:SHBLVel — KEW Necdog Bonk index 6.99 2B Shore
Slide 26: Peer Group Definition
Peer Group Definition Publically traded banking companies in MD, DC, VA, DE with total assets between $750M - $2B. 26
Slide 27: Peer Group
Peer Group Company 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 (%) 2018Q3 2018Q3 2018Q3 2018Q3 2018Q3 2018
Slide 28: Talent, depth, unique skills
Talent, depth, unique skills • Lloyd L. “Scott” Beatty, Jr ., 65, CPA, President & CEO of SHBI since June 2013, Director of SHBI since December 2000, Director of Shore United Bank (for mer ly the Talbot Bank and CNB) since 1992. COO from 2006 until 2012 and named President and COO in 2012. Formerly
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