Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill + Partners 2015 DC Field Trip
40 slides from Shore Bancshares's conference presentation, Sep 16, 2015
Slide 1: Sandler O'Neill + Partners 2015 DC Field Trip
Sandler O’Neill + Partners, L.P. 2015 DC Field Trip September 16, 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 June 30, 2015 4 Total Assets: $ 1,084.4 million Gross Loans: $ 741.0 million Total Deposits: $ 928.9 million Total Shareholder’s Equity: $ 143.4 million Tangible Common Equity: $ 130.2 million Tangible Book value per Share: $ 10.31 Branches: Depository 18 Insurance and Wealth
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 New Markets
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 ($486,102mm of Assets) Wye Financial & Trust 1 The Talbot Bank of Easton Maryland ($578,240mm 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
Slide 8: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies 8
Slide 9: Branch Map
24 locations 18 branches 6 non - bank offices 9 Branch Map
Slide 10: Selected SHBI Market Highlights
Selected SHBI Market Highlights ▪ Household income for entire franchise is $74,567 in MD and $61,587 in DE vs. $ 53,706 for the US. ▪ Projected HH income growth rate (2015 - 2020) is 9.98% for MD, and 7.31% for DE ▪ Projected 5 - year population growth rate (2015 - 2020) in overall market = 3.93% fo
Slide 11: Deposit Market Share: SHBI Market
Deposit Market Share: SHBI Market 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 43 1,984,150 19.25 2 MTB M&T Bank Corp. Buffalo NY 30 1,676,287 16.27 3 SHBI Shore Bancsha
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 . 18 930,670 Money Centers/Regionals 27 1,475,712 40 2,148,723 Community Banks 23 1,010,462 34 1,4417,12 TOTALS
Slide 13: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of June 30, 2015 Loan Type Balance % of Total Construction $ 80,715 10.9% Residential Real Estate 278,598 37.6% Commercial Real Estate 317,131 42.8% Commercial 57,300 7.7% Consumer 7,286 1.0% Total $ 741,030 100.0% 13 Residential Real Estate 37.6% Commer
Slide 14: Improving Credit Quality
Improving Credit Quality 6/30/2015 12/31/2014 12/31/2013 12/31/12 NON - PERFORMING ASSETS Nonaccrual Loans $14,009 $13,467 $18,147 $36,474 90+ or More Days Past Due 35 87 270 460 Other Real Estate Owned 2,498 3,691 3,779 7,659 Total Non - Performing Assets 16,542 17,245 22,196 44,593 Performing TDRs
Slide 15: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 6/30/15 12/31/2014 12/31/2013 12/31/2012 Construction $12,400 $10,068 $5,569 $37,029 Residential Real Estate 10,761 10,486 19,768 18,839 Commercial Real Estate 8,896 9,358 14,462 32,612 Commercial 217 188 1,137 715 Consumer 123 127 48 92 Total 32,397 30,227 40,984 89,287 O
Slide 16: Attractive Deposit Base
Attractive Deposit Base 16 (Dollar Value in Thousands) June 30, 2015 Deposit Type Quarterly Average Balance % of Total Cost Noninterest Bearing Demand $ 203,435 21.8% 0.00% Interest Bearing Demand 171,274 18.4% 0.12% Money Market & Savings 238,173 25.6% 0.14% CDs $100,000 or more 152,478 16.4% 0.97%
Slide 17: Transaction Deposit Growth
Transaction Deposit Growth* 66% 65% 60% 59% 56% 34% 35% 40% 41% 44% 6/30/2015 12/31/2014 12/31/2013 12/31/2012* 12/31/2011* Transaction Deposits Time Deposits *Excludes IND Program 17
Slide 18: 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: June 30, 2015 U.S. Treasury $ 5,144 $11 $ --- $5,155 U.S. Government Agencies 70,449 175 250 70,374 Mortgage - backed 151,952 730 6
Slide 19: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 2Q15 1Q15 4Q14 3Q14 2Q14 Interest income $9,542 $9,445 $9,625 $9,686 $9,523 Interest expense 859 906 989 1,050 1,076 Net interest income 8,683 8,539 8,636 8,636 8,447 Provision for credit losses 540 650 650 775 950 Noninte
Slide 20: Pre Tax Pre Provision ROA
Pre Tax Pre Provision ROA 1.17% 1.09% 0.93% 1.02%* 1.17% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 2Q15 1Q15 4Q14 3Q14 2Q14 *Includes severance cost and equates to 10 BPs. 20
Slide 21: SHBI Net Interest Margin
SHBI Net Interest Margin 21 3.43% 3.43% 3.48% 3.23% 3.10% 3.15% 3.20% 3.25% 3.30% 3.35% 3.40% 3.45% 3.50% 6 months 2015 2Q14 2Q13 2012
Slide 22: Interest Rate Sensitivity
Interest Rate Sensitivity 22 6/30/2015 - 200 +200 % in Net Interest Income (13.0)% 0.9% % in Value of Capital 1.2% 13.3% 2014 - 200 +200 +200 % in Net Interest Income (13.3)% 1.9% % in Value of Capital 3.6% 14.8%
Slide 23: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income 1) Q2 2015 is annualized 2) Excludes wholesale insurance operation Dollars in thousands 24% 25% 26% 34% 32% 31% 69% 72% 72% 74% 73% 31% 28% 28% 26% 27% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 2Q15 2014 2013
Slide 24: Key Ratios
SHBI Return on Average Assets 0.56% Return on Average Equity 4.29% Net Interest Margin 3.43% Non - interest Income/Operating Revenue 31.37% Non - interest Income/Average Assets 1.40% Non - interest Expense/Average Assets 3.44% Efficiency Ratio Bank Only (Non - GAAP) (1) 70.15% Nonperforming Assets/A
Slide 25: Capital Ratios
Capital Ratios 25 12.20% 11.70% 8.41% 8.36% 15.64% 15.27% 10.09% 12.05% 16.71% 16.36% 11.34% 13.32% 15.64% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 2015 2014 2013 2012 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio Comm
Slide 26: Company Ownership
Company Ownership as of 3/31/15 Major Holders % of Ownership Wellington Management Company 9.47% Maltese Capital Management LLC 5.04% FJ Capital Management LLC 4.74% Banc Funds Company LLC 4.16% Manufacturers Life Insurance Company 3.17% Elizabeth Park Capital Advisors LTD Brown Advisory Inc. Mendon
Slide 27: 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 I ndependent F inancial S ervices C ompany in all Markets within Footprint 27
Slide 28: Compelling Investment Considerations
28 ● 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 29: SHBI-LTM Price Change (%)
SHBI-LTM Price Change (%) SHORE BANCSHARES, INC. ‘Good things are happening here.™
Slide 30: Addendum
ADDENDUM SHORE BANCSHARES, INC. Good things are happening here.
Slide 31: Peer Group Definition
Peer Group Definition 31 Publically traded banking c ompanies in MD, DC, VA, DE w ith total a ssets between $750M - $2B.
Slide 32: Peer Group
Peer Group 32 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 (%) 2015Q2 2015 Q2 2015 Q1 20
Slide 33: Talent, depth, unique skills
33 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 34: Non-GAAP Financial Measures
Non - GAAP Financial Measures June 30, 2015 December 31, 2014 2013 2012 2011 2010 Total Assets $1,084,352 $1,100,402 $1,054,124 $1,185,807 $1,158,193 $1,130,311 Less: Intangible Assets 13,195 13,262 15,974 16,270 16,662 18,518 Tangible Assets $1,071,157 $1,087,140 $1,038,150 $1,169,537 $1,141,531 $1
Slide 35: General Impact of Consolidation
General Impact of Consolidation 35 Unified policies and procedures; eliminate differences and streamline approval process Streamlined decisioning and meetings Specialist versus generalist
Slide 36: Departments Currently Consolidated
Departments Currently Consolidated 36 Deposit Operations Finance IT Marketing Human Resources Loan Operations
Slide 37: Departments to be Consolidated
Departments to be Consolidated 37 Retail Sales/Branch Administration Administrative Sales Manager Branch Operations and Security 18 branch locations
Slide 38: Departments to be Consolidated
Departments to be Consolidated 38 Loan Administration Credit Administration (policy and procedure) Underwriting / Credit Analysis Business Bankers / Lenders Collections / Workout Documentation / Processing
Slide 39: Departments to be Consolidated
Departments to be Consolidated 39 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 Co
Slide 40: Consent Order Termination and Bank Consolidation Benefits
Consent Order Termination and Bank Consolidation Benefits 40 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
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