Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill + Partners East Coast Financial Services Conference 2010
34 slides from Shore Bancshares's conference presentation, Nov 10, 2010
Slide 1: Shore Bancshares, Inc.
Shore Bancshares, Inc. NASDAQ:SHBI W. Moorhead Vermilye President & CEO Lloyd L. “Scott” Beatty, Jr. Executive Vice President & COO Sandler O’Neill + Partners, LP East Coast Financial Services Conference Aventura, FL — November 11, 2010
Slide 2: Forward-Looking Statement
Forward-Looking Statement This presentation includes forward-looking statements, including statements about future results. These statements are subject to uncertainties and risks, including but not limited to our ability to integrate acquisitions; the strength of the U.S. economy and the local econ
Slide 3: SHBI Corporate Overview
SHBI Corporate Overview Q) A family of companies, with FOUR over 100 years old Q Largest Delmarva independent with $1.135 billion assets, * $80.5MM market cap*, 33 locations (19 branches, 14 non-bank offices) QO) Weare located in the best strategic, natural submarkets with population growth rates &
Slide 4: Presentation Agenda
Seago ae egete Presentation Agenda Market Analysis Financial Performance Highlights Key Strategic Goals Compelling Investment Considerations
Slide 5: Vision
Vision “The strength of our markets has created the opportunity to historically outperform our peers, and we are striving to dominate every market within our footprint.”
Slide 6: Shore Bancshares market footprint map
New York City + Shore Bancshares, Inc. Philadelphia - a > SL Micon «aa Pe Tiighman + A “i x 4 DELAWARE vehoowor — smnsurance SLY" A) Anema mest er Monee cE
Slide 7: Shore Bancshares market footprint map (Maryland)
Baltimore ® Washington be * nidfinond a onary Neat oc i TALBOT BANK fen) JAVONDNON WNSURANCE FELTON RAN SGA NSURANCE ae WE FANCLAL @ TRUST or Wicomico county
Slide 8: Selected SHBI Market Highlights
Selected SHBI Market Highlights © Projected 5-year population growth (2007-2012) in both DE counties exceeds 14%; growth rates in two lead MD counties (Talbot & Queen Anne's) to exceed 10%. © Current median age across market is ~40 years old. © Household income for entire 2-state franchise is $65,12
Slide 9: Loans and Deposits
Loans and Deposits (As of 9/30/2010) Loan Composition Deposit Composition cxerea ees oe ins Be cee = Other time = bearing Construction zx | S_ emand | rarmmna] SO wt sax 7 Eee cars uae falta cueon aan Liebrdinsbiel 24.7% } $100,000 or | 26.6% salts oe
Slide 10: Current Year Highlights (QTD 9/30/2010)
Shore Bancshares, Inc. Current Year H ighlights (QTD 9/30/2010) Return on Average Assets (0.49)% Return on Average Equity (4.43)% Total Equity/Total Assets 10.78% Tangible Equity/Tangible Assets 9.35% Risk-Based Capital Ratio 12.99% Net Interest Margin 4.00% Non-interest Income/Operating Revenue 30.
Slide 11: Credit Composition & Quality
Credit Composition & Quality Loan Portfolio Composition lResidential Mortgages (Construction [519.603] Permanent 223,540) [Total Mortgage Loans 243.143] 26.9%4| (Commercial Loans (Owner Occupied RE. 177309 19.5%) ‘Non-Owner Occupied RE, 134.946] 149%) Farmland 34.761] 3.8%) Constmction and Land Deve
Slide 12: Credit Composition & Quality
Credit Composition & Quality NPA Quarterly Trends () Percent 0 3 4 192010] 2010|___ 302030] Total NPA: Residential Mortzages| Construction! $ 815] $ - 5 ma et Permanent! 5.808) 11.7171 12.4161 29.8% ‘Total Mortgage Loans| 623] 11,717] 12.484] 30.0% ‘Commercial Loans| ‘Owner Occupied RE) 73 1,450] 1.
Slide 13: Credit Composition & Quality
Credit Composition & Quality Q Historically, SHBI’s asset quality has been strong a Conducted comprehensive review of portfolio and potential issues have been identified and are being proactively addressed 2005 2006 2007 2008 2009 _| 9/30/2010, NPAs & 90+ days Past Due/Assets 0.23%] 0.92% 0.56%| 0.9
Slide 14: Quarterly Financial Trends
Quarterly Financial Trends S034 |S 10058 |S 10085 _|§ 10.898 _[S 10.806 § 1.61 |S 10,687 [Provision for Credit Losses 1385 1935 1581 imm_| 3668 | 7617 | 4917 4193 [Now-interest Income 403 | 5301 4719 4302 | 4568 FRSC jon-interest Income - Nou Recut as) } = = s = 2 [Nowinterest Expense geo | 9883 [ro
Slide 15: Financial Results & Trends
Financial Results & Trends $1,200,000 5 Year 2009 $1,000,000 $800,000 LOANS 12.9% 9.1% $600,000 DEPOSITS 9.3% 16.4% $400,000 $200,000 ASSETS 9.1% 11.7% $0 2005 2006 -~=«2007.-«=«2008 «= 2009S yTD 9/30/2010 Loans MDeposits Assets Dollars in thousands
Slide 16: Revenue Composition
Revenue Composition Revenue Breakdown 70,000 60,000 50,000 2005 2008 © 2007.«« 2008 «2009 YTD 9/30/2010 ‘@Net Interest Income _ mNoninterest Income Dollars in thousands ( Noninterest income excludes investment securities gains 2009 Noninterest Income Detail () Service Charges on Deposit Accounts 17.
Slide 17: Capital Adequacy
Capital Adequacy 16.00% 12.15% 2005 2006 2007 2008 2008 9/30/2010 ® Tangible Common Equity/Tangible Assets ™ Total Risk-Based Capital Ratio "Tier 2 Risk-Based Capital Ratio = = Minimum total risk-based capital ratio to be well capitalized-10%
Slide 18: Key Strategic Goals: Profitability
Q Key Strategic Goals Profitability Target Net Interest Margin — NIM > 4.0% Maintain bank efficiency ratios <60% Generate >30% non-interest income as percentage of total revenue Reduce Non-Performing Assets — NPAs <1%
Slide 19: Key Strategic Goals: Growth
Key Strategic Goals Growth fee Make “institutional” branching decisions Commitment to invest in infrastructure to support growth Execute 3-prong acquisition strategy (banks, insurance, asset management) Dominate all sub-markets within our footprint
Slide 20: Focus on Execution Ensures Success
{a EAE | ain Focus on Execution Ensures Success We concentrate only on Delmarva Peninsula Our Management Team has talent and unique skills We follow a “dynamic” strategic plan We invest in the correct components to execute our growth strategy 20
Slide 21: What Makes SHBI Unique?
What Makes SHBI Unique? Track record of consistent financial performance = Management Depth = Strong Capital Position = Strong Net Interest Margin = Diversity of Revenue Sources Acquirer and employer of choice with 3-prong acquisition strategy (banks, insurance, asset management) Dominant independen
Slide 22: Compelling Investment Considerations
Compelling Investment Considerations Q Track record of results v Diversity of revenue sources Y Organizational depth Q Focused on creating sustainable competitive advantages Q Scarcity of investment opportunities Q ~~ Current valuation is attractive
Slide 23: Addendum
ADDENDUM
Slide 24: Peer Group Definition
Peer Group Definition Publically traded commercial banks in MD, DC, VA, DE with total assets between S5OOM-S1.5B.
Slide 25: Peer group comparison table
MEQ) -MRQ)-MRQ. | -MRQ Acazs National Coprstion “Allimes Baakchane: Corporation American National Bankshave: Ine (CF Fismeial Corporation, Conmonweilts Bankcharer, Tne (Community Bashers Trst Comporation Enctern Virginia Bankshares, ne. ‘Fauquir Baukshares, Ine Fist Capital Bancorp, Ine ‘Fist Marine
Slide 26: SHBI Management Team
SHBI Management Team Talent, depth, unique skills + W. Moorhead Vermilye, 70, has served as President and Chief Executive Officer of Shore Bancshares, Inc. (SHBI) since December 2000. Between 1997 and December 2000, Mr. Vermilye served as President of Talbot Bancshares, Mr. Vermilye served as Presid
Slide 27: Selected Financial Data
Selected Financial Data YID 2005 2006, 2007 2008 2009 9/30/2010 [Performance Ratios: Return on average assets 1.519% 1.4224 1.1384 0.4994 (0.30)%| Return on average common equity 13.20% 12.6624 11,7984) 9.2284 4.00% (2.66)%%| Yield on average interest-earning assets 6.9894 7.340 6.49% 5.2284 [Rate o
Slide 28: SHBI vs. peer returns
oro oro 2005, 2006 2007 2008 2009 9/30/2010 2005 2006 2007 2008 2009 9/30/2010 181 1.52 mae us k i: ie | ar cr al (0.49) "=SHBI © PEER =SHBI © PEER 1320 42.65 44.79 Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets $500M-/$1.5B Source: SNL Financial, Inc. 28
Slide 29: Tangible Equity/Tangible Assets
Tangible Equity/Tangible Assets 10.46 10.49, 10.47 1032 9.38 . 921 Hes 9.35 ud 8.49 8.25 824 | L L 2005 2006 2007 2008 2003 9/30/2010 BSHBI = PEER Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets ssoom-s2.5B Source: SNL Financial, Inc. 29
Slide 30: Total Risk-Based Capital Ratios
Total Risk-Based Capital Ratios 14.04 13.05 1383 43.82 1299 12.74 2005 2008 9/30/2010 ™SHBI “PEER Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets $500M-$1.5B Source: SNL * Financial, Inc.
Slide 31: Net Interest Margin
Net Interest Margin Interest Margin rp 9/30/2010 MSHBI “PEER Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets s500M-s2.5B Source: SNL Financial, Inc. at
Slide 32: Non-interest Income/Operating Revenue
Non-interest Income/ Operating Revenue 3307 2005, 2006 2007 2008 2008 ‘arp 9/30/2010 =SHBI © PEER Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets ssooM-s1.5B Source: SNL Financial, Inc. 2
Slide 33: Efficiency Ratio (Non-GAAP)
Efficiency Ratio (Non-GAAP) 71.37 68.67 a 65.73 6258 une 62.91 63.41 58.41 54.13, 2 2007 2008 2008 ar 9/30/2010 =SHBI «PEER ‘Note: Presented on a Non-GAAP basis Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets ¢s00M-$2.5B Source: SNL Financial, Inc.
Slide 34: NPAs + Days Past Due/Assets
NPAs + 90 Days Past Due/Assets oo = - kk i . i} 9/30/2010 SSHBI © PEER Peers: MD-DE-DC-VA commercial banks traded on NYSE/NASDAQ/AMEX with assets $500M - $2.58 Source: SNL Financial, Inc. a4
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