Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — KBW 2017 Community Bank / Sandler O'Neill 2017 East Coast Financial Services Conference
32 slides from Shore Bancshares's conference presentation, Nov 16, 2017
Slide 1: KBW 2017 Community Bank / Sandler O'Neill East Coast Financial Services Conference
KBW 2017 COMMUNITY BANK SANDLER O’NEILL 2017 East Coast Financial Services Conference November 15 - 17, 2017
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 24 11 Edward C. Allen SVP and Chief Financial Officer SHBI, Bank 40 6 Donna J. Stevens SVP and Chief Operating Officer SHBI, Bank 37 19 Patrick M. Bi
Slide 4: Financial Summary
Financial Summary As of September 30, 2017 Total Assets: $ 1.376 billion Gross Loans: $ 1.047 billion Total Deposits: $ 1.206 billion Total Shareholder’s Equity: $ 162.6 million Tangible Common Equity: $ 129.9 million Tangible Book value per Share: $ 10.24 Branches: Depository 21 Insurance and Wealt
Slide 5: Strategic Direction - Market Expansion
Strategic Direction - Market Expansion ▪ LPO’s and Strategic Branching ▪ Acquire Banks Contiguous to our Existing Markets ▪ Leverage Back Office Capability ● Striving to be the Bank and Employer of Choice on the Delmarva ▪ Dominant Independent Locally Headquartered Company in our Footprint 5
Slide 6: Strategic Direction - Marketing Strategy
Strategic Direction - Marketing Strategy ▪ Drive Profitability ▪ Emphasis on Core Deposits & Cost of Funds ▪ Cross Sell Across Subsidiaries ▪ Diversify Revenue • Banking, Insurance, Service Charges, Wealth Management 6
Slide 7: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies SHBI Shore United Bank ($1.38 billion of Assets) Wye Financial Trust (1) Avon - Dixon Agency LLC (Retail) 2 (Gross Revenue 2017 YTD $7,404,703) Mubell Finance LLC 1. Wye Financial & Trust is a division of Shore United Bank 2. Freestate & Son, Elliott Wilson a
Slide 8: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies 8
Slide 9: Branch Map
29 locations 21 branches 2 loan production offices 6 non - bank offices Branch Map 9
Slide 10: Geographical Diversification
Geographical Diversification In addition to expansion to the Baltimore suburbs, Shore United is entering new markets East and Southeast: - Lower Shore expansion – Hiring of Market Executive - LPO – Ocean City, MD opened early 2 nd quarter - Hired top lenders in market - Potential for full service br
Slide 11: Selected SHBI Market Highlights
Selected SHBI Market Highlights ▪ 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 - 2023) in
Slide 12: Deposit Market Share: SHBI Market
Deposit Market Share: SHBI Market Market Rank Ticker Company Name City (HQ) HQ State Branches 06/30/17 Total Deposits as of June 30, 2017 ($000) ’17 Market Share(%) 1 BAC Bank of America Corp. Charlotte NC 42 5,862,663 19.55 2 MTB M&T Bank Corp. Buffalo NY 54 4,958,733 16.53 3 PNC PNC Financial Serv
Slide 13: 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 43 2,973,242 191 34,438,947 Community Banks 20 874,850 40 1,977,670 TOTAL
Slide 14: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of September 30, 2017 Loan Type Balance % of Total Construction - 1 - 4 family residential - Other $ 106,617 14,828 91,789 10.2% Residential Real Estate - Secured by 1 - 4 family - revolving - Secured by 1 - 4 family - closed end - Secured by multifamily
Slide 15: Improving Credit Quality
Improving Credit Quality 09/30/2017 06/30/2017 03/31/2017 12/31/2016 09/30/2016 NON - PERFORMING ASSETS Nonaccrual Loans $6,289 $7,157 $8,729 $8,972 $11,490 90+ or More Days Past Due 5 314 118 20 64 Other Real Estate Owned 1,809 2,302 2,354 2,477 2,192 Total Non - Performing Assets 8,103 9,773 11,20
Slide 16: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 09/30/2017 06/30/2017 03/31/2017 12/31/2016 09/30/2016 Construction $ 6,986 $ 7,037 $ 7,883 $ 8,007 $ 9,554 Residential Real Estate 7,195 6,646 7,974 7,778 7,986 Commercial Real Estate 5,265 5,567 5,663 6,089 7,145 Commercial 341 345 --- 10 41 Consumer --- --- 109 109 100
Slide 17: Securities Portfolio
Securities Portfolio (Dollars in thousands) Amortized Cost G Gross Unrealized Gains/Losses E Estimated Fair Value Available - for - sale securities: September 30, 2017 U.S. Government Agencies $ 52,093 $ <90> $ 52,003 Mortgage - backed 160,645 80 160,725 Equity Securities 662 --- 662 Total $ 213,400
Slide 18: Attractive Deposit Base
Attractive Deposit Base (Dollar Value in Thousands) September 30, 2017 Deposit Type Quarterly Balance % of Total Cost Noninterest Bearing Demand $ 326,020 27.0% 0.00% Interest Bearing Demand 227,973 18.9 0.23 Money Market & Savings 377,334 31.3 0.12 CDs $100,000 or more 113,618 9.4 0.50 Other Time 1
Slide 19: Transaction Deposit Growth
Transaction Deposit Growth 77% 75% 74% 70% 65% 23% 25% 26% 30% 35% 9/30/2017 06/30/2017 12/31/2016 12/31/2015 12/31/2014 Transaction Deposits Time Deposits 19
Slide 20: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 3Q17 2Q17 1Q17 4Q16 3Q16 Interest income $12,937 $11,449 $10,447 $10,505 $10,236 Interest expense 611 549 514 540 578 Net interest income 12,326 10,900 9,933 9,965 9,658 Provision for credit losses 345 974 427 418 605 Noni
Slide 21: SHBI Net Interest Margin
SHBI Net Interest Margin 3.79% 3.73% 3.71% 3.63% 3.54% 3.00% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70% 3.80% 3.90% 3Q17 2Q17 1Q17 4Q16 3Q16 21
Slide 22: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income * annualized Dollars in thousands 24% 25% 26% 34% 32% 31% Trust and Investment Fee Income 8.5% Other Non - interest Income 20.7% Retail Insurance Agency Commission 50.6% Service Charges on Deposits 20.2% 22 $0 $10,000 $20,000
Slide 23: Key Ratios as of September 30, 2017
09/30/17 12/31/16 09/30/16 Return on Average Assets 0.98% 0.84% 0.83% Return on Average Equity 8.48% 6.32% 6.23% Net Interest Margin 3.79% 3.56% 3.54% Non - interest Income/Operating Revenue 28.8% 30.32% 30.8% Non - interest Income/Average Assets (1) 1.29% 1.46% 1.44% Non - interest Expense/Average
Slide 24: Capital Ratios
Capital Ratios 9.72% 12.30% 11.29% 11.70% 12.13% 15.78% 15.55% 15.27% 13.02% 16.79% 16.61% 16.36% 12.13% 15.78% 15.55% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 9/30/2017 YE 2016 YE 2015 YE 2014 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Ris
Slide 25: Institutional Ownership as of 06/30/17
Institutional Ownership as of 06/30/17 Major Holders % of Ownership Wellington Management Company 9.36% FJ Capital Management LLC 8.02% Blackrock Inc. 5.79% Banc Funds Company LLC 5.66% Manulife Asset Management 4.12% Vanguard Group Inc. 3.67% Bridgeway Capital Management Inc. 2.34% Renaissance Tech
Slide 26: Compelling Investment Considerations
● We are a very different Company now x Strategic plan positioned for organic growth and acquisitions x Focused on creating sustainable competitive advantages x Strengthened noninterest revenue sources x Forging a sales culture with both a commercial and retail focus while maintaining our credit dis
Slide 27: SHBI - LTM Price Change (%)
SHBI – LTM Price Change (%) 27
Slide 28: Addendum
ADDENDUM Shore
Slide 29: Peer Group Definition
Peer Group Definition Publically traded banking companies in MD, DC, VA, DE with total assets between $750M - $2B. 29
Slide 30: 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 (%) 2017Q1 2017Q1 2017Q1 2017Q1 2017Q1
Slide 31: Talent, depth, unique skills
Talent, depth, unique skills • Lloyd L. “Scott” Beatty, Jr ., 64, 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
Slide 32: Non-GAAP Financial Measures
Non - GAAP Financial Measures 09/30/2017 December 31, 2016 2015 2014 2013 2012 Total Assets $1,376,127 $1,160,271 $1,135,143 $1,100,402 $1,054,124 $1,185,807 Less: Intangible Assets 32,740 13,010 13,142 13,262 15,974 16,270 Tangible Assets $1,343,387 $1,147,261 $1,122,001 $1,087,140 $1,038,150 $1,16