Shore Bancshares, Inc. · NASDAQ:SHBI
Shore Bancshares — Sandler O'Neill + Partners, L.P. 2016 DC Field Trip
34 slides from Shore Bancshares's conference presentation, Sep 14, 2016
Slide 1: Sandler O'Neill + Partners 2016 DC Field Trip
Sandler O’Neill + Partners, L.P. 2016 DC Field Trip September 14, 2016
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 39 5 Donna J. Stevens SVP and Chief Operating Officer SHBI, Bank 35 18 Patrick M. B
Slide 4: Financial Summary
Financial Summary As of June 30, 2016 Total Assets: $ 1,125.7 million Gross Loans: $ 821.1 million Total Deposits: $ 961.1 million Total Shareholder’s Equity: $ 152.3 million Tangible Common Equity: $ 139.2 million Tangible Book value per Share: $ 11.00 Branches: Depository 18 Insurance and Wealth M
Slide 5: Strategic Direction
Strategic Direction • Consolidate Banking S ubsidiaries ▪ Legal M erger 7/1/2016 ▪ Operational Merger 9/26/2016 • Marketing Strategy ▪ Drive Profitability ▪ Emphasis on Core Deposits ▪ Cross Sell Across Subsidiaries ▪ Diversify Revenue • Banking , Insurance, Service Charges, Wealth Management 5
Slide 6: Strategic Direction
Strategic Direction • Market Expansion ▪ LPO’s and Strategic Branching ▪ Acquire Banks Contiguous to our Existing Markets ▪ Leverage Existing Platform ● Striving to be the Bank and Employer of Choice on the Delmarva ▪ Dominant Independent Locally Headquartered Company in our Footprint ▪ Opportunity
Slide 7: Shore Bancshares' Community of Companies
Shore Bancshares’ Community of Companies SHBI Shore United Bank ($1.1 billion of Assets) Wye Financial Trust Avon - Dixon Agency LLC (Retail) 2 (Gross Revenue 2015 $8,506,627) Mubell Finance LLC 1. Wye Financial & Trust is a division of Shore United Bank 2. Freestate & Son, Elliott Wilson and Jack M
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 • One single Board of Directors • Unified P olicies and P rocedures • Improved Operational E fficiencies • Capitalized on Employee Strengths • Total c ost of c onsolidation as of June 30, 2016 was $267 thousand. Additional a nticipated costs of $400,000 over the next
Slide 11: 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 6.46% for DE ▪ Projected 5 - year population growth rate ( 2016 - 2021) in overall market = 3.90% for
Slide 12: 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, 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 14 858,587 15.18 3 MTB M&T Bank Co
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 . 18 936,286 Money Centers/Regionals 36 1,971,347 35 2,124,855 Community Banks 20 592,735 52 2,236,375 TOTALS 5
Slide 14: Loan Portfolio
Loan Portfolio (Dollar Value in Thousands) As of June 30, 2016 Loan Type Balance % of Total Construction - 1 - 4 family residential - Other $ 81,148 17,797 63,351 9.9% Residential Real Estate - Secured by 1 - 4 family - revolving - Secured by 1 - 4 family - closed end - Secured by multifamily reside
Slide 15: Improving Credit Quality
Improving Credit Quality 06/30/2016 12/31/2015 12/31/2014 12/31/2013 NON - PERFORMING ASSETS Nonaccrual Loans $13,531 $12,093 $13,467 $18,147 90+ or More Days Past Due 6 7 87 270 Other Real Estate Owned 1,897 4,252 3,691 3,779 Total Non - Performing Assets 15,434 16,352 17,245 22,196 Performing TDRs
Slide 16: Credit Trends: NPAs & TDRs
Credit Trends: NPAs & TDRs 06/30/2016 12/31/15 12/31/2014 12/31/2013 Construction $9,670 $11,598 $10,069 $5,569 Residential Real Estate 9,720 7,945 10,484 19,768 Commercial Real Estate 7,188 7,762 9,358 14,462 Commercial 192 161 190 1,137 Consumer 105 129 127 48 Total 26,875 27,595 30,228 40,984 ORE
Slide 17: 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, 2016 U.S. Treasury $ 5,011 $4 $ --- $5,015 U.S. Government Agencies 40,834 151 121 40,864 Mortgage - backed 147,299 2,001
Slide 18: Attractive Deposit Base
Attractive Deposit Base (Dollar Value in Thousands) June 30, 2016 Deposit Type Quarterly Average Balance % of Total Cost Noninterest Bearing Demand $ 231,614 24.1% 0.00% Interest Bearing Demand 179,508 18.7 0.12 Money Market & Savings 270,482 28.1 0.13 CDs $100,000 or more 129,399 13.5 0.69 Other Ti
Slide 19: Transaction Deposit Growth
Transaction Deposit Growth 71% 70% 65% 60% 59% 29% 30% 35% 40% 41% 6/30/2016 12/31/2015 12/31/2014 12/31/2013 12/31/2012 Transaction Deposits Time Deposits 19
Slide 20: Income Statement (Quarterly)
Income Statement (Quarterly) (Dollars in thousands, except per share amounts) 2Q16 1Q16 4Q15 3Q15 2Q15 Interest income 10,003 9,908 $10,047 $9,837 $9,542 Interest expense 620 665 754 827 859 Net interest income 9,383 9,243 9,293 9,010 8,683 Provision for credit losses 375 450 475 410 540 Noninterest
Slide 21: Pre Tax Pre Provision ROA
Pre Tax Pre Provision ROA 1.50% 1.58% 1.39% 1.26% 1.17% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% 2Q16 1Q16 4Q15 3Q15 2Q15 21
Slide 22: SHBI Net Interest Margin
SHBI Net Interest Margin 3.57% 3.50% 3.45% 3.43% 3.43% 3.00% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 2Q16 1Q16 4Q15 3Q15 2Q15 22
Slide 23: Continued Focus on Fee Revenue
Continued Focus on Fee Revenue Total Revenue Breakdown Noninterest Income * 6/30/16 is annualized Dollars in thousands 24% 25% 26% 34% 32% 31% Trust and Investment Fee Income 8.3% Other Non - interest Income 17.3% Retail Insurance Agency Commission 54.8% Service Charges on Deposits 19.6% 23 $0 $10,0
Slide 24: Key Ratios as of June 30, 2016
6/30/16 2015 Return on Average Assets 0.84% 0.75% Return on Average Equity 6.34% 5.85% Net Interest Margin 3.53% 3.45% Non - interest Income/Operating Revenue 34.54% 28.40% Non - interest Income/Average Assets (1) 1.48% 1.36% Non - interest Expense/Average Assets (1) 3.32% 3.28% Efficiency Ratio Ban
Slide 25: Capital Ratios
Capital Ratios 12.52% 11.93% 11.70% 8.41% 15.89% 15.55% 15.27% 10.09% 16.93% 16.61% 16.36% 11.34% 15.89% 15.55% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 6/30/2016 YE 2015 YE 2014 YE 2013 Tangible Common equity / Tangible Assets Tier 1 Risk-Based Capital Ratio Total Risk-Based
Slide 26: Institutional Ownership as of 03/31/16
Institutional Ownership as of 03/31/16 Major Holders % of Ownership Wellington Management Company 9.20% Basswood Capital Management LLC 5.05% FJ Capital Management LLC 4.89% Banc Funds Company LLC 4.80% Maltese Capital Management, LLC 4.06% Manulife Asset Management LLC 3.71% Mendon Capital Advisors
Slide 27: What Makes SHBI Unique?
What Makes SHBI Unique? ● Dominant Independent Financial Services Company in all Markets within Footprint ● Diversity of Revenue Sources - - without Mortgage ● Strong Capital Position ● Improving Net Interest Margin ● Strong Control of Operating Expenses 27
Slide 28: Compelling Investment Considerations
● We are a very different Company now x Improved credit culture x Entirely new Management Team at Bank and Holding Company x Revamped strategic plan positioned for organic growth and acquisitions x Focused on creating sustainable competitive advantages x Strengthened noninterest revenue sources x Fo
Slide 29: SHBI-LTM Price Change (%)
SHBI-LTM Price Change (%) Shore Bancshares, Inc. - Price Change (%) Price Change (%) Thousands sii 23 204) ste 800 Bank 15.0050 —NAs0A0 Bank (2.94%) te ne a tr ex 208 ae 2016 ‘i000| $8101 \CSHARES, 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 Publically traded banking c ompanies in MD, DC, VA, DE w ith total a ssets between $750M - $2B. 31
Slide 32: 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 (%) 2016Q2 2016 Q2 2016Q2 2016Q2 2016Q
Slide 33: 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 Shore United Bank (formerly the Talbot Bank and CNB) since 1992. COO from 2006 until 2012 and named President and COO in 2012. Formerly C
Slide 34: Non-GAAP Financial Measures
Non - GAAP Financial Measures 6/30/2016 December 31, 2015 2014 2013 2012 2011 Total Assets $1,125,690 $1,135,143 $1,100,402 $1,054,124 $1,185,807 $1,158,193 Less: Intangible Assets 13,076 13,142 13,262 15,974 16,270 16,662 Tangible Assets $1,112,614 $1,122,001 $1,087,140 $1,038,150 $1,169,537 $1,141
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