Community Bank Performance and Value Trends Curtis Carpenter - PowerPoint PPT Presentation

Over 250 Transactions in the Past 20 Years: The Leader in Community Bank Mergers and Acquisitions Community Bank Performance and Value Trends Curtis Carpenter Sheshunoff & Co Investment Banking June 13, 2016

Industry Update: The New Normal is Here, but is it Good Enough for Your Shareholders? Page 2

Asset Distribution Among Banks and Thrifts Total Industry Assets = $17.9 Trillion Top 4 Banks: $8.3T in Assets 46.1% of Industry Assets Greater than 10B Wells Fargo 100 Companies 10.1% 38.2% Citigroup 10.3% 1B-10B 585 Companies Bank of America 9.0% 100MM-1B 12.2% 3,565 Companies JP Morgan 6.2% 13.5% 0-100M 1,652 Companies 0.5% March 31, 2016 Data Consolidated by HC Excludes any bank larger than $1 billion in assets with a deposits to assets ratio of less than 20% Page 3 Page 3

15-Year Trend in Number of Banks (2000 to 2015) Note: Banks and Thrifts in the United States excluding Holding Companies. Number of institutions based upon data from SNL Financial, LC as of February 26, 2016 and does not fully reconcile with FDIC data releases due in part to how merger activity is recorded. Page 4

Bank/Thrift Count by State 2007 vs. 2015 -40% -15% -29% -24% -19% -20% -25% -37% -33% -17% -21% -21% -18% -26% -30% -31% -20% -19% -23% -21% -20% -54% -20% -25% -19% -33% -24% -34% -43% -10% -27% -23% -16% -19% -16% Moderate -39% -16% -64% -20% -17% -29% -28% -16% -16% -42% -26% -16% -38% -11% -45% Severe Page 5

15-Year Trend in Number of Banks (2000 to 2015) Note: Banks and Thrifts in the United States excluding Holding Companies. Number of institutions based upon data from SNL Financial, LC as of February 26, 2016 and does not fully reconcile with FDIC data releases due in part to how merger activity is recorded. Page 6

Bank and Thrift ROA – Change since financial crisis The median bank in 2016Q1 earns 0.15% less on average assets 35% Tax Rate Applied to S-Corps Page 7

Bank and Thrift Equity/Assets – Change since crisis The median bank in 2016Q1 holds 0.93% more equity to assets 35% Tax Rate Applied to S-Corps Page 8

Bank and Thrift ROE - Change since financial crisis The median bank in 2016Q1 earns 2% less on average equity 35% Tax Rate Applied to S-Corps Page 9

Bank and Thrift Financials – Change since crisis LTM Better/ 2006 3/31/2016 Worse Loans/ Deposits 83.3 78.5 -5.7% % of average assets: Net Interest Income 3.76 3.35 -10.9% Non-Interest Income 0.62 0.55 -11.3% Non-Interest Expense 2.98 2.85 -4.4% Note: Median level Source: Federal Reserve; Treasury constant maturity monthly average of daily rates Page 10

Net Noninterest Expense by Size Difference of 1.06% Net Expense Net Expense Net Expense Net Expense Net Expense Expenses Expenses Expenses Expenses Expenses Fees Fees Fees Fees Fees Median Data, % of Average Assets, LTM March 31, 2016 Consolidated HC Page Page 11 11 Page 11

Bank and Thrift ROAAs % of the industry by bank 5% 20% 29% 46% Losing Money 0% to .50% ROAA 50% to 1.00% ROAA > 1.00% ROAA 35% Tax Rate Applied to S-Corps LTM March 31, 2016 Page Page 12 12 Page 12

Bank and Thrift Return on Equity (4 Qtr moving average since 1995) Page 13 Page 13

Loan to Deposits Impact on Net Interest Margin Loans/Deposits > 80% 2,896 Institutions Loans/Deposits 60% - 80% 1,868 Institutions 73bp Loans/Deposits < 60% 1,311 Institutions Year-to-Date 2016 through March Page Page 14 14 Page 14

Publicly Traded Bank Stocks: A Bumpy Ride to Start the Year Page 15

Index Performance 2015 through May 27, 2016 30.0% 20.0% Cumulative Index Price Change (%) 10.0% 0.0% Big banks down 5.1% -10.0% -20.0% -30.0% SNL U.S. Bank $1B-$5B SNL U.S. Bank $5B-$10B SNL U.S. Bank > $10B SNL Southwest U.S. Bank As of May 27, 2016 Page 16

Publicly Traded Banks and Thrifts Greater than $2 Billion in Assets Median Price to Tangible Book and Price/Earnings as of May 27, 2016 80 25.0x 21.2x 70 20.0x 18.7x 60 17.4x 15.5x Number of Institutions 15.0x Price/ LTM Earnings 50 15.0x 13.3x 40 10.0x 30 20 5.0x 10 5 10 68 75 41 9 0 0.0x <1.0x 1.0 - 1.5x 1.5 - 2.0x 2.0 - 2.5x 2.5 - 3.0x >3.0x Number of Institutions Price to LTM Earnings Page 17

Publicly Traded Banks and Thrifts Greater than $2 Billion in Assets Comparison of Median ROAA and 4-year Asset CAGR 1.40 25 1.30 1.20 20 1.14 1.00 1.07 20 0.98 14 15 0.80 0.82 10 0.60 10 0.58 0.40 5 6 0.20 5 0 0.00 0 <1.0x 1.0 - 1.5x 1.5 - 2.0x 2.0 - 2.5x 2.5 - 3.0x >3.0x ROAA % 4-year Asset CAGR % Price to Tangible Book As of May 27, 2016 Page 18

Publicly Traded Banks and Thrifts > $2 Billion Price-to-Tangible Book Locations 3.0x – 4.0x Tg Book 2.5x – 3.0x Tg Book 2.0x – 2.5x Tg Book As of May 3, 2016 Page 19

Bank Stock Valuation in Relation to Market Cap Median Price/TBV % by Market Capitalization 200% 180% 180% 166% 162% 160% 145% 140% 125% PRICE/ TG. BOOK 120% 104% 97% 100% 80% 60% 40% 20% 0% < $50 $50-100 $100-200 $200-500 $500M-1 $1-5 Billion > $5 Billion Million Million Million Million Billion MARKET CAP As of May 27, 2016 Page 20

M&A Review: Deal Volume is Steady and the Median Deal Price is Rising Page 21

National Bank and Thrift Volume Deal Volume by Month 40 35 30 25 # Transactions 20 15 10 5 23 27 32 16 18 38 20 30 21 22 23 23 22 24 27 18 18 35 29 21 19 22 23 22 17 0 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 # of Deals Data as of May 30, 2016 Page 22

Total Merger Activity 400 350 0 300 3 18 8 250 Total Number of Deals 157 250 51 24 200 92 140 25 150 299 285 284 282 225 221 3 100 181 150 144 110 103 50 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est. 2016 Total Deals Healthy Deals Failed Banks Data as of May 30, 2016 Page 23

Total Georgia Merger Activity Data as of June 1, 2016 Page 24

Transaction Volume Compared to Assets Acquired $1,600 350 $1,374 299 $1,400 300 285 284 283 $1,200 250 250 # of Transactions Announced Total Target Assets (Billions) 225 221 $1,000 200 181 $800 150 144 150 $600 $472 110 100 $369 $400 $196 $188 $167 50 $146 $137 $148 $200 $111 $46 $61 $0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 # of Transactions Annualized Transactions Target Assets ($B) Annualized Assets Data as of May 30, 2016 Page 25

Merger Activity by Quarter Median Target Asset Size 100 $400 90 85 80 $300 69 Median Target Asset Size ($MM) # of Transactions Announced 70 65 64 63 $240 60 50 $200 $182 $155 40 $141 $127 39 $122 30 $100 20 10 0 $0 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 Median Target Assets ($MM) # of Transactions Data as of May 30, 2016 Page 26

Median Buyer and Target Asset Comparison 10.0x 60% 9.0x Median Buyer Asset Size/Median Target Asset Size 49% 50% 46% 8.0x 45% 43% 43% 7.0x 38% 38% % of Buyers > $1B in Assets 40% 34% 6.0x 5.0x 30% 27% 24% 4.0x 17% 20% 3.0x 2.0x 10% 1.0x 9.3x 6.7x 5.8x 5.8x 6.0x 5.7x 6.3x 6.5x 7.3x 5.6x 6.8x 0.0x 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Median Buyer Assets/ Median Target Assets % of Buyers > $1.0B in Assets (%) Note: Buyer Total Assets of NA assumed to be under $1B Data as of May 30, 2016 Page 27

Median Target Pricing vs. ROAA Performance 1.2% 2.5x 2.27x 1.0% 2.16x 2.3x 0.94% 0.8% 0.85% 2.0x Median Price to Tangible Book Value (x) 0.6% 0.67% 1.65x 0.62% 1.8x 0.55% 0.55% Median Target ROAA (%) 0.4% 0.49% 1.41x 1.5x 0.36% 1.35x 1.31x 0.2% 1.23x 1.20x 1.19x 1.15x 1.3x 1.10x 0.0% -0.06% 1.0x -0.2% 0.8x -0.4% -0.48% 0.5x -0.6% -0.81% 0.3x -0.8% -1.0% 0.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Median Target ROAA Median Price/Tg BV (x) Data as of May 30, 2016 Page 28

Georgia Merger Activity by Year Median Price/Tangible Equity and Median Target ROAA Data as of June 1, 2016 Page 29

Bank and Thrift Deal Count by Pricing Announced Since May 1, 2015 60 59 50 49 40 30 29 25 20 16 10 11 0 Less than Tg Tg Book to 1.25x to 1.50x 1.50x to 1.75x 1.75x to 2.00x More than Book 1.25x 2.00x Price to Tangible Book Value Data as of May 30, 2016 Page 30

Trends in Transactions > 2x Tangible Book Value 150 127 2000 to 2006 Yearly Average of 116 Transactions Per Year > 2x Tangible Book Value 125 100 75 50 31 25 18 16 8 4 6 1 2 4 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Data as of May 30, 2016 Page 31

Bank and Thrift Deal Activity Map Since May 1, 2015 Higher Pricing Multiple Activity (Based on Price to Tangible Book) > 2.0x Tg Book 1.75x – 2.0x Tg Book 1.50x – 1.75x Tg Book As of May 30, 2016 Page 32

Rural M&A Transactions (2012 – 2016) 2012 2013 2014 2015 2016 Note: Targets not headquartered in an MSA per SNL Financial Data as of May 30, 2016 Page 33