![]() Shareholder Meeting June 13, 2013 Community Financial Shares, Inc. Exhibit 99.1 |
![]() 2 Shareholder Meeting 6/13/2013 Forward-Looking Statements Disclaimer (cont.) This presentation contains certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this presentation, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following: (i) the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, an escalation in problem assets and foreclosures, a deterioration in the credit quality and value of the Company’s assets, especially real estate, which, in turn would likely reduce our customers’ borrowing power and the value of assets and collateral associated with our existing loans; (ii) the effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters; (iii) the success and timing of our business strategies and our ability to effectively carry out our business plan and capital restoration plan; (iv) an inability to meet our liquidity needs; (v) the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; |
![]() 3 Shareholder Meeting 6/13/2013 Forward-Looking Statements Disclaimer (vi) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; (vii) the risks of changes in interest rates on the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities; (viii) our ability to comply with the requirements of our regulatory consent order and the mandatory provisions of 12 U.S.C. § 1831o and 12 C.F.R. § 325 (subpart B), as well as the effect of further changes to our regulatory ratings or capital levels under the regulatory framework for prompt corrective action or the imposition of additional enforcement action by regulatory authorities upon the Bank or the Company as a result of our inability to comply with applicable laws, regulations, regulatory orders and agreements; (ix) Our ability to effectively manage market risk, credit risk and operational risk; (x) the ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector; (xi) the inability of the Company to obtain new customers and to retain existing customers; (xii) the timely development and acceptance of products and services including services, products and services offered through alternative delivery channels such as the Internet; (xiii) technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers; (xiv) the ability of the Company to develop and maintain secure and reliable electronic systems; (xv) the ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner; (xvi) business combinations and the integration of acquired businesses which may be more difficult or expensive than expected; (xvii) the costs, effects and outcomes of existing or future litigation; and (xviii) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission, including in the Section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. |
![]() 4 Shareholder Meeting 6/13/2013 Financial Overview Eric Wedeen Chief Financial Officer |
![]() 5 Shareholder Meeting 6/13/2013 A Tale of Two Half-Decades Financial Measure Net Income (before extraordinary items) $10.1mm Margin % (range) 3.63% - 4.03% Provision for Loan Losses $ 0.93mm Legal Fees $ 0.38mm OREO expenses & write-downs $ 0.08mm FDIC Premia $ 0.37mm Ave Texas Ratio 7.6% Loan Growth during period 52.8% Deposit Growth during period 17% Financial Measure Net Income (before extraordinary items) $ -20.2mm Margin % (range) 3.13% - 3.64% Provision for Loan Losses $ 20.5mm Legal Fees $ 1.28mm OREO expenses & write-downs $ 4.67mm FDIC Premia $ 4.14mm Ave Texas Ratio 133.8% Loan Growth during period -8.8% Deposit Growth during period 25.1% Pre-Recession (2003-2007) Recessionary Period (2008-2012) |
![]() 6 Shareholder Meeting 6/13/2013 First Quarter Update Community Financial reported a $2.3 million loss for 1Q13, primarily driven by provision expenses and OREO write-downs, minimizing potential future credit charges. The 1Q credit charges included provision expense of $1 million, net charge-offs of $366 thousand, OREO write-down of $842 thousand, loss on OREO sale of $320 thousand, and other OREO expenses of $162 thousand. Importantly, the company believes these to be the last major piece of credit expenses related to the previously identified problem assets. These 1Q13 charges will allow the company to accelerate the disposition of these assets. The first quarter credit charges bring the cumulative credit cost since October 2011 to $14.7m, in line with the downside scenario in the third-party loan review performed in October 2011. The credit charges will clear the way for nominal credit expenses for the rest of the year, which in turn should allow the company to be near break-even in the 2Q13 and to post break-even/modest profit quarters for the second half of 2013. Nonperforming assets declined by $2.5 million to $14.3 million, or 4.03% of assets. The extra provision expenses increased the ALLL by $676 thousand to $3.7 million, or 1.85% of loans. The deferred tax asset(DTA) remains off the balance sheet. The usable portion of the DTA is $6.7 million. |
![]() 7 Shareholder Meeting 6/13/2013 Historical Income Statement - Quarterly 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 INTEREST INCOME 3,132 2,922 3,057 3,025 2,954 2,970 2,930 2,876 2,812 2,758 2,719 2,669 2,604 Interest on investment securities 475 445 340 308 353 390 363 321 333 340 325 292 277 Other interest income 12 21 30 32 31 29 27 34 36 39 36 34 42 Total interest income 3,619 3,388 3,427 3,366 3,338 3,389 3,321 3,230 3,181 3,137 3,080 2,996 2,923 INTEREST EXPENSE Deposits 836 746 678 604 555 518 487 481 466 451 426 411 401 Borrowings 128 127 109 105 100 99 100 99 102 98 90 20 17 Subordinated debentures 17 17 20 18 17 20 17 18 18 18 18 18 39 Total interest expense 981 890 807 727 672 636 605 598 586 567 534 449 457 NET INTEREST INCOME 2,638 2,498 2,620 2,639 2,666 2,753 2,716 2,633 2,595 2,570 2,546 2,546 2,466 Provision for loan losses 240 4,425 110 3,565 173 2,521 173 3,304 180 777 180 330 1,030 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,398 (1,927) 2,510 (926) 2,493 232 2,542 (671) 2,415 1,793 2,366 2,216 1,436 NONINTEREST INCOME Service charges on deposit accounts 129 133 121 117 100 115 108 100 97 94 98 90 86 Gain on sale of securities 0 0 112 27 104 0 0 0 0 141 0 839 7 Gain on sale of loans 166 184 219 255 226 114 126 255 196 184 229 337 482 Other 172 175 226 248 261 277 272 391 261 284 255 632 229 Total noninterest income 467 493 678 648 691 506 506 746 554 703 582 1,898 805 NONINTEREST EXPENSE Salaries and related benefits 1,411 1,310 1,456 1,398 1,493 1,370 1,402 1,368 1,404 1,408 1,548 1,526 1,596 Occupancy & Equipment 347 324 348 356 350 343 344 341 331 318 313 313 327 Foreclosure & OREO 86 325 76 531 68 442 167 665 299 392 166 1,575 1,324 Other 969 1,116 1,048 1,178 1,167 1,200 1,249 1,426 1,236 1,329 1,306 1,281 1,257 Total noninterest expense 2,813 3,075 2,928 3,464 3,078 3,354 3,162 3,800 3,270 3,447 3,333 4,695 4,505 Income before provision for taxes 52 (4,509) 260 (3,742) 106 (2,616) (113) (3,726) (301) (951) (385) (580) (2,264) Tax provision (58) (1,824) 30 (1,514) (23) (347) (112) 5,139 37 (63) (30) 301 45 NET INCOME 110 (2,685) 230 (2,229) 129 (2,269) (1) (8,865) (338) (888) (355) (881) (2,309) Preferred Dividends 109 110 112 112 111 111 113 113 112 113 114 3,903 0 NET INCOME AVAILABLE TO COMMON 1 (2,795) 118 (2,341) 18 (2,381) (114) (8,978) (450) (1,001) (469) (4,784) (2,309) PRE-TAX PRE-CREDIT COST INCOME* 378 241 334 327 243 347 227 244 178 77 (39) 86 84 *Excludes securities gains and foreclosure & OREO costs Loans, including fees |
![]() 8 Shareholder Meeting 6/13/2013 Credit Overview Jeffrey Vock Chief Credit Officer |
![]() 9 Shareholder Meeting 6/13/2013 Loan Portfolio Detail – Loan Mix Total Loan Portfolio: $202 million at 3/31/13 and $233 million at 6/30/09 Loans by Type 3/31/13 Loans by Type 6/30/09 Repositioning of the portfolio has resulted in a 92% reduction of construction and development loans since 2007 Extensive management knowledge of market Loan portfolio is diversified by type with no significant concentrations Outstanding HELOC loans totaled $49.3 million, or 54.7% of the total commitments of $90.1 million $32.8 million of the commitments were related to 1 st lien HELOCs with average LTV of 44.0% $57.3 million of the commitments were related to 2 nd lien HELOCs with average LTV of 70.0% 9 Shareholder Meeting 6/13/2013 |
![]() 10 Loan Portfolio Detail – Over Time ($000's) 2006 2007 2008 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 1Q13 Construction & land development 27,903 39,016 31,247 21,346 15,435 4,363 2,442 1,881 2,487 3,617 3,233 Owner occupied CRE 67,021 67,268 60,111 66,304 62,519 62,905 61,431 60,670 62,006 62,711 62,289 Non-owner occupied CRE 14,376 18,931 21,015 28,215 26,200 25,965 27,055 28,516 28,781 28,144 28,843 1-4 family residential 21,462 23,546 20,074 28,589 27,783 21,842 21,137 19,648 22,582 28,147 26,087 HELOC 38,213 49,893 59,941 62,418 66,372 59,325 57,624 56,619 54,446 50,574 49,266 Multifamily residential 4,200 1,547 3,000 5,004 5,757 5,653 5,190 5,477 5,451 5,854 6,005 C & I 26,319 28,227 27,200 25,992 25,666 26,302 25,560 25,722 26,276 24,445 24,943 Consumer & other 1,940 1,948 1,804 1,692 1,410 1,363 1,405 1,330 1,294 1,312 1,298 Total Loans 201,434 230,376 224,392 239,560 231,142 207,718 201,844 199,863 203,323 204,804 201,964 10 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 1Q13 Consumer & other C & I Multifamily residential HELOC 1-4 family residential Non-owner occupied CRE Owner occupied CRE Construction & land development Shareholder Meeting 6/13/2013 |
![]() Shareholder Meeting 6/13/2013 Loan Portfolio Detail Commercial Real Estate Mix: $91 million at 3/31/13 Loans by Type The majority of the CRE portfolio is performing well Average loan amount is $497 thousand Weighted average LTV is 65.0% Owner -occupied CRE makes up approximately 68.4% of the total CRE portfolio 11 |
![]() 12 Shareholder Meeting 6/13/2013 Loan Charge-offs 1Q2013 Charge-offs: $366 thousand Cumulative 2007 to 1Q2013 Charge-offs: $20.0 million 40.9% of the charge-offs since 2007 have come from the construction portfolio. However, construction loans have shrunk to only $3.6 million now – we believe this translates into limited exposure to additional credit losses in this category. ($000's) 2007 2008 2009 2010 2011 2012 1Q13 Cumulative C & D - $ $125 $773 $2,733 $2,813 $1,740 - $ $8,184 Farm - - - - - - - - HELOC - - - 141 814 1,031 242 2,228 1 - 4 Family - - - 814 934 1,190 - 2,938 Multi-Family - - - - 194 241 - 435 CRE - - - 530 140 2,705 122 3,497 C & I 12 771 5 1,281 109 445 - 2,623 Consumer & Other 2 9 59 12 8 11 2 103 Total Charge-offs $14 $905 $837 $5,511 $5,012 $7,363 $366 $20,008 |
![]() 13 Shareholder Meeting 6/13/2013 Loan Portfolio Detail Reduced Construction & Development Portfolio Represented $3.2 mm or 1.6% of total loan portfolio as of 3/31/13 No C&D loans are non-performing at 3/31/13 Accounted for $8.2 mm or 40.1% of cumulative charge-offs (2007 through 1Q13) C&D portfolio has declined 91.7% since 2007 |
![]() 14 Shareholder Meeting 6/13/2013 Credit Quality Details 2006 2007 2008 2009 2010 2011 2012 1Q13 Nonperforming Assets ($000) Nonaccrual Loans 25 $ 62 $ 2,725 $ 14,555 $ 20,294 $ 13,799 $ 7,426 $ 6,699 $ 90 + Days Delinquent 644 635 32 480 - - 342 119 OREO - - 189 2,396 3,008 5,322 9,012 7,465 Real Estate Held For Investment - - - - 4,318 3,942 - - Total NPAs 669 $ 697 $ 2,946 $ 17,431 $ 27,620 $ 23,063 $ 16,780 $ 14,283 $ Classified Loans 39,912 32,497 19,788 7,685 8,744 Classified Assets 42,308 $ 39,823 $ 29,052 $ 16,697 $ 16,209 $ Performing TDRs - $ - $ 1,866 $ 9,899 $ 4,132 $ 6,522 $ 3,708 $ 3,109 $ 30-89 Days Past Due 1,615 $ 2,173 $ 444 $ 5,448 $ 4,381 $ 1,444 $ 1,270 $ 1,876 $ Loan Loss Reserve ($000) Loan Loss Reserve - Beginning 1,381 $ 1,549 $ 1,970 $ 3,300 $ 4,813 $ 7,680 $ 8,853 $ 3,032 $ Charge-offs 20 14 905 837 5,511 5,012 7,363 366 Recoveries 23 15 20 6 38 15 75 12 Provision 165 420 2,215 2,344 8,340 6,171 1,467 1,030 Loan Loss Reserve - Ending 1,549 $ 1,970 $ 3,300 $ 4,813 $ 7,680 $ 8,853 $ 3,032 $ 3,708 $ Asset Quality Ratios (%) NPAs (+90 days)/Assets 0.25 0.23 1.00 5.10 7.94 7.01 4.72 4.03 NPAs (+90 days)/Loans & OREO 0.33 0.30 1.32 7.26 11.67 10.69 8.13 6.87 NPLs/Loans 0.01 0.03 1.22 6.12 8.85 6.68 3.76 3.34 Reserves/NPLs NM NM 121.10 33.07 37.84 64.16 40.83 55.35 Loan Loss Reserves/Gross Loans 0.77 0.86 1.47 2.01 3.35 4.29 1.54 1.85 Loan Loss Reserves/NPAs 231.54 282.64 68.45 17.61 32.96 46.30 18.07 25.96 NCOs/Average Loans 0.00 0.00 0.39 0.36 2.40 2.36 3.71 0.71 Loan Loss Provision/NCO NM NM 250.28 281.73 152.38 123.49 20.13 290.96 |
![]() 15 Shareholder Meeting 6/13/2013 Adversely Classified Assets Adversely Classified Assets at 3/31/13 $16.2 million Nearly one-half of the nonperforming assets and classified assets are in OREO, which allows for faster resolution as the bank has ownership and control of the assets. 15 Shareholder Meeting 6/13/2013 |
![]() 16 Shareholder Meeting 6/13/2013 Business Overview Scott Hamer Chief Executive Officer |
![]() 17 Shareholder Meeting 6/13/2013 Update on Recent Events In December 2012 Community Financial shares completed a $24 million private placement of convertible preferred shares and common shares. The conversion price of the preferred shares and the price of the common shares was $1.00. The transaction resulted in several high-profile bank investors becoming shareholders of the Company, including the Clinton Group and Wellington Management. The new capital allowed Community Financial to repay the TARP preferred stock at a discount of 55%. CFIS also repaid the holding company loan at a discount of 31%. The new capital allows the Company to continue its aggressive problem asset management and disposition strategy and puts it in a position to pursue removing the regulatory order later in 2013. As a result of the transaction, 4 representatives of the new investors joined the Board of Directors (including Don Wilson as Chairman) and 5 legacy directors resigned. The new Board is now made up of 9 directors (4 new and 5 legacy). The new capital positioned the bank to complete the credit cleansing process, resolve the regulatory constraints and begin growing the franchise. |
![]() 18 Shareholder Meeting 6/13/2013 Potential Capital Enhancement As mentioned in our prior filings, we may engage in a concurrent private placement offering to be closed after the consummation of the rights offering, but we cannot comment on the status or potential outcome of that process. |
![]() ![]() 19 Shareholder Meeting 6/13/2013 Deposit Market Share – Leading Community Bank In Market 2012 Rank 2011 Rank Institution (ST) 2012 Number of Branches 2012 Total Deposits in Market ($000) 2012 Total Market Share (%) 2011 Total Deposits in Market ($000) 2011 Total Market Share (%) Glen Ellyn, IL 1 1 JPMorgan Chase & Co. (NY) 3 199,705 19.10 168,440 16.42 2 2 U.S. Bancorp (MN) 2 192,966 18.45 166,414 16.22 3 3 Community Financial Shares Inc (IL) 1 156,924 15.00 152,410 14.86 4 4 Bank of Montreal 1 76,614 7.33 83,281 8.12 5 6 Citigroup Inc. (NY) 1 74,646 7.14 73,995 7.21 6 7 Bank of America Corp. (NC) 1 71,233 6.81 73,254 7.14 7 8 Wintrust Financial Corp. (IL) 1 66,015 6.31 66,314 6.47 8 5 PNC Financial Services Group (PA) 1 62,816 6.01 82,006 8.00 9 9 Inland Bancorp Inc. (IL) 2 56,376 5.39 63,611 6.20 10 10 Fifth Third Bancorp (OH) 1 35,830 3.43 36,822 3.59 Total For Institutions In Market 17 1,045,847 1,025,669 Wheaton, IL 1 1 JPMorgan Chase & Co. (NY) 7 964,558 44.25 882,180 42.50 2 2 Wintrust Financial Corp. (IL) 1 395,349 18.14 327,242 15.77 3 3 PNC Financial Services Group (PA) 3 171,696 7.88 197,338 9.51 4 4 Community Financial Shares Inc (IL) 3 156,052 7.16 139,648 6.73 5 5 Northern Trust Corp. (IL) 1 72,006 3.30 80,897 3.90 6 8 Bank of Montreal 1 62,632 2.87 61,861 2.98 7 7 Illinois State Bancorp Inc. (IL) 1 58,902 2.70 69,132 3.33 8 10 West Suburban Bancorp Inc. (IL) 2 58,882 2.70 50,592 2.44 9 9 Fifth Third Bancorp (OH) 1 58,194 2.67 59,547 2.87 10 11 Providence Bank (IL) 1 34,174 1.57 44,307 2.13 Total For Institutions In Market 28 2,179,941 2,075,512 Source: SNL Financial LLC / FDIC Summary of Deposits 6/30/12 |
![]() 20 Shareholder Meeting 6/13/2013 Funding Overview – Deposit Portfolio Snapshot Deposit Mix – 3/31/13 Deposit Mix – Rolling 8 Quarters Total Deposits $324 million at 3/31/13 The company has continued to grow deposits despite the low cost of funds and additional rate cuts implemented during March and April The company was able to grow the deposit portfolio by $5.9 million in 1Q13 The Deposit mix is desirable, with a cost of interest bearing deposits of 57 basis points, cost of total deposits of 50 basis points, and cost of funds of 53 basis points for 1Q13 CDs represent 29.1%, down from 42.6% at 12/31/08; with no brokered deposits Loan to deposit ratio at 3/31/13 was 62.4% Non-Interest Checking 12% Interest Checking 23% Savings 22% MMDA 14% CD <100k 16% CD > 100k 13% 0 50,000 100,000 150,000 200,000 250,000 300,000 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 CDARS CD > $100k CD < $100k Money Market Savings Interest Checking Non-Interest Checking |
![]() 21 Shareholder Meeting 6/13/2013 Strategy Overview Don Wilson Chairman of the Board |
![]() 22 Shareholder Meeting 6/13/2013 December Investors’ Value Perspective Attractive deposit base Ability to resolve TARP and holding company note at a discount Attractive demographics of market Density of four existing branches Credit issues somewhat compartmentalized Seasoning of credit resolution process Low loan/deposit ratio provides room to grow Operational opportunities |
![]() 23 Shareholder Meeting 6/13/2013 Strategic Priorities Strengthen Capital Position and balance sheet structure Cleanse credit portfolio (OREO and NPLs) Resolve regulatory order Implement new core operating system Rationalize expense base Drive revenue growth |
![]() 24 Shareholder Meeting 6/13/2013 Key Strategies Guiding Principles for Growth Rigorous focus on core deposit growth. Deposits generate most franchise value as it is product with most “stickiness.” Improves stability of funding and margin. How customers define relationship – bank will do so as well. Organic growth from deposit –driven staff objectives and incentives in the existing branches; acquisitive growth through pursuit of branch purchases whenever possible. Marketing critical to achieve growth in customer count, depth, and retention. Develop a vigilant and disciplined sales pipeline management throughout the organization. Minimize price-based advertising. Service quality is necessary, but not sufficient, condition for banks. |
![]() 25 Shareholder Meeting 6/13/2013 Key Strategies (Continued) Guiding Principles for Growth Pursue a few niche customer categories: Develop specialized skill set of bankers. Use of seminar selling techniques within these niche categories: Use “reflected reputation” of third party expert presenters. Maintain expertise of bankers. Deal efficiently and effectively with legacy assets: Quickly reduce NPAs through aggressive sales, pool sales and/or isolating these assets in a non- bank (BHC subsidiary) entity. Capacity determined by initial excess capital position and DTA limits of Section 382 rules. Realization of longer-term workout value of assets without regulatory “contamination” of banking charter. Maximizes speed of achieving acquisition capacity for banking charter. |
![]() 26 Shareholder Meeting 6/13/2013 Key Strategies (Continued) Guiding Principles for Growth Investment in technology platform: Treasury services and wealth management platforms need to be state-of-the-art solutions to attract and serve targeted customer base. BSA/AML process must be robust across entire organization. Strong technology necessary to minimize integration risk of acquisitive growth. FIS/Metavante contract expires in October 2013; converting to Open Solutions as core systems provider Establish and build an effective wealth management business: Serving the integrated personal and business financial needs of customer base. Targeted groups include lawyers, accountants, insurance firms, and other advisory professionals. Source of diversified, recurring fee revenue. Plan to use open architecture investment management to maximize competitive positioning. |
![]() 27 Shareholder Meeting 6/13/2013 Questions? |
![]() Shareholder Meeting June 13, 2013 Community Financial Shares, Inc. |