Preferred Bank · NASDAQ:PFBC
Preferred Bank — Sandler O'Neill & Partners West Coast Financial Services Conference 2016
29 slides from Preferred Bank's conference presentation, Mar 8, 2016
Slide 1: Sandler O'Neill & Partners West Coast Financial Services Conference
Sandler O’Neill & Partners, L.P. West Coast Financial Services Conference March 8, 2016
Slide 2: Forward Looking Statements
Forward Looking Statements During the course of this presentation, management may make statements regarding events or future financial performance of the Bank. These statements may include comments with respect to our objectives and strategies, and the results of our operations and our business. How
Slide 3: About Preferred Bank (PFBC)
About Preferred Bank (PFBC) • Founded in December 1991 • Headquartered in Los Angeles, California • $2.6 billion in total assets - All organic growth, no acquisitions • Attractive branch footprint – 12 branches in California (11 in Southern California, 1 in San Francisco) and 1 branch in New York •
Slide 4: PFBC Stock Profile
PFBC Stock Profile Ticker Symbol NASDAQ: PFBC Recent Price $30.23 (3/4/16) Shares O/S 13.8 mm Market Cap $419.7 mm Average Daily Volume 46.5 m Analyst Coverage Annual Dividend: $0.60 Sandler O’Neill & Partners, LP Raymond James & Associates Current Yield: 1.98% D.A. Davidson & Co. FIG Partners 4
Slide 5: The Street
The Street Research Analyst Estimates and Ratings Sandler FIG Raymond D. A. O'Neill Partners James Davidson Consensus Rating BUY OUTPERFORM OUTPERFORM 2 BUY Price Target $ 33.00 $ 36.00 $ 36.00 $ 38.00 $ 35.75 2016 Year EPS $ 2.34 $ 2.34 $ 2.34 $ 2.32 $ 2.34 2017 Year EPS $ 2.45 $ 2.63 $ 2.52 $ 2.50
Slide 6: Our Strategy
Our Strategy • Stick to Our Core Competencies – Business Banking – Commercial and Multi-Family Real Estate Lending – International Trade Finance – L.A. and Orange County, S.F. Bay Area and New York • How We Execute – Ultra High-Touch Service (over 30% of total Bank staff are in business development)
Slide 7: Management Experience
Management Experience • Management team averaging 30 years of industry experience • Deep ties to the Chinese-American and mainstream banking communities Years of Name Position Experience Li Yu Chairman & CEO 33 Wellington Chen President & Chief Operating Officer 32 Edward Czajka Chief Financial Offi
Slide 8: Branch Locations
Branch Locations San Rafael Berkeley New York © Oakland aS S Francisco S San Francisco Bay ‘Northridge ~ LOS ANGELES —— Leconte COUNTY > California sean‘ . 4 B revtas pn a Ze 8 Atnambra =e Century City ine © 9 @ a ° o¢ Diamond Bar ® PicoRivern -—Citvof Industry sats y «1 Seguco © coun i fullerton @
Slide 9: Market Share Potential
Market Share Potential Deposit Market Share - L.A. Long Beach MSA B of A 20.30% Wells Fargo 15.06% Chase 10.74% Union Bank 10.94% City National 6.04% Los Angeles County: Population: 10.1 million Citibank 4.22% NonFarm Businesses (Approx) 250,000 East West 4.06% Unemployment Rate Jan 2016 5.4% OneWes
Slide 10: UIB Acquisition
UIB Acquisition • On November 20, 2015 we closed the acquisition of United International Bank (UIB) for approximately $22.2 million. • Consideration is all cash and represents approximately 1.07x of TBV • United International Bank: • Chinese-focused, one-branch bank located in Flushing, NY • $184mm
Slide 11: Financial Performance
Financial Performance
Slide 12: Financial Highlights - 2015
Financial Highlights - 2015 § Net income of $29.7 million or $2.13 diluted EPS § Organic deposit growth was $354.6 million or 20.0% § Organic loan growth was $305.6 million or 19.1% § Net interest margin came in at 3.92% § ROA of 1.35% § ROE of 12.64% § Efficiency ratio of 40.9% 12
Slide 13: 2015 Financial Results
2015 Financial Results Financial Highlights --Year Ended-- Dollars in thousands, except per share amounts Dec 31, 2015 Dec 31, 2014 % Change Net Income $ 29,706 $ 24,592 20.8% Diluted EPS $ 2.13 $ 1.78 19.7% ROA 1.35% 1.31% 3.1% ROE 12.64% 11.88% 6.4% --As Of-- Dec 31, 2015 Dec 31, 2014 % Change Tot
Slide 14: Consistent and Growing Profitability
Consistent and Growing Profitability….. Diluted EPS $0.65 $0.60 $0.57 $0.55 $0.55 $0.54 $0.50 $0.50 $0.48 $0.46 $0.45 $0.45 $0.43 $0.40 $0.38 $0.37 $0.35 $0.30 $0.25 $0.20 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q4 2015 results impacted by $658,000 in merger-r
Slide 15: Higher Profitability vs. Peers
…And Higher Profitability vs. Peers Pre Tax ROA - VS FDIC Peers 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Pre Tax ROAA PFBC Pre Tax ROAA Peers 15
Slide 16: Higher Profitability vs. Peers (cont.)
…Higher Profitability vs. Peers (cont.) ROA - VS FDIC Peers 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 ROAA PFBC ROAA Peers 16
Slide 17: Superior Operating Efficiency vs. Peers
Superior Operating Efficiency vs. Peers Efficiency Ratio - VS FDIC Peers 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 PFBC Peers 17
Slide 18: Consistent Loan Growth
Consistent Loan Growth….. Total Loans $2,200,000 2-Year CAGR of 19.9% (Ex acquisition) $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 18
Slide 19: And Consistent Deposit Growth
And Consistent Deposit Growth….. Total Deposits $2,400,000 2-Year CAGR of 18.0% (Ex Acquisition) $2,200,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 19
Slide 20: Funding Composition
Funding Composition December 31, 2015 CD > $250k 14% DDA 25% CD < $250k 27% Int-Bearing Demand 34% DDA Int-Bearing Demand CD < $250k CD > $250k 20
Slide 21: Capital Ratios – December 31, 2015
Capital Ratios – December 31, 2015 PFBC Well Capitalized Regulatory Guidance 14.00% 11.99% 12.00% 11.02% 11.02% 10.60% 10.00% 10.00% 8.00% 8.00% 6.00% 6.50% 4.00% 5.00% 2.00% 0.00% Tier 1 Leverage Ratio Common Equity Tier 1 Tier 1 Capital Ratio Total Capital Ratio Ratio No TARP, TruPs, Senior or Sub
Slide 22: Poised for Higher Rates
Poised for Higher Rates Interest Rate Risk - Rising Rate Scenario Base Case +25 bps +50 bps +75 bps +100 bps +200 bps +300 bps NIM 3.81% 3.90% 4.00% 4.12% 4.25% 4.91% 5.59% NII (000's) $ 81,307 $ 83,215 $ 85,343 $ 87,872 $ 90,857 $ 104,990 $ 119,876 NII Increase $ - $ 1,908 $ 4,036 $ 6,566 $ 9,550 $
Slide 23: Credit
Credit
Slide 24: Loan Portfolio Composition
Loan Portfolio Composition December 31, 2015 Commercial & Industrial RE - Commercial 31% 42% RE - SFR and Multi-Family RE - Construction 20% 7% Commercial & Industrial RE - SFR and Multi-Family RE - Construction RE - Commercial 24
Slide 25: Real Estate Loans by LTV
Real Estate Loans by LTV • Only 8% of the portfolio has an LTV greater than 75%. • Weighted average LTV is 47%. Cumulative % of LTV Distribution at 12/31/15 # Loans Balance ($000’s) % of Total Total Less than 50% 313 $ 514,571 41% 41% 50% to 55% 43 103,871 8% 49% 55% to 60% 59 116,578 9% 59% 60% to
Slide 26: NPA Trends are Positive
NPA Trends are Positive Nonperforming Assets $45,000 $40,000 $35,000 $29,664 $30,000 $25,000 $19,646 $20,404 $20,000 $17,377 $16,927 $14,742 $15,000 $10,771 $10,000 $7,944 $7,932 $6,446 $5,000 $- Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 26
Slide 27: One Property as of December 31, 2015
One Property as of December 31, 2015 ($ '000) Other Real Estate Owned $20,000 $18,000 $16,000 $14,000 $11,936 $12,000 $10,000 $8,902 $8,811 $8,811 $8,000 $6,000 $5,602 $4,112 $4,000 $2,302 $2,000 $- $- $- $- Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 27
Slide 28: 2014 Honors
2014 Honors • Bank Director Magazine named Preferred Bank the top performing bank in the U.S. for 2014 ($1 to $5 billion total assets) • SNL Securities ranked Preferred Bank 16th overall in 2014 in their Top 100 community banks with assets between $500 million and $5 billion (No. 1 for Banks $2 to $
Slide 29: Why PFBC?
Why PFBC? • Focused on creating scarcity value in an attractive market • Superior earnings power and growth profile vs. peers ̶ Loans and deposits CAGR of 19.9% and 18.0% over the past two years • Experienced management team with deep ties to the community • Strong capital position will support futu
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