Preferred Bank · NASDAQ:PFBC
Preferred Bank — FIG Partners 21st Bank CEO Forum (February 2018)
29 slides from Preferred Bank's conference presentation, Feb 1, 2018
Slide 1: FIG Partners 21st Bank CEO Forum
FIG Partners 21st Bank CEO Forum January 31 – February 1, 2018
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: Company Overview
Company Overview • Founded in December 1991 • $3.8 Billion commercial bank headquartered in Los Angeles, CA • Leading Los Angeles-based community banking franchise with operations in San Francisco and New York • Strong insider ownership aligned with stakeholders – Directors and Officers collectively
Slide 4: PFBC Stock Profile
PFBC Stock Profile Ticker Symbol NASDAQ: PFBC Recent Price $64.69 (1/30/18) Shares O/S 15.15 mm Market Cap $980.1mm Average Daily Volume 83.7 m FIG Partners Sandler O’Neill & Partners, LP Annual Dividend: $0.88 Stephens & Co Current Yield: 1.36% Raymond James & Co D.A. Davidson & Co. FBR/B. Riley 4
Slide 5: Management Experience
Management Experience • Management team averages 31 years of industry experience • Deep ties to the Chinese American and mainstream banking communities Years of Years With Name Position Experience PFBC Li Yu Chairman & CEO 34 27 Wellington Chen President & COO 33 7 Edward Czajka Chief Financial Offi
Slide 6: Our Strategy
Our Strategy • Stick to Our Core Competencies – Business banking – Commercial and multi-family real estate lending – Letter of Credit Financing – Serving ethnic Chinese in the markets of: • San Gabriel Valley area of Southern California (Alhambra, Arcadia, Diamond Bar, City of Industry) • South Bay
Slide 7: Our Strategy
Our Strategy • How We Execute – Business Model – Ultra high-touch service – our frontline personnel develop long lasting and deep relationships with their clients, fostering loyalty and word of mouth advertising – We place a large percentage of our personnel in frontline positions, (32% of total Ban
Slide 8: Branch Locations
Branch Locations ‘San Rafael Berkeley © ~ Oakland San S Francisco S & San Francisco Bay » California New York @ L NGELE pee Os ANGELES oo Laconsda COUNTY Burbank C7) e wie Gp Panta Arcatlia af oS @ Mtns can 7 Century City Los Angeles 9 0 @ o,..% oe 2 Diamond Bar () PicoRivera ——““itvot Industry mene
Slide 9: Loans and Deposits by Region
Loans and Deposits by Region Loans by Region 8% 10% L.A N.Y Deposits by Region S.F. 82% 6% 9% L.A N.Y S.F 85% 9
Slide 10: Market Share Potential
Market Share Potential Deposit Market Share - L.A. Long Beach MSA B of A 18.63% Wells Fargo 15.24% Chase 11.95% Union Bank 8.51% CIT Bank 5.80% Los Angeles County: City National Bank 4.91% Population, July 2016: 10.14 million CitiBank 4.22% NonFarm Businesses (Approx) 250,000 East West Bank 3.32% Un
Slide 11: Consistent and Growing Profitability
Consistent and Growing Profitability….. Diluted EPS $1.00 $0.97 $0.95 $0.94 34.0% CAGR over last two years $0.90 $0.85 $0.80 $0.80 $0.75 $0.71 $0.71 $0.70 $0.69 $0.65 $0.61 $0.60 $0.57 $0.56 $0.55 $0.54 $0.50 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2017 res
Slide 12: And 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% Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Pre Tax ROAA PFBC Pre Tax ROAA Peers Average is 2.15% pre-tax ROA to 1.51% Pre-tax ROA 12
Slide 13: Higher Profitability (cont'd)
…Higher Profitability (cont’d) ROA - VS FDIC Peers 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 ROAA PFBC ROAA Peers Average is 1.29% ROA vs. 1.02% ROA 13
Slide 14: Superior Operating Efficiency vs Peers
Superior Operating Efficiency vs Peers Efficiency Ratio - VS FDIC Peers 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 PFBC Peers PFBC Average of 40.73% vs. peer average of 61.47% 14
Slide 15: Consistent Loan Growth
Consistent Loan Growth….. Total Loans $3,300,000 5-Year CAGR of 19.8% $3,100,000 (Ex acquisition) $2,900,000 $2,700,000 $2,500,000 $2,300,000 $2,100,000 $1,900,000 $1,700,000 $1,500,000 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 15
Slide 16: And Consistent Deposit Growth
And Consistent Deposit Growth $3,500,000 Total Deposits $3,300,000 5-Year CAGR of 18.0% (Ex Acquisition) $3,100,000 $2,900,000 $2,700,000 $2,500,000 $2,300,000 $2,100,000 $1,900,000 $1,700,000 $1,500,000 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 16
Slide 17: Stock Performance
Stock Performance • PFBC stock has significantly outperformed peers over the past 5 years Source: SNL Financial. Market data as of August 29, 2017 17
Slide 18: Regulatory Capital Position
Regulatory Capital Position
Slide 19: Capital Ratios – December 31, 2017
Capital Ratios – December 31, 2017 PFBC Well Capitalized Regulatory Guidance 16.00% 13.83% 14.00% 12.00% 10.07% 10.07% 10.00% 10.00% 8.52% 8.00% 8.00% 6.00% 6.50% 5.00% 4.00% Tier 1 Leverage Ratio Common Equity Tier 1 Tier 1 Capital Ratio Total Capital Ratio Ratio 19
Slide 20: Credit Overview
Credit Overview
Slide 21: Loan Portfolio Composition – December 31, 2017
Loan Portfolio Composition – December 31, 2017 • Diverse loan portfolio – 30% of loans are C & I • High level of diversification among industries • Above-average number of Senior Lenders and Business Development staff allow PFBC to look at tremendous deal flow • Drives strong loan yields Loan Compos
Slide 22: Real Estate Loan Portfolio – December 31, 2017
Real Estate Loan Portfolio – December 31, 2017 Portfolio Characteristics Other 13% 1-4 Family 20 Largest Relationships 31% of total CRE 17% Wtd Average Maturity 3.5 Years Wtd Average Coupon 5.43% Average DCR 1.75x Hotel/Motel 9% Wtd Average LTV 56% Multi-Family 9% Industrial 11% Retail Office 25% 16
Slide 23: C&I Portfolio Detail – December 31, 2017
C&I Portfolio Detail – December 31, 2017 Other 16% Electronics Food Distribution 4% 3% Service Related 40% Merchant/Wholesaler 5% Professionals 7% Motion Pictures 7% Food Service Healthcare 9% 9% Portfolio Characteristics 20 Largest Relationships 36% of C&I Loans Line Usage % 70.8% Wtd Avg Maturity
Slide 24: NPA's Remain At Very Low Levels
NPA’s Remain At Very Low Levels Nonperforming Assets $30,000 $25,000 $20,000 $15,000 $11,760 $11,913 $10,646 $10,612 $10,612 $10,000 $6,446 $6,775 $5,793 $5,121 $5,000 $- Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 24
Slide 25: One Property as of December 31, 2017
One Property as of December 31, 2017 Other Real Estate Owned $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,112 $4,112 $4,112 $4,112 $4,112 $4,112 $4,112 $4,112 $4,112 $4,000 $2,000 $- Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 25
Slide 26: Liquidity & Rate Sensitivity
Liquidity & Rate Sensitivity
Slide 27: Deposit Composition – December 31, 2017
Deposit Composition – December 31, 2017 DDA CD's > $250k 20% 19% CD's < $250k 18% Savings MMDA 1% 42% Characteristics Percentage DDA 20.2% MRQ Cost of Deposits 0.73% MRQ Growth Rate 5.2% Core Deposits / Total Deposits 69% 27
Slide 28: Rate Sensitivity Analysis – September 30, 2017
Rate Sensitivity Analysis – September 30, 2017 % Change in NII 80.00% 66.60% 70.00% 60.00% 50.00% 50.00% 40.00% 33.40% 30.00% 16.60% 20.00% 10.00% 0.00% -10.00% Up 400 Up 300 Up 200 Up 100 Down 100 Down 300 -20.00% -9.80% -10.60% EVE % Change 40.00% 36.30% 28.80% 30.00% 20.20% 20.00% 10.60% 10.00% 0
Slide 29: Why PFBC?
Why PFBC? • Focused on creating scarcity value in an attractive market • Superior earnings power and growth profile vs. peers ̶ Adjusted 2017 ROA of 1.43% and ROE of 16.82% * • Experienced management team with deep ties to the community • The potential and discipline to acquire if organic growth slo
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