Preferred Bank · NASDAQ:PFBC
Preferred Bank — D. A. Davidson 18th Annual Financial Services Investor Conference and Summit (May 2016)
33 slides from Preferred Bank's conference presentation, May 10, 2016
Slide 1: D. A. Davidson 18th Annual Financial Services Investor Conference and Summit
D. A. Davidson 18th Annual Financial Services Investor Conference and Summit May 10, 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: Company Overview
Company Overview • Founded in December 1991 • $2.6 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: Our Strategy
Our Strategy • Stick to Our Core Competencies – Business banking – Commercial and multi-family real estate lending – International trade finance – L.A. County, Orange County, S.F. Bay Area and New York • How We Execute – Ultra high-touch service (32% of total Bank staff are in business development)
Slide 5: Management Experience
Management Experience • Management team averages 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 Offic
Slide 6: Management Experience
Management Experience Name/ Title Background Li Yu • Chief Executive Officer of Preferred Bank since 1993 Chief Executive Officer • From December 1991 to the present, he has served as Chairman of Board of Directors Chairman of the Board • From 1987 to 1991, he was involved in several privately held
Slide 7: Board of Directors
Board of Directors Name Background Li Yu • Chief Executive Officer of Preferred Bank since 1993 Chairman of the Board • From December 1991 to the present, he has served as Chairman of Board of Directors Clark Hsu • Chairman and CEO of Lotus Creek Investments, Inc. which provides venture and growth c
Slide 8: PFBC Stock Profile
PFBC Stock Profile Ticker Symbol NASDAQ: PFBC Recent Price $31.97 (5/4/16) Shares O/S 14.06 mm Market Cap $449.4 mm Average Daily Volume 37.1 m Analyst Coverage Annual Dividend: $0.60 D. A. Davidson & Co Raymond James & Associates Current Yield: 1.88% Sandler O’Neill & Partners, LP FIG Partners 8
Slide 9: Branch Locations
Branch Locations Los Angeles-Long Beach-Anaheim, CA As of June 30, 2015 Total Market # of Deposits Share Rank Company Branches ($mm) (%) 1 Bank of America Corp. 334 87,298 20.0 2 Wells Fargo & Co. 356 71,971 16.5 3 JPMorgan Chase & Co. 403 46,655 10.7 4 Mitsubishi UFJ Financial Group Inc. 110 43,168
Slide 10: 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 Mar 2016 4.8% OneWes
Slide 11: United International Bank Acquisition
United International Bank Acquisition • On July 20, 2015 we announced the acquisition of United International Bank (UIB) for approximately $22 million. • All cash consideration; approximately 106% of TBV • United International Bank: • Chinese-focused, one-branch bank located in Flushing, NY • $184mm
Slide 12: Q1 2016 Financial Results
Q1 2016 Financial Results (Dollars in millions, except per share data) Three Months Ended Three Months Ended Q -o-Q Y-o-Y December 31, 2015 March 31, 2016 Change March 31, 2015 March 31, 2016 Change Net Income $7.5 $7.8 4.0% $6.6 $7.8 18.2% Diluted EPS $0.54 $0.56 3.7% $0.48 $0.56 16.7% ROAA 1.28% 1
Slide 13: Consistent and Growing Profitability
Consistent and Growing Profitability….. Diluted EPS $0.65 $0.60 $0.57 $0.56 $0.55 $0.55 $0.54 $0.50 $0.50 $0.48 $0.46 $0.45 $0.45 $0.43 $0.40 $0.38 $0.35 $0.30 $0.25 $0.20 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q4 2015 results impacted by $658,000 in merger-r
Slide 14: 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% 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 14
Slide 15: Higher Profitability vs Peers (cont'd)
…Higher Profitability vs Peers (cont’d) 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 15
Slide 16: 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 16
Slide 17: Consistent Loan Growth
Consistent Loan Growth….. Total Loans $2,400,000 2-Year CAGR of 19.9% (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 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 17
Slide 18: And Consistent Deposit Growth
And Consistent Deposit Growth….. Total Deposits $2,600,000 2-Year CAGR of 18.0% (Ex Acquisition) $2,400,000 $2,200,000 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 18
Slide 19: Regulatory Capital Position
Regulatory Capital Position
Slide 20: Capital Ratios – March 31, 2016
Capital Ratios – March 31, 2016 PFBC Well Capitalized Regulatory Guidance 13.00% 12.00% 11.70% 11.00% 10.74% 10.74% 10.29% 10.00% 10.00% 9.00% 8.00% 8.00% 7.00% 6.00% 6.50% 5.00% 5.00% 4.00% Tier 1 Leverage Ratio Common Equity Tier 1 Tier 1 Capital Ratio Total Capital Ratio Ratio No TARP, TruPs, Sen
Slide 21: Credit Overview
Credit Overview
Slide 22: Loan Portfolio Composition
Loan Portfolio Composition • Diverse loan portfolio - nearly 30% of loans are C & I • High level of diversification among industries • Above-average number of Senior Lenders and Business Development staff allow PFBC to look at tremendous deal flow • Drives strong loan yields Loan Composition 7.2% 0.
Slide 23: Real Estate Loan Portfolio Detail
Real Estate Loan Portfolio Detail 1% 0% 13% 22% 1-4 Family Special Purpose 13% Retail Office Industrial Multi-Family 19% 15% Land - Residential Land - Commercial 17% Portfolio Characteristics 20 Largest Loans/ Relationships 32% of CRE Portfolio 20 Largest Loans/ Relationships 22% of Total Loan Portf
Slide 24: C&I Portfolio Detail
C&I Portfolio Detail 5% 2% 1% 0% Service/Others 7% Healthcare Food Service 9% Motion Pictures 42% Merchant Wholesaler Food Distribution 10% Electronics Contractors Garment/Textile 12% US Government Guaranteed 12% Portfolio Characteristics 20 Largest Loans/ Relationships 46% of C&I Portfolio 20 Large
Slide 25: Total Real Estate by Geography
Total Real Estate by Geography Top 10 Geographical Concentrations in California Top 5 Geographical Concentrations ($mm) Los Angeles $1,200 $1,144 San Francisco $1,000 Orange $800 San Bernardino San Diego $600 Riverside $400 Santa Clara $184 Alameda $200 $40 $15 San Joaquin $8 $0 Kern California NY,
Slide 26: Real Estate Loans by LTV
Real Estate Loans by LTV Loan-to-Value • Borrowers have sizeable equity 313 stakes • 92% of our real estate portfolio maintains an LTV less than 75% 96 59 53 43 13 21 • Weighted average LTV is 47%. Less than 50% - 55% - 60% - 65% - 70% - 75% and 50% 55% 60% 65% 70% 75% above Number of Loans Number %
Slide 27: NPA and OREO Are Low and Trending Downward
NPA and OREO Are Low and Trending Downward Nonperforming Assets ($mm) $48 $40 $30 $20 $21 $21 $17 $17 $11 $8 $8 $6 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 Total OREO ($mm) $20 $15 $12 $9 $9 $9 $6 $4 $3 $- $- $- 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 201
Slide 28: Credit Approval Process
Credit Approval Process • Our credit granting process is managed very closely – Non-Executive Lending Officers have $0 loan authority • All C&I credits up to $8mm and all CRE credits to $12mm require the approval of CEO, COO and CCO – All credits above those amounts go to Board Loan Committee • Exec
Slide 29: Liquidity & Rate Sensitivity
Liquidity & Rate Sensitivity
Slide 30: Deposit Composition
Deposit Composition • 25% non-interest bearing deposits provide stable source of liquidity • 75% core deposits from relationship banking • 69% of our borrowers have a deposit relationship with the Bank Deposit Composition 45.9% MMDA & Savings Retail Time Jumbo Time 12.7% Transaction Total Deposits (
Slide 31: Rate Sensitivity Analysis
Rate Sensitivity Analysis Net Interest Income % Change For Positive Rate Movement Net Interest Income ($mm) 74% $166 $147 $129 54% $110 $95 35% 16% + 100 bp + 200 bp + 300 bp + 400 bp Base + 100 bp + 200 bp + 300 bp + 400 bp Economic Value of Equity Sensitivity Economic Value of Equity ($mm) 36.5% $
Slide 32: Why PFBC?
Why PFBC? • Focused on creating scarcity value in an attractive market • Superior earnings power and growth profile vs. peers ̶ Loan and deposit 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 future
Slide 33: Questions
Questions