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| EX-99.2 - EXHIBIT 99.2 - PACIFIC MERCANTILE BANCORP | pmbcinvestorpresentationpr.htm |
| 8-K - 8-K - PACIFIC MERCANTILE BANCORP | pmbcinvestorpresentationau.htm |
INVESTOR PRESENTAT ION
A U G U S T 2 0 1 6
1
This presentation contains statements regarding our expectations, beliefs and views about our future financial performance and our business, trends
and expectations regarding the markets in which we operate, and our future plans. Those statements constitute “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, can be
identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,”
“intend,” “plan,” “estimate,” “project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may”.
Forward-looking statements are based on current information available to us and our assumptions about future events over which we do not have
control. Moreover, our business and our markets are subject to a number of risks and uncertainties which could cause our actual financial
performance in the future, and the future performance of our markets (which can affect both our financial performance and the market prices of our
shares), to differ, possibly materially, from our expectations as set forth in the forward-looking statements contained in this presentation. In addition to
the risk of incurring loan losses, which is an inherent risk of the banking business, these risks and uncertainties include, but are not limited to, the
following: the risk that the economic recovery in the United States, which is still relatively fragile, will be adversely affected by domestic or international
economic conditions, which could cause us to incur additional loan losses and adversely affect our results of operations in the future; the risk that our
results of operations in the future will continue to be adversely affected by our exit from the wholesale residential mortgage lending business and the
risk that our commercial banking business will not generate the additional revenues needed to fully offset the decline in our mortgage banking
revenues within the next two to three years; the risk that our interest margins and, therefore, our net interest income will be adversely affected by
changes in prevailing interest rates; the risk that we will not succeed in further reducing our remaining nonperforming assets, in which event we would
face the prospect of further loan charge-offs and write-downs of other real estate owned and would continue to incur expenses associated with the
management and disposition of those assets; the risk that we will not be able to manage our interest rate risks effectively, in which event our operating
results could be harmed; the prospect that government regulation of banking and other financial services organizations will increase, causing our costs
of doing business to increase and restricting our ability to take advantage of business and growth opportunities. Additional information regarding these
and other risks and uncertainties to which our business is subject are contained in our Annual Report on Form 10-K for the year ended December 31,
2015 which is on file with the SEC as well as subsequent Quarterly Reports on Form 10-Q that we file with the SEC. Due to these and other risks and
uncertainties to which our business is subject, you are cautioned not to place undue reliance on the forward-looking statements contained in this news
release, which speak only as of its date, or to make predictions about our future financial performance based solely on our historical financial
performance. We disclaim any obligation to update or revise any of the forward-looking statements as a result of new information, future events or
otherwise, except as may be required by law.
FORWARD LOOKING STATEMENTS
2
CORPORATE OVERVIEW
_________________________________
PACIFIC MERCANTILE BANK IS A
COMMUNITY-BASED COMMERCIAL BANK
SERVING SOUTHERN CALIFORNIA
Bank founded in 1999
$1.1 billion in total assets
9 offices in Southern California
Focused on serving small- and
middle-market businesses
32% owned by Carpenter
Community BancFund
CORPORATE HEADQUARTERS
COSTA MESA, CALIFORNIA
3
OFFICE LOCATIONS
_________________________________
ONTARIO
BEVERLY HILLS
LA HABRA
COSTA MESA
IRVINE SPECTRUM
NEWPORT BEACH
LA JOLLA
4
INVESTOR HIGHLIGHTS
_________________________________
Opportunity to Capitalize on Turnaround Transitioning to Growth
Double-digit loan growth projected for 2016
18% DDA growth in 1H16
Discounted Valuation Trading at 1.2x TBV
Addressing Attractive Growth Markets
Comprehensive Client Engagement
Outstanding Growth Market of Southern California
Over 8,000 Potential Clients within Service Area
Improving Operational Leverage
High insider ownership (over 30%)
5
CORE MARKET OVERVIEW
_________________________________
Southern California
A LARGE ATTRACTIVE MARKET
* Source: National Venture Capital Association
** Source: California Employment Development Department
*** LA 5-County Area consists of Los Angeles, Orange, Riverside, San Bernardino and Ventura Counties
**** Source: Los Angeles County Economic Development Corporation
Large addressable market for small- and middle-market banking
97,000 businesses with fewer than 500 employees**
Strong growth in entrepreneurial businesses
5th largest market for VC investment in 2015 *
LA 5-County Area*** Expected to Add 158,000 Jobs in 2016 (2.1% employment growth)****
6
Banker Position Past Financial Institutions
Years of
Banking Experience
Tom Vertin President & CEO
Silicon Valley Bank
(CA Division Manager)
32
Curt Christianssen Chief Financial Officer
Carpenter & Company
Bank of Manhattan, Eldorado Bank
30
Thomas Inserra Chief Credit Officer
Susquehanna Bank
FDIC
Citibank
25
Curtis Birkmann Chief Technology Officer Bank of Manhattan 7
Maxwell Sinclair Chief Compliance Officer California Bank & Trust 26
STRONG EXECUTIVE TEAM
_________________________________
7
STRONG COMMERCIAL BANKING TEAM
_________________________________
Banker Position Past Financial Institutions
Years of
Banking
Experience
Kittridge Chamberlain Chief Banking Officer
Silicon Valley Bank
(Sr. Credit Officer, Western Div.)
30
Robert Anderson
Head of Product and Market
Development
Silicon Valley Bank
(Head of Orange County office)
20
Tom Wagner Chief Strategy Officer
Silicon Valley Bank
(Head of Corporate Finance)
30
Cindy Verity Head of Cash Management
Silicon Valley Bank
(Head of Treasury Management Sales)
30
Adrian Ward
Head of Entertainment Industries
Division
National Bank of California
(SVP, Entertainment)
23
8
MARKET POSITIONING
_________________________________
“Business Banking Beyond the Obvious”
Differentiating Strategy to Target Commercial Clients
9
Small- to Medium-
Sized Businesses
•Need for financial
guidance
• Limited internal
financial sophistication
• Limited outside
advisory support
Horizon Analytics
• Financial analysis
• Business planning
•Modeling and
forecasting
•Balance sheet
management
Service/Products
•Customized Commercial
Loans
•Asset Based Lending
•Owner Occupied RE
•Treasury Management
BALANCE SHEET OVERVIEW:
Loans, Deposits, Asset Quality, Capital
10
LOAN PORTFOLIO
FOCUS ON RELATIONSHIP LENDING
_________________________________
CRE: all other,
16.0%
CRE: owner-
occupied, 24.5%
Commercial,
38.7%
Multifamily,
[VALUE]
SFR,
[VALUE]
Other,
5.7%
$ 884 Million as of June 30, 2016
11
SIGNIFICANT SHIFT TO RELATIONSHIP LOANS
_________________________________
$158
$195 $191 $203 $217
$174
$156
$253
$323
$343
46.8%
48.2%
55.1%
63.2% 63.2%
45%
47%
49%
51%
53%
55%
57%
59%
61%
63%
65%
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
2Q12 2Q13 2Q14 2Q15 2Q16
CRE OWNER-OCCUPIED C&I RELATIONSHIP LOANS AS A PERCENTAGE OF TOTAL LOANS
12
($
in
m
ill
io
n
s)
Commercial Loans
Total Commitments and Line Utilization Trends
_________________________________
$301.7 $312.6
$323.2
$321.7
$347.3
$332.6 $342.6
$123.4
$151.6
$140.3
$180.3
$152.6 $178.2
$188.6
71.0%
67.3%
69.7%
64.1%
69.5%
65.1%
64.5%
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
72.0%
$250
$350
$450
$550
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
TOTAL C&I OUTSTANDING UNUSED C&I COMMITMENTS C&I LINE UTILIZATION RATE
($
in
m
ill
io
n
s)
Volatility in utilization rate impacting growth trend in C&I outstandings
13
DEPOSIT COMPOSITION
FOCUSED ON CORE DEPOSITS
_________________________________
$937 Million as of June 30, 2016
Continuing to attract non-interest bearing deposits
Shifted balances out of CDs into savings and money market accounts
Savings and money market balances tend to be stickier and less price sensitive than CDs
Non-interest
bearing
31%
Interest
checking
6%
Savings/Money
Market
34%
Certificates of
Deposit
29%
Core Deposits as a Percentage of Total Deposits
14
61%
65%
64%
68%
69%
73%
71%
60%
62%
64%
66%
68%
70%
72%
74%
4Q15 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
ASSET QUALITY TRENDS
_________________________________
53% of NPAs Relate to Two Credits
0.52% 0.61%
1.15%
0.89% 0.81%
1.36% 1.17%
1.04%
2.10%
1.27%
0.38%
0.35%
0.23%
0.16%
0.32%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2Q15 3Q15 4Q15 1Q16 2Q16
NPAS/TOTAL ASSETS
Other Two Credits PMAR
0.04% 0.01% -0.05%
0.01%
0.09%
0.85%
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2Q15 3Q15 4Q15 1Q16 2Q16
NCOS/GROSS LOANS
Other NCOs One Credit
15
90% of 2Q16 NCOs Relate to
One Commercial Loan Participation
STRONG CAPITAL POSITION
_________________________________
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
TOTAL CAPITAL RATIO TIER 1 CAPITAL RATIO COMMON EQUITY TIER 1
CAPITAL RATIO
15.0%
13.8%
12.5%
10.0%
8.0%
6.5%
PMBC WELL-CAPITALIZED REQUIREMENT
16
As of June 30, 2016
OUTLOOK
17
DISRUPTION IN THE
CALIFORNIA LANDSCAPE
_________________________________
RBC acquisition of City National Bank
Western Alliance acquisition of Bridge Bank
PacWest Bancorp acquisition of Square 1 Bank
Key opportunities to add clients and banking teams
18
OUTLOOK
_________________________________
Double-digit loan growth in 2016 and beyond
Continued focus on growing commercial banking relationships
Expanded production staff will accelerate growth in core markets
Improving sales effectiveness and process throughput
Improving net interest margin
Loan-to-deposit ratio increasing
Diminishing impact of lost interest from non-accrual loans
Cost of funds declining
Higher non-interest income
New commercial clients using more treasury management products
Relatively stable expense levels
Continuing expense discipline
Increase in production staff cost offset by office transition
Steady increase in profitability
19
Strategic Change to More Effective Delivery Model
_________________________________
Transitioning from retail branches to smaller commercial banking offices
Cash management products used by commercial client base reduce need
for retail style branches
Cost savings from transition will be redeployed into more production staff
Planned addition of relationship managers during 2016
20
I n v e s t o r R e l a t i o n s :
C u r t C h r i s t i a n s s e n
( 7 1 4 ) 4 3 8 - 2 5 3 1
C u r t . c h r i s t i a n s s e n @ p m b a n k . c o m
21
APPENDIX
2Q16 Financial Statements
22
2Q16 Consolidated Statements of Income
(Dollars and numbers of shares in thousands, except per share data)
(Unaudited)
_______________________________
23
Three Months Ended
June 30, 2016
March 31,
2016 June 30, 2015
Jun '16 vs Mar
'16
% Change
Jun'16 vs Jun
'15
% Change
Total interest income $ 9,835 $ 9,954 $ 9,813 (1.2 )% 0.2 %
Total interest expense 1,355 1,251 1,324 8.3 % 2.3 %
Net interest income 8,480 8,703 8,489 (2.6 )% (0.1 )%
Provision for loan and lease losses 8,720 420 — 1,976.2 % 100.0 %
Net interest income (loss) after provision for loan and
lease losses (240 ) 8,283
8,489
(102.9 )% (102.8 )%
Non-interest income:
Service fees on deposits and other banking services 267 255 234 4.7 % 14.1 %
Net gain on sale of small business administration loans — 40 — (100.0 )% — %
Other non-interest income 597 459 382 30.1 % 56.3 %
Total non-interest income 864 754 616 14.6 % 40.3 %
Non-interest expense:
Salaries & employee benefits 5,506 5,687 5,423 (3.2 )% 1.5 %
Occupancy and equipment 1,243 1,168 1,182 6.4 % 5.2 %
Professional Fees 774 550 744 40.7 % 4.0 %
OREO expenses — (70 ) 59 (100.0 )% (100.0 )%
FDIC Expense 251 195 339 28.7 % (26.0 )%
Other non-interest expense 1,119 1,025 1,220 9.2 % (8.3 )%
Total non-interest expense 8,893 8,555 8,967 4.0 % (0.8 )%
(Loss) income before income taxes (8,269 ) 482 138 (1,815.6 )% (6,092.0 )%
Income tax (benefit) expense (3,559 ) 198 — (1,897.5 )% (100.0 )%
Net (loss) income (4,710 ) 284 138 (1,758.5 )% (3,513.0 )%
Accumulated undeclared dividends on preferred stock — — (309 ) — % (100.0 )%
Net (loss) income allocable to common shareholders $ (4,710 ) $ 284 $ (171 ) (1,758.5 )% 2,654.4 %
Basic (loss) income per common share:
Net (loss) income available to common shareholders $ (0.21 ) $ 0.01 $ (0.01 ) (2,200.0 )% 2,000.0 %
Diluted (loss) income per common share:
Net (loss) income available to common shareholders $ (0.21 ) $ 0.01 $ (0.01 ) (2,200.0 )% 2,000.0 %
Weighted average number of common shares outstanding:
Basic 22,962 22,873 19,774 0.4 % 16.1 %
Diluted 22,962 23,006 19,774 (0.2 )% 16.1 %
Ratios from continuing operations(1):
Return on average assets (1.71 )% 0.11 % 0.05 %
Return on average equity (13.96 )% 0.85 % 0.46 %
Efficiency ratio 95.17 % 90.46 % 98.48 %
2Q16 Consolidated Statements of Financial Condition
(Dollars in thousands, except share and book value data)
(Unaudited)
_______________________________
24
ASSETS June 30, 2016
December
31, 2015
Increase/
(Decrease)
Cash and due from banks $ 11,546 $ 10,645 8.5 %
Interest bearing deposits with financial institutions(1) 119,986 103,276 16.2 %
Interest bearing time deposits 3,917 4,665 (16.0 )%
Investment securities (including stock) 57,433 60,419 (4.9 )%
Loans (net of allowances of $13,429 and $12,716, respectively) 872,198 849,733 2.6 %
Other real estate owned — 650 (100.0 )%
Net deferred tax assets 20,507 17,576 16.7 %
Other assets 15,328 15,425 (0.6 )%
Total Assets $ 1,100,915 $ 1,062,389 3.6 %
LIABILITIES AND SHAREHOLDERS’ EQUITY
Non-interest bearing deposits $ 294,153 $ 249,676 17.8 %
Interest bearing deposits
Interest checking 59,720 51,210 16.6 %
Savings/money market 314,277 312,628 0.5 %
Certificates of deposit 268,519 280,326 (4.2 )%
Total interest bearing deposits 642,516 644,164 (0.3 )%
Total deposits 936,669 893,840 4.8 %
Other borrowings 10,000 10,000 — %
Other liabilities 5,697 7,106 (19.8 )%
Junior subordinated debentures 17,527 17,527 — %
Total liabilities 969,893 928,473 4.5 %
Shareholders’ equity 131,022 133,916 (2.2 )%
Total Liabilities and Shareholders’ Equity $ 1,100,915 $ 1,062,389 3.6 %
Tangible book value per share $ 5.70 $ 5.87 (2.9 )%
Tangible book value per share, as adjusted(2) $ 5.71 $ 5.90 (3.2 )%
Shares outstanding $ 22,984,453 $ 22,820,332 0.7 %