Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - PACIFIC MERCANTILE BANCORP | pmbcpressreleaseinvestorde.htm |
| 8-K - 8-K - PACIFIC MERCANTILE BANCORP | pmbcq117investordeck8k.htm |
INVESTOR PRESENTAT ION
M A Y 2 0 1 7
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,
2016 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
FULL SERVICE BUSINESS BANK
SERVING SOUTHERN CALIFORNIA
Bank founded in 1999
$1.2 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
_________________________________
NEWPORT BEACH
BEVERLY HILLS
IRVINE SPECTRUM
COSTA MESA
LA HABRA
ONTARIO
SAN DIEGO
4
MARKET POSITIONING
_________________________________
“We Help Companies Succeed”
Differentiating Strategy to Target Business Clients
5
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
•Value driven pricing
IMPROVING PROFITABILITY
_________________________________
6
$0.9
$0.5
$0.6
$0.2
$1.8
$0.0
$0.5
$1.0
$1.5
$2.0
1Q16 2Q16 3Q16 4Q16 1Q17
Pre-Provision Pre-Tax Earnings
($ in millions)
Catalysts driving improved
profitability in 1Q17
Higher average loan balances
Expanding net interest margin
Higher non-interest income
Stable expense levels
Improving credit quality
LOAN PORTFOLIO
FOCUS ON RELATIONSHIP LENDING
_________________________________
CRE: all
other, 20.5%
CRE: owner-
occupied,
22.4%Commercial,
34.0%
Multifamily,
12.8%
SFR,
3.5%
Other
6.8%
$ 951 Million as of
March 31, 2017
7
CRE: all
other, 20.6%
CRE: owner-
occupied,
22.7%
Commercial,
23.4%
Multifamily,
14.4%
SFR,
11.9%
Other,
7.0%
$ 731 Million as of
December 31, 2012
46.1% Relationship Loans
56.4% Relationship Loans
INCREASING LOAN PRODUCTION
_________________________________
8
$66.5
$137.7
$124.3
$167.0
$65.4
64.3%
63.1%
55.9%
58.1%
58.5%
40%
45%
50%
55%
60%
65%
70%
75%
80%
$0.0
$50.0
$100.0
$150.0
$200.0
1Q16 2Q16 3Q16 4Q16 1Q17
New Loan Commitments
($ in millions)
Branch repositioning strategy
has put more of the staff in
business development roles
Better sales execution and
leveraging the competitive
advantages of Horizon Analytics
Increasing loan production
partially offset by declining
utilization rates
C&I Line Utilization
ASSET QUALITY
_________________________________
9
$38.8
$29.7
$68.5
$53.9
$37.1
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
3/31/16 6/30/16 9/30/16 12/31/16 3/31/17
Classified Assets
($ in millions)
Complete overhaul of credit administration in
the first half of 2016
New CCO implemented improved loan
monitoring and underwriting standards
Comprehensive credit review resulted in
significant credit downgrades in Q316
Classified assets have declined 46% since
9/30/16, primarily due to payoffs
Further credit improvement expected in 2Q17
and balance of year as other classified loans
are paid off or upgraded
DEPOSIT COMPOSITION
FOCUSED ON CORE DEPOSITS
_________________________________
$1.05 Billion as of March 31, 2017
Continuing to attract non-interest bearing deposits
Shifted balances out of CDs into savings and money market accounts
Savings and money market balances tend to be stickier and less price sensitive than CDs
Non-interest
bearing
31%
Interest
checking
9%
Savings/Money
Market
35%
Certificates of
Deposit
25%
Core Deposits as a Percentage of Total Deposits
10
43.1%
51.5%
60.6%
68.6%
74.2% 74.8%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 3/31/17
WELL POSITIONED FOR HIGHER INTEREST RATES
_________________________________
11
Fed looking to raise
rates by 50 to 75
basis points in 2017
and current
consensus looks for
same in 2018
Conservative asset
sensitive position
reflects loan portfolio
consisting of short
duration C&I and RE
loans
High proportion of
DDA and core deposit
funding
WELL POSITIONED FOR HIGHER INTEREST RATES
_________________________________
12
Balance Sheet Highlights
($ in 000s) Yield/Cost Duration
3/31/17 3/31/16 3/31/17 3/31/16 3/31/17 3/31/16
Total Investments $210,634 $224,241 0.41% 0.44% 0.8 0.6
Net Loans $943,305 $832,335 4.53% 4.31% 1.8 1.9
Total Assets $1,153,939 $1,056,576 3.78% 3.49% 1.6 1.6
Non Maturity Deposits $789,561 $687,065 0.34% 0.31% 4.5 4.2
Time Deposits $265,698 $255,794 1.12% 0.95% 0.7 0.7
Total Deposits $1,055,259 $942,859 0.54% 0.48% 3.5 3.3
STRONG CAPITAL POSITION
_________________________________
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
TOTAL CAPITAL RATIO TIER 1 CAPITAL RATIO COMMON EQUITY TIER 1
CAPITAL RATIO
12.5%
11.3%
9.7%
10.0%
8.0%
6.5%
PMBC WELL-CAPITALIZED REQUIREMENT
13
As of March 31, 2017
OUTLOOK
_________________________________
Strong loan growth in 2017 and beyond
Growing business banking relationships
Increasing focus on larger operating companies ($5-$10 million credits)
Increasing net interest margin
Well positioned to benefit from rising interest rates
Improving mix of higher yielding earning assets
Higher non-interest income
New business clients using more treasury management products
Relatively stable expense levels
Investment in infrastructure offset by a decline in professional fees
Improving credit quality with manageable credit costs
Continue moving lower quality credits out of the bank
Leading to steady increase in profitability
14
I n v e s t o r R e l a t i o n s :
C u r t C h r i s t i a n s s e n
( 7 1 4 ) 4 3 8 - 2 5 3 1
C u r t . c h r i s t i a n s s e n @ p m b a n k . c o m
15
Non-GAAP Metric Reconciliation
Net Income to Pre-Provision Pre-Tax Earnings
($ in 000s)
16
1Q16 2Q16 3Q16 4Q16 1Q17
Net Income $284 -$4,710 -$30,526 $309 $1,781
Add Back: Provision for Loan Losses $420 $8,720 $10,730 $0 $0
Add Back: Provision for Taxes $198 -$3,559 $20,352 -$159 $49
Pre-Provision Pre-Tax Earnings $902 $451 $556 $150 $1,830