FIG Investor Conference

Transcription

1 FIG Investor Conference January 31st, 2018 Mr. Ciaran McMullan President & CEO Mr. Peter Nutz Chief Credit Officer Where Local Matters

2 Forward Looking Statements Except for the historical information in this presentation, the matters described herein contain forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Suncrest Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the Suncrest Bank annual reports which are available on our website. 1

3 Suncrest Bank Overview Nine years old and ~$530M in assets Young Management Team and Board with insider ownership of ~15% Located in agricultural heartland of CA s Northern and Southern Central Valley Yuba City Commercial lending focus on small business, agribusiness and SBA. Strong core business and personal deposits and sound credit quality Outstanding growth since new management took over in April 2013 (3/31/13 to 9/30/17 asset growth of 429%) 1 st in California over that time period 13 th in the US Nov 2017 announced acquisition of $325M Community Business Bank (Sac/Lodi) Fresno Visalia Kingsburg Porterville Numerous performance awards including: Rated 5 Stars Superior by Bauer Financial OTCQX Top 50 for 2017 &

4 Our Leadership Team Executive / Director Relevant Work Experience Ciaran McMullan Chief Executive Officer Age: 48 Suncrest President & CEO since April 2013 Previously CEO of ~$6 billion National Australia Bank (NAB) Americas Group operating in Midwest & Brazil (including the ~$4 billion Great Western Bank) Previously served as Chairman of Great Western Bancorp (GWB) Banking Partner with Ernst & Young / Cap Gemini EY 25 years of industry experience Peter Nutz Chief Credit Officer Age: 54 Suncrest CCO since Jan 2015 Previously EVP / Executive Credit Risk Director with Rabobank Group Head of Ag Credit for the US Prior to Rabobank, Mr. Nutz held various senior credit officer positions at other institutions 27 years of experience in credit risk management Jean Carandang Chief Financial Officer Age: 52 Suncrest CFO since March 2016 Previously CFO of ~$1bn NASDAQ listed Simplicity Bank Held multiple senior finance and risk roles including with Quaker City Bank, PFF Bank & Trust Formerly Audit Manager with KPMG in Los Angeles 25 years of industry experience Steve Jones Chief Operating Officer Age: 55 Suncrest COO since Dec 2016 Previously CEO & CFO of Security First Bank, Fresno Also President and CFO at The Grange Bank, OH and multiple roles with JP Morgan Chase/Banc One including oversight of Bank Consolidation & Acquisition 28 years of industry experience 3

5 Strategic Emphasis Shifting From Growth to Profitability Previous focus on $500 million in assets in five years Growth in Current Locations Open in new strategically attractive locations Open businesses not branches Specialize in sectors critical to Central Valley economy Seek out acquisition opportunities Key Markets Visalia-Kingsburg Porterville Yuba-Sutter Fresno New increased focus on profitable growth Organic Growth Sector Specialization Key Sectors Agriculture Government Guaranteed SBA, USDA, FSA Key Measures Improved Earnings Improved ROA Improved Operating Leverage Focus on Profitability Local Market Business Model 4 Targeted M&A Key Questions Right Bank Right Location Right Deal

6 Demonstrated Ability to Grow Organically & via M&A Suncrest has proven ability to successfully integrate acquisitions-and-grow organically Sutter Community Bank acquired Dec 15 Security First Bank acquired Dec 16 While maintaining healthy asset quality and operational efficiency (1) NPAs include all nonaccrual loans, loans 90+ days past due, restructured loans and OREO. (2) Excluding impact of DTA write down in December 2017 Year-End Financials ($000) 2017 Total Assets $528,917 Asset Growth 18.2% Total Deposits $468,100 Deposit Growth 20.0% Total Loans $353,368 Loan Growth 14.9% NPAs / Assets (1) 0.18% ROAA (2) 0.96% Efficiency Ratio (2) 59.32% Total Loans ($000) Total Deposits ($000) $400,000 $353,368 $500,000 $466,901 $300,000 $400,000 $300,000 $200,000 $200,000 $100,000 $82,178 $100,000 $86,256 $0 3/31/2013 (Prior Mgmt) 12/31/2017 $0 3/31/2013 (Prior Mgmt) 12/31/2017 Suncrest has grown by 429% since new management took over in April 2013, making it the fastest growing bank in California, 5 and the 13 th fastest in the U.S. over that period

7 Suncrest Leads Growth In California and Nationally New management took over in April 2013 Top 10 Fastest Growing Banks in California (1) Top 15 Fastest Growing Banks in the U.S. (1) ($ in Millions) Asset Growth ($ in Millions) Asset Growth Q3'17 Q3'17 Institution Ticker City, State Asset Growth Assets 1 Suncrest Bank SBKK Visalia, CA 429.7% $529 2 Banc of California, Inc. BANC Santa Ana, CA ,280 3 First Foundation Inc. FFWM Irvine, CA ,052 4 Pacific Premier Bancorp, Inc. PPBI Irvine, CA ,532 5 PacWest Bancorp PACW Beverly Hills, CA ,243 6 Commercial Bank of California NCAL Irvine, CA San Diego Private Bank PBAM Coronado, CA Pacific Commerce Bank PCBC Los Angeles, CA American Riviera Bank ARBV Santa Barbara, CA BofI Holding, Inc. BOFI San Diego, CA ,582 Average 305.0% $5,467 Median 307.7% $2, Q3'17 Q3'17 Institution Ticker City, State Asset Growth Assets 1 TriCentury Bank De Soto, KS % $87 2 Oakwood Bank Dallas, TX 1, Bank3 Memphis, TN Peoples State Bank Manhattan, KS NexBank Capital, Inc. Dallas, TX ,634 6 Texas Exchange Bank, SSB Crowley, TX ,078 7 Vintage Bank Kansas Leon, KS Comenity Capital Bank ADS Salt Lake City, UT ,970 9 Banco Do Brasil Americas BBAS3 Miami, FL Hanover Community Bank Garden City Park, NY Auto Club Trust, FSB Dearborn, MI Franklin Financial Network, Inc. FSB Franklin, TN , Suncrest Bank SBKK Visalia, CA 429.7% $ Bank of the Ozarks OZRK Little Rock, AR , Core Bank Omaha, NE Average 808.9% $2,945 Source: SNL Financial. (1) Asset growth is calculated from 12/31/2013 to 9/30/ Median 620.6% $501

8 Focus on Improved Profitability Going Forward Net Income (Excluding One Time Expenses) Operating Revenue $6,000 $24,000 $22,292 $5,000 $4,816 $20,000 $4,000 $1,430 $16,000 $3,000 $12,000 $2,000 $1,000 $499 $3,386 $8,000 $4,000 $4,511 $0 3/31/2013 LTM (Prior Mgmt) 12/31/2017 LTM $0 3/31/2013 LTM (Prior Mgmt) 12/31/2017 LTM Noninterest Expense / Avg. Assets Interest Expense / Avg. Assets 4.50% 4.00% 3.50% 3.00% 2.50% 3.85% 3.30% 2.98% 3.22% 2.92% Excluding one-time non-recurring expenses (1) 2.71% 2.54% 2.50% 0.40% 0.30% 0.20% 0.10% 0.36% 0.27% 0.17% 0.19% 0.22% 0.23% 0.19% 0.21% 2.00% 2.4% 1.50% Q1'17 Q2'17 Q3'17 Q4' % Q1'17 Q2'17 Q3'17 Q4'17 Source: SNL Financial, Company Management. (1) Non-recurring expenses include deferred tax asset write-down and one-time merger expenses. 7

9 How we execute on M&A We have successfully structured deals that minimize dilution for existing shareholders Dilution earned back to pre-deal TBVPS in 4 months for Sutter and ~13 months for Security First Significant value accretion for acquired shareholders: SFRK shareholders up 76% 1 SUTB shareholders up 122% 1 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Market Performance SBKK TBVPS SBKK Stock Price Average Daily Trading Volume 3,814 3,951 3,676 3,688 $10.50 $11.07 $10.50 $10.00 $10.00 $8.20 $8.00 $7.51 $7.63 $7.83 $8.03 $8.02 1,881 1,470 Q3 ' 16 Q4 ' 16 Q1 ' 17 Q2 ' 17 Q3 ' 17 Q4 ' 17 4,500 3,750 3,000 2,250 1, $8.60 $8.40 $8.20 $8.00 $7.80 $7.60 $7.40 $7.20 $7.00 $7.98 TBVPS Above Pre-deal TBVPS SBKK TBVPS $7.78 $7.91 $8.06 TBV Earnback $8.20 $7.51 $7.63 $7.83 Source: SNL Financial, Company Management. (1) Based on acquired bank s closing share price on the day before deal announcement; SBKK stock price as of 12/31/2017. $8.03 $8.02 $8.24 Q3 ' 15 Q4 ' 15 Q1 ' 16 Q2 ' 16 Q3 ' 16 Q4 ' 16 Q1 ' 17 Q2 ' 17 Q3 ' 17 Q4 ' 17 Q1 ' 18E 8 $0.25 $0.20 $0.15 $0.10 $0.05 $- $0.08 $0.09 $0.06 Earnings Per Share Accretion $0.06 $0.14 $0.13 $0.12 $0.02 Quarterly EPS excluding merger costs $0.10 Quarterly EPS $0.17 $0.19 $0.18 $0.01 Q3 ' 15 Q4 ' 15 Q1 ' 16 Q2 ' 16 Q3 ' 16 Q4 ' 16 Q1 ' 17 Q2 ' 17 Q3 ' 17 Q4 ' 17

10 Acquisition of Community Business Bank Merger Highlights Central Valley California by County (1) Approximately $900 million in pro forma assets at close Immediately accretive to earnings in year one (2) by over 40% Expands Suncrest s footprint into the Greater Sacramento market Internal rate of return greater than 35% Potential pro forma market capitalization of $142 (3) million CBBC Key Financials (4) Total Assets ($mm) $325.5 Gross Loans ($mm) $242.2 Total Deposits ($mm) $267.6 Loans / Deposits 90.5% NIB Deposits / Total Deposits 34.0% TCE / TA 10.0% Total Capital Ratio 13.4% LTM ROAA 1.12% LTM ROATCE 11.3% LTM NIM 3.98% LTM Efficiency Ratio 56.6% NPAs / Assets 0.00% NCOs / Average Loans 0.00% LLR / Gross Loans 1.04% Suncrest Bank Branch Community Business Bank Branch Community Business Bank LPO Source: SNL Financial. GAAP Financials as of September 30, (1) Counties included in the Central Valley are Amador, Butte, Calaveras, Colusa, El Dorado, Fresno, Glenn, Kern, Kings, Madera, Mariposa, Merced, Nevada, Placer, Sacramento, San Joaquin, Solano, Stanislaus, Sutter, Tehama, Tulare, Tuolumne, Yolo, and Yuba County (2) First full year following deal close (3) Based on Suncrest s stock price of $11.59 as of November 6, (4) GAAP Financials as of September 30, 2017.

11 Suncrest s Strategic Rationale for the Merger 1. Location Is there a geographical fit? Access to expanding Sacramento metropolitan market Expands existing footprint in Central Valley Previously acquired Sutter Community Bank in December 2015 CBBC continues to experience superior asset growth, averaging 20% from 2012 through 2016 and 14.4% YoY as of Q Bank Is there a capability & cultural fit? Clean balance sheet with no NPAs or OREO Strong earnings performance with an ROAA of 1.18% (1) Identical core banking platform Shared expertise in ag and government guaranteed lending (SBA, USDA/FSA) Transformational opportunity for Suncrest 3. Deal Does the deal make sense? Immediately EPS accretive in year one and beyond Attractive ROIC, highly positive NPV and acceptable earn-back Enhances potential for increased liquidity and a major exchange listing in the future Supported by our key capital partners Source: SNL Financial, company management. (1) ROAA based on GAAP financials as of or for the quarter ending September 30,

12 Transaction Overview Deal pricing is $23.75 per share Transaction Pricing Equivalent to 1.86x TBV or 17.6x LTM EPS Plus cash out of CBBC options for approximately $2.1 million Total aggregate transaction value of $62.5 (1) million (inclusive of the options) CBBC shareholder election for either $23.75 in cash or shares of Suncrest common stock Transaction Structure Election is subject to automatic proration such that 50% of CBBC shares receive cash and 50% of CBBC shares receive stock Suncrest shares issued at $10.50 per share. Implied exchange ratio of (2.262 as if all stock) Pro forma ownership as of 2017 close: 76.5% Suncrest / 23.5% CBBC (2) Closing & Approvals Expected closing in Q Customary regulatory approvals Suncrest and CBBC shareholder approvals (1) Assumes Suncrest stock price of $10.50 (2) Based on 7,002,594 SBKK common shares outstanding as of September 30,

13 Pro Forma Financial Impact and Assumptions Estimated Pro Forma Financial Impact Year One EPS Accretion > 40% TBV Earnback ~ 5 years Selected Transaction Assumptions Cost savings - 35% of CBBC NIE - 75% realized in year one Key Marks - Credit mark equal to ALLL Internal Rate of Return > 35% TCE / TA: 9.1% Leverage Ratio: 9.75% Total Risk Based Capital Ratio: 12.5% Intangibles Revenue Synergies Transaction / Financing Costs - CDI of 1.2% - Goodwill of $27.8 million - none - $5.5 million approximately (pre-tax) Note: Based on Suncrest shares issued at $10.50 per share 12

14 Pro Forma Loan & Deposit Composition SBKK and CBBC have similar lending philosophies that will create a pro-forma portfolio with minimal integration risks, strong weightedaverage loan yield, and will result in larger lending limit that will better serve customer lending needs Suncrest continues to be successful at attracting and retaining core deposits that could potentially lead to further margin expansion when combined with Community Business Bank s high loan growth track record SBKK CBBC Pro Forma Loan Composition Non-Owner- Occupied CRE 25.5% HELOC 1.7% Owner- Occupied CRE 13.3% Ag Production 6.2% Farm 21.0% C&I 10.8% Residential 11.4% Construction 4.9% Multifamily 5.1% Non-Owner- Occupied CRE 18.2% Ag Production 5.1% HELOC 0.3% Owner- Occupied CRE 12.0% Consumer & Other Consumer & 11.8% C&I Ag Other C&I 18.2% Production 5.0% 5.7% 13.9% Farm 16.0% Residential 3.4% Construction 10.6% Multifamily 4.5% Non-Owner- Occupied CRE 22.4% HELOC 1.1% Owner-Occupied CRE 12.7% Farm 18.9% Residential 8.0% Construction 7.3% Multifamily 4.9% Gross Loans: $347.5mm Yield on Loans: 6.08% Gross Loans: $242.2mm Yield on Loans: 5.46% Gross Loans: $589.7mm Yield on Loans: 5.83% Retail Time 8.7% Jumbo Time 6.8% Retail Time 22.8% Retail Time 13.9% Deposit Composition Other- Interest Bearing 49.2% Non-Interest Bearing 35.2% Other-Interest Bearing 27.2% Non-Interest Bearing 34.0% Jumbo Time 16.0% Other-Interest Bearing 41.2% Non-Interest Bearing 34.8% Jumbo Time 10.2% Deposits: $467.4mm Cost of Deposits: 0.22% Deposits: $267.6mm Cost of Deposits: 0.57% Deposits: $735.1mm Cost of Deposits: 0.34% Loans / Deposits 74.3% 90.5% 80.2% Source: SNL Financial. Bank Level Regulatory Financials. Note: Regulatory financial data as of or for the quarter ended September 30, No purchase accounting adjustments assumed. 13

15 Prudent & Responsible Organic and M&A Growth $400 High Quality Loan Growth has been a Focus for the Management Team Gross Loans (Prior Mgmt) Gross Loans (New Mgmt) NPLs / Gross Loans 2.50% $350 Acquisition of Security First $337 $353 $300 $250 Acquisition of Sutter $208 $231 $ % 1.50% $200 $150 $100 $50 $55 $70 $80 $82 $88 $94 $106 $125 $ % 0.50% $ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q % Legacy Suncrest less than $150,000 in charge-offs since inception. Sutter Acquisition in 2015: Acquired $3.8M in non-accrual loans and $0.6M in OREO Significant write down of Sutter of NPLs and OREO Security First Acquisition in 2016: Less than $150,000 in OREO and small NPL portfolio Maintaining prudent reserves of ~1.27% (excluding acquired portfolios) Source: SNL Financial, Company Management. 14

16 High Yield and Low Cost of Deposits Through Rapid Growth Loan Trends $400 $350 $ % 6.47% Total Loans ($mm) Yield on Loans Core Yield on Loans Excludes discount accretion and recoveries 6.28% 6.42% 5.73% 6.08% 5.58% 5.64% 5.64% 5.62% 5.58% 5.65% 5.62% 5.58% 5.77% 5.94% 5.98% 5.80% 7.00% 6.50% 6.00% $ % $ % 5.00% $150 $ % 4.40% 4.50% 4.00% $50 $0 $82 $88 $82 $94 $97 $106 $119 $125 $127 $139 $149 $208 $219 $231 $222 $308 $316 $337 $347 $353 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Deposit Trends 3.50% 3.00% $500 $ % 0.41% 0.39% 0.42% 0.37% Total Deposits ($mm) Cost of Funds 0.50% 0.40% $ % 0.28% 0.29% 0.22% 0.20% 0.20% 0.21% 0.19% 0.22% 0.25% 0.24% 0.25% 0.25% 0.22% 0.23% 0.30% $ % $ % $0 $86 $93 $106 $110 $136 $143 $158 $166 $165 $175 $187 $257 $256 $275 $311 $389 $392 $425 $467 $467 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q %

17 Significant core growth & highly successful acquisitions over last three years ($ in Millions except for per share data) Strong Balance Sheet Growth Fiscal Year End 2015Y 2016Y 2017Y 2017Y * Total Assets $296.9 $447.7 $528.9 Total Loans $208.4 $307.5 $353.4 Annualized Loan Growth Rate 47.6% 14.9% Total Deposits $256.7 $389.0 $466.9 Annualized Deposit Growth Rate 51.5% 20.0% Core Deposits / Total Deposits 89.9% 89.8% 92.7% Loans / Deposits 81.2% 79.1% 75.7% Securities / Assets 18.3% 12.0% 17.1% Well Capitalized Balance Sheet TCE / TA 13.1% 11.8% 10.7% Leverage Ratio 13.2% 11.7% 10.6% Tier 1 Ratio 16.1% 13.9% 13.6% Risk-based Capital Ratio 17.0% 14.5% 14.5% Improving Asset Quality NPAs / Assets (1) 1.54% 0.47% 0.18% NPLs / Loans 1.88% 0.43% 0.19% Reserves / Gross Loans 1.08% 0.81% 0.97% OREO $0.6 $0.8 $0.3 Total NPAs $4.6 $2.1 $1.0 Earnings & Efficiency Continue to Improve Net Income $0.91 $1.73 $3.39 $4.82 Annualized Net Income Growth Rate 90.6% 95.4% 177.9% (3) Operating Revenue (2) $9.41 $14.55 $22.29 Net Interest Margin 4.08% 4.13% 4.65% ROAA 0.41% 0.50% 0.69% 0.96% (4) ROAE 3.0% 4.1% 5.7% 7.85% (4) Efficiency Ratio 77.1% 76.7% 59.3% 59.3% (4) * Adjusted for non-recurring costs Source: SNL Financial, Company Management. (1) NPAs include all nonaccrual loans, loans 90+ days past due, restructured loans and OREO. (2) Pre provision net interest income + recurring noninterest income. (3) Excluding impact of deferred tax asset write-down AND - merger expenses. (4) Excluding impact of deferred tax asset write-down ONLY 16

18 Well Diversified Loan Portfolio and Deposit Composition 2017Y Loan Composition 2017Y Deposit Composition Other construction 3.5% Ag production 5.7% Multifamily 5.2% Revolving 1-4 Family 1.3% Consumer & Other Loans 0.1% Non-Owner Occupied CRE 26.4% Retail Time 7.5% Jumbo Time 7.4% 1-4 Family 11.5% Other-Interest Bearing 50.4% Owner Occupied CRE 14.3% Farmland 21.1% Non-Interest Bearing 34.8% Commercial 11.1% LTM Yield on Total Loans & Leases 6.10% LTM Cost of Int-bearing Deposits 0.35% Loan Composition ($000) Weight (%) Non-Owner Occupied CRE 93, % Farmland 74, % Commercial 39, % Owner Occupied CRE 50, % 1-4 Family 40, % Multifamily 18, % Ag production 20, % Other construction 12, % Revolving 1-4 Family 4, % Consumer & Other Loans % Total Loans 353, % Deposit Type ($000) Weight (%) Retail Time 131, % Jumbo Time 122, % Non-Interest Bearing 84, % Other-Interest Bearing 50, % Total Deposits 388, % Source: Company data. Note: Financial data for the quarter ended Dec 31,

19 Investment Summary 1. Premier Management Team With Equity Strong organic growth track record Completed over 20 acquisitions Management & Board hold significant equity through personal investment 2. High Growth Bank with opportunity to leverage asset base Balance sheet growth focused for last three years Emphasis shifting to earnings / operating leverage Simple capital structure, solid credit quality, diversified & high yielding portfolio Asset sensitive: positioned to take advantage of rising rates 3. Attractive Market for Community Banking Less Big Bank competition. Central Valley markets non-core for many. Less Community Bank competition. Six sold in our footprint since 2012 Niche Differentiation: SBKK is one of only seven ag-banks (1) in CA New markets recently opened up in Sacramento ( 18) and Fresno ( 17) 4. Positioned for Business Expansion (1) Ag loans > 20% of total loans One of only 9 companies to make OTCQX Top 50 list in 17 & 18 Post acquisition shares outstanding of >12.3 million Potential market cap > $150 million Potential for inclusion in the Russell