Exhibit 99.2
Greater Bay Bancorp slide presentation
for January 28, 2004 Smith Barney Citigroup Financial Services conference
Greater Bay
Bancorp
Smith Barney Citigroup Financial Services Conference January 28, 2004
Greater Bay Bancorp
Certain matters discussed in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements relate to the Company’s current expectations regarding future operating results, the bank subsidiary consolidation, net interest margin, net loan charge-offs, asset quality, level of loan loss reserves, growth in loans and deposits and the strength of the local economy. These forward looking statements are subject to certain risks and uncertainties that could cause the actual results, performance or achievements to differ materially from those expressed, suggested or implied by the forward looking statements. These risks and uncertainties include, but are not limited to: (1) the impact of changes in interest rates, a decline in economic conditions at the international, national and local levels and increased competition among financial service providers on the Company’s results of operations, the Company’s ability to maintain its net interest spread, and the quality of the Company’s earning assets; (2) any difficulties that may be encountered in integrating newly acquired businesses, consolidating the bank subsidiaries and in realizing operating efficiencies; (3) government regulation; and (4) the other risks set forth in the Company’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10- K for the year ended December 31, 2002. Greater Bay does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements
Table of Contents Agenda I. Overview of Greater Bay Bancorp II. Recent Developments III. Financial Highlights IV. Looking Forward: Our Strategy for 2004 and Beyond V. Investment Rationale VI. Appendix
Overview of Greater Bay Bancorp
Company Snapshot—December 31, 2003
Company Name | Greater Bay Bancorp | ||
Nasdaq NM | GBBK | ||
Shares Outstanding | | 52.5 million | |
Market Value(1) | $ | 1.6 billion | |
Assets | $ | 7.6 billion | |
LTM Net Income | $ | 92.0 million | |
Common Equity | $ | 658.8 million | |
Preferred Equity: | |||
Convertible Preferred | $ | 91.8 million | |
Perpetual Preferred | $ | 15.3 million
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(1) Calculated using closing price of GBBK stock on 1/20/04
Experienced Senior Management TeamOverview
President & CEO | Byron A. Scordelis | 25+ | |||
Chief Financial Officer | Steven C. Smith (1 | ) | 25+ | ||
Chief Information Officer | Gregg Johnson | | 25+ | ||
Chief Risk Officer | Kenneth Shannon | | 20+ | ||
Chief Administrative Officer | Kimberly Burgess | | 30+ | ||
EVP, Finance and Accounting | Shawn E. Saunders | | 15+ | ||
EVP, Human Resources | Peggy Hiraoka | | 25+ | ||
Community Bank Presidents | 20+ avg. | ||||
GBBK Board of Directors | 20+ avg. | ||||
19 diversified and seasoned directors | |||||
Community Bank Boards of Directors | 20+ avg. | ||||
90 diversified and seasoned directors |
(1) Announced intention to retire, but will continue his employment during the search process. Upon his retirement, Mr. Smith will serve as a consultant to the Company.
Franchise Overview
Overview
Regional Community Banking
Formed in late 1996 with merger of Cupertino National Bancorp and Mid-Peninsula BancorpCurrently largest independent community bank holding company headquartered in Northern California with assets of $7.6 billion, loans of $4.5 billion and deposits of $5.3 billionDiversified financial services company offering a full range of products and servicesñ Business Banking focus (small and mid-sized businesses)ñ Personal Banking presence among high net worth individuals, owners/managers of business banking clients and custom banking for individualsñ Trust and investment servicesñ Insurance brokerage services
Franchise Overview
Overview
Unique characteristics of GBBKñ”
Regional Community Banking” – maintain strong community involvement in order to fully understand client’s business and personal needsñOpportunistic and strategic acquirer of financial services companiesEleven community banks with 42 offices in 8 counties located in the San Francisco Bay areaOn February 1, 2004, the banks will be consolidated but will continue to maintain their local names and community identification
Proven Ability to Manage Acquired Businesses
Overview
Formation of GBBK $0.6 BFormation ofAcquired Growth Organic Growth Total Assets$ 3.0 B $ 4.0 B $ 7.6 B
Acquisition Strategy—“Ring the Bay”
OverviewGreater Bay now has a presence in all of the key sub-markets of the San Francisco Bay Area
Date | Seller | Assets At Acquisition | ||||
12/97 | Peninsula Bank of Commerce | $200 | ||||
05/98 | Golden Gate Bank | $150 | ||||
08/98 | Pacific Business Funding | $ 15 | ||||
05/99 | Bay Area Bank | $200 | ||||
10/99 | Bay Bank of Commerce | $200 | ||||
01/00 | Mt. Diablo National Bank | $250 | ||||
05/00 | Coast Commercial Bank | $400 | ||||
07/00 | Bank of Santa Clara | $400 |
(1) Gross annual revenues of $110 million
(2) Gross annual revenues of $10 million
Business Lines
Overview
management of $0.6 Wealth Management Trust Private Banking Assets under Billion ? ? ? Specialty Finance International/Trade Finance Leasing Factoring Asset Based Lending SBA Lending Assets of $0.9 Billion $7.6 Billion ? ? ? ? ? ? 12 Diversified Financial Services Provider Total Assets: (1) Insurance Premiums > $1 billion Revenue > $120 million Offering P&C, D&O, Employee Benefits, 401(k) Products ? ? ? Regional Banking 11 Banks 42 Offices Local Client Decision Making Local Management and Board Assets of $6.1 Billion No underwriting risk. Business Lines ? ? ? ? ? ___________________________ (1)
Recent Developments
Recent Developments
Insurance brokerage operations expanded to improve non-interest income diversification
Charter consolidation in progress
Enhanced enterprise-wide risk management processes implemented
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Charter ConsolidationRecent DevelopmentsSeptember / October / February January 2004 October 2003 November Approved by Public GBBK andApplication ProcessFinal approval Legal charterIntegration / Consolidationannouncement subsidiary(45-60 days)of application consolidation(12-18 months)expected banksPotential BenefitsGreater efficiencyImprove relationship pricingMaintain community presence andEnhance risk management relationshipsReduce operational / regulatoryOptimize resource allocation complexityEnhance product development
Enhanced Risk ManagementRecent DevelopmentsFocus on infrastructure – Key Accomplishments in 2003Hired Chief Risk OfficerEstablished dedicated risk management departmentñComplianceñCredit reviewñInternal auditñRisk management / assessmentsñInsuranceMet all risk management requirements under cure agreementñSustained complianceEngaged E-Risk to assist in establishing capital-at-risk modelñUnderstand and optimize capital allocation and returnsñEvaluate credit portfolio concentration and limitsEnhanced capital and IRR analysis and stress testing
ABD Insurance and Financial ServicesRecent DevelopmentsWe completed the acquisition of ABD Insurance and Financial Services (currently the 20thlargest commercial insurance brokerage agency in the country) in March 2002It has been a very successful partnership and, during 2003, ABD provided $117.5 million in fee income with no underwriting risk
Significant Growth in Insurance Income
Recent Developments
Insurance Fee Income Insurance Fee Income / Total Revenue
ABD Insurance and Financial Services
Recent Developments
Product FocusñP & CñD & OñEmployee benefitsñ401K products
Great opportunity for cross selling relationshipsABD completed the acquisition of Sullivan and Curtis Insurance Brokers in July 2003ñ
The firm generates annual revenues of approximately $10 millionñ
The acquisition was neutral to 2003 earnings and marginally accretive to 2004 earnings
Financial Highlights
Q4 2003 Financial HighlightsFinancial HighlightsNet Income—$21.4 millionFully Diluted EPS—$0.37Return on Average Assets of 1.10%Return on Average Tangible Assets of 1.13%(1)Return on Average Common Equity of 13.05Return on Average Tangible Equity(2)of 16.26%
(1) Average tangible assets includes total assets, less average goodwill and intangibles of $212.5 (2) Average tangible equity includes average convertible preferred stock of $91.8 million and excludes average intangibles of $212.5
Q4 2003 Financial Highlights
Financial Highlights
Non-interest inco1me $40.5 million – 35% of Total RevenueDeposit Growth – 0.77% year over yearCore Deposit Growth – 3% year over year excluding brokered depositsLoan Growth – $ 36.3 million in year over year loan growth in our business portfolio offset by payoffs in Shared National Credit (SNC) portfolio ($43.2 million) and real estate construction portfolio ($173.9 million)
Net Interest Margin
Financial Highlights
GBBK is asset sensitiveOver the last year, MBS portfolio has declined approximately $ 415 million as plannedInvestment strategy continues to be to invest in short duration securitiesñGive up current yield for stable valueñPosition Company to take advantage of rising rates in 2004 and beyond
Financial Highlights 23 Give up current yield for stable value Position Company to take advantage of rising rates in 2004 and beyond GBBK is asset sensitive Over the last year, MBS portfolio has declined approximately $415 million as planned Investment strategy continues to be to invest in short duration securities - - Net Interest Margin ? ? ?
Net Interest Margin
Financial Highlights
Management in a Volatile Environment
Non-Interest Income(1)
Financial Highlights
Grow insurance agency fees
Expand wealth management capability
2001 | 2002 | 2003 | |||||||||||||||||||||
% of Total | | % of Total | | % of Total | | ||||||||||||||||||
Total $ Revenue |
| Total $ Revenue | Total $ Revenue | ||||||||||||||||||||
$ | 44.8 | 12.7 | % | $ | 155.5 | 31.0 | % | $ | 171.5 | 37.0 | % |
(1) As a result of the ABD acquisition in March 2002, the Company’s 2002 results included 10 months insurance agency commissions and fees totaling $88.5 million with a full year in 2003. There were no such insurance agency commissions in 2001.
Credit Quality
Financial Highlights
Credit quality generally stableñIn spite of recent weakness in regional economyLoan loss reserves continue to exceed our peersCurrent outstandings in the non-relationship SNC portfolio have been reduced to less than $20 millionAttention to relationship-based business, portfolio concentrations, and discipline in underwriting remain at the core of credit culture.
Credit Quality
Financial Highlights | ||||||||||||||||||||||||
NON-PERFORMING ASSETS | $ | in millions | | Q4 2003 | Q3 2003 | Variance | ||||||||||||||||||
Commercial | $ | 14.4 | $ | 8.1 | $ | 6.3 | ||||||||||||||||||
Real Estate Term and Construction | 17.1 | 17.4 | (0.3) | |||||||||||||||||||||
SBA | 4.8 | 6.4 | (1.6) | |||||||||||||||||||||
Shared National Credits | 12.7 | 15.2 | (2.5) | |||||||||||||||||||||
Venture Banking Group | 3.5 | 3.6 | (0.1) | |||||||||||||||||||||
Specialty Finance | 8.6 | 6.7 | 1.9 | |||||||||||||||||||||
Other | 0.6 | 0.7 | 0.1 | |||||||||||||||||||||
Total Non-performing Loans | 61.7 | 58.1 | 3.6 | |||||||||||||||||||||
OREO | 0.0 | 0.0 | 0.0 | |||||||||||||||||||||
Total Non-performing Assets | $ | 61.7 | $ | 58.1 | $ | 3.6 | ||||||||||||||||||
Non-performing Loans to Total Loans | 1.37% | 1.26% | 0.11% | |||||||||||||||||||||
Non-performing Assets to Total Assets | 0.81% | 0.75% | 0.06% |
Credit QualityFinancial HighlightsQ4 2003
(1) * Peer data as of September 30, 2003. Custom peer group defined by GBBK -
Financial Highlights Dec-03 Sep-03 Jun-03 Mar-03 UBPR Peer Allowance as % of Loans Dec-02 Sep-02 29 Jun-02 Quarter Ending Mar-02 GBBK Allowance as % of Loans Dec-01 Sep-01 Jun-01 Mar-01 YTD Annualized Net Charge-offs Credit Quality Trends in the Level of Allowance and Charge-offs 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% % of Loans
Financial Highlights Consumer $0.4 $0.5 $0.9 CRE & Construction -$2.4 $9.5 $5.3 Other C&I $11.4 $13.5 $5.8 SNC $15.2 $13.8 $10.1 30 Matsco $0.7 $17.5 $9.5 Total $25.2 $54.8 $31.6 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 -$10.0 2001 2002 2003 Credit Quality Net Charge-offs Peaked in 2002 $ in millions
Financial Highlights 1-4 SFR 52% Warehouse 1% Total: $431.3 mm Industrial 2% Construction Loans (12/31/03) Retail 5% Office 20% Hotel/Motel 1% Other RE 3% Self Storage 4% Multifamily 12% 31 Office 38% Retail 15% Self Storage 3% Total: $1,733.0 mm Term Loans (12/31/03) Warehouse 4% Industrial 11% 1-4 SFR 4% Multifamily 3% R&D 5% Commercial Real Estate Loan Portfolio Other RE 8% Hotel/Motel 9%
Financial Highlights Santa Clara 36% San Mateo 13% Placer 1% Solano 1% Sacramento 1% By County (12/31/03) Monterey 2% Alameda 13% Marin 4% Sonoma 5% 5% Other 6% 7% Contra Costa Santa Cruz 6% San Francisco 32 Owner Occupied / Owner Operator 42% Total: $1,733.0 mm By Owner Occupied (12/31/03) SFR 4% Real Estate Term Loan Portfolio Non-Owner Occupied 54%
Santa Clara 35% Financial Highlights San Francisco 16% Sacramento 1% Solano 2% Sonoma 2% By County (12/31/03) San Mateo 12% Orange 2% Other 2% Marin 4% Contra Costa 5% Alameda 9% Santa Cruz 10% Total: $431.3 mm 33 Non-Owner Occupied 25% Owner Occupied / Owner Operator 23% By Owner Occupied (12/31/03) Real Estate Construction Loan Portfolio SFR 52%
Financial Highlights Minimum to be Well-Capitalized N/A 5.00% 6.00% 10.00% (3) Top 75 Banks 9/30/03 6.92% 7.71% 10.51% 13.25% (2) Peer Group 9/30/03 7.20% 7.99% 11.11% 13.46% 34 (1) GBBK 12/31/03 7.33% 9.98% 12.87% 14.13% Tangible Equity includes Shareholders’ Equity, Convertible Preferred Stock and REIT Preferred Securities, less Goodwill and Other see schedule A Intangibles. Custom peer group defined by GBBK - Top 75 banks by asset size at September 30, 2003 Capital Strength Tangible Equity Ratio Leverage Ratio Tier I Risk Based Capital Total Risk Based Capital ___________________________ (1) (2) (3)
Capital Strength
Financial Highlights
Emphasis on increasing capital ratios during the past year has resulted in tangible equity to asset ratio of 7.33%, up from 6.40% at December 31, 2002
All other capital ratios are substantially in excess of regulatory well capitalized guidelines and peers
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Economic Capital as a Foundation for Enterprise- wide Risk Management
Financial Highlights
We are utilizing an economic capital allocation model that incorporates economic factors, our capital levels in relation to our risk profile 36 developed by ERisk historical factors and our actual operating results to measure Results show returns on risk adjusted capital by business line Results provide framework, based on risk appetite correlated to ratings targets, to optimize capital allocation for enhancing shareholder returns
Required Economic Capital Formulatedto GBBK Risk Appetite
Financial Highlights
$510 GBBK Tangible Actual $411 A $355 BBB (2) $322 $ in millions BB (1) 37 a very
This chart provides an initial look at GBBK’s economic capital position vs. the economic capital required to achieve various credit ratings
GBBK’s Tangible Equity does not include the value of ABD which currently is locked up in goodwill, but is worth more today than when we acquired ABD in early 2002
GBBK’s Tangible Equity does not include an allocation of loan loss reserves in excess of expected losses - conservative assessment
___________________________
(1)No impact on regulatory capital ratios which continue to be maintained above well-capitalized levels
(2)Data as of 12/31/03
Return on Risk Adjusted Capital by Business Unit
Financial Highlights
Risk | |||||||||||||||||||
Economic | Adjusted | ||||||||||||||||||
Capital | | Q4 2003 | Return on | | |||||||||||||||
(1 | ) | (2 | ) | (3 | ) | ||||||||||||||
$ in millions | Required | Net Income | Capital | ||||||||||||||||
Core Banks | $ | 332 | $ | 18.7 | 22 | % | |||||||||||||
ABD | 33 | 0.8 | 10 | % | |||||||||||||||
Greater Bay Trust | 2 | 0.3 | 60 | % | |||||||||||||||
Matsco | 44 | 1.6 | 15 | % | |||||||||||||||
Total Required | 411 | 21.4 | 21 | % | |||||||||||||||
Excess Capital | 99 | 0 | 0 | % | |||||||||||||||
Total Greater Bay | $ | 510 | $ | 21.4 | 17 | % |
___________________________
(1)Required for A/A2 rating per ERisk
(2)Net Income rounded to nearest million
(3)Annualized
Looking Forward: Our Strategy for 2004 and Beyond
Looking forward
“The economy of the Bay Area took a major blow from the post-2000 downturn, and the damage received maximum publicity from a fascinated world.”
McKinsey & Company/Bay Area Council “Downturn and Recovery in Restoring Prosperity” Economic Profile January 2004
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Looking forward
“The Bay Area has proven fairly resilient in the economic downturn. Several fundamental strengths remain in tact such as its highly skilled work force, global presence, and multi-faceted economy…(and) the Bay Area retains its core dynamism, and still has marked advantages over most other comparable regions in the country.”
McKinsey & Company/Bay Area Council “Downturn and Recovery in Restoring Prosperity” Economic Profile January 2004
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Strategic Goals
Looking forward
Reaching greater critical mass in the Company’s market areas Generating increased fee income through cross-selling broader services Continue to diversify revenue stream Continue to mitigate and proactively manage risk Opportunistic market expansion
Mitigate and Proactively Manage Risk
Looking forward
Enterprise-wide Risk Management Maintain Credit Quality Loan Concentration Analysis Focus on Relationships Economic Capital Analysis
Market Concerns About GBBK
Looking forward
The Northern California economy, the state deficit, the dot com fall-out and the technology industry in Silicon Valley Real estate valuations, lease rates and vacancy factors in the San Francisco Bay Area Impact of additional Fed rate decreases on net interest margin Market perception of GBBK’s credit quality and overall risk profile Ability to grown loans
Guidance
Looking forward
Loan growthñ Ranging from the low single to mid-single digits Deposit growthñ Core deposit growth in the mid-single digits, offset by continued reductions in our non-core funding sources, primarily institutional deposits—net result will be a low single digit growth rate in total deposits.
Guidance
Looking forward
Net interest marginñ Current consensus recognized economic forecasts predict that there will be at least two 25 basis point increases in short-term market interest rates in mid to late 2004, which would result in our average net interest margin increasing by 10—30 bps depending on the timing of the rate increases. Credit quality – net charge offs estimated to be in the 60-70 bps range for 2004
Investment Rationale
Well Positioned for an Economic Upturn
Investment Rationale
Our franchise provides competitive opportunities Asset sensitive balance sheet Internal capital generation will support future growth Stable credit quality Increase in fee income from insurance agency and wealth management Increased business activity will bring higher commercial loan volume
Long Term Shareholder Returns(1)
Investment Rationale
11/27/96 – 12/31/03
(1) Total shareholder return, including the reinvestment of dividends
Appendix
Schedule A – Custom Peer Group
Appendix
Allfirst Financial, Inc. | Fulton Financial Corporation | |
Associated Banc-Corp | Greater Bay Bancorp | |
BancorpSouth, Inc. | Hibernia Corporation | |
Bank of Hawaii Corporation | Hudson United Bancorp | |
BOK Financial Corporation | International Bancshares Corporation | |
Bremer Financial Corporation | Mercantile Bankshares Corporation | |
Central Bancompany | Old National Bancorp | |
Citizens Banking Corporation | Provident Financial Group, Inc. | |
City National Corporation | RBC Centura Banks, Inc. | |
Colonial BancGroup, Inc. | Riggs National Corporation | |
Commerce Bancorp, Inc. | Sky Financial Group Inc. | |
Commerce Bancshares, Inc. | South Financial Group, Inc. (The) | |
Community First Bankshares, Inc. | Southwest Bancorporation of Texas, Inc. | |
Cullen/Frost Bankers, Inc. | Susquehanna Bancshares, Inc. | |
F.N.B. Corporation | Synovus Financial Corp. | |
FBOP Corporation | TCF Financial Corporation | |
First Banks, Inc. | Trustmark Corporation | |
First Citizens BancShares, Inc. | UMB Financial Corporation | |
First Midwest Bancorp, Inc. | United Bankshares, Inc. | |
First National of Nebraska, Incorporated | Valley National Bancorp | |
Firstbank Holding Company of Colorado | Whitney Holding Corporation | |
FirstMerit Corporation | Wilmington Trust Corporation |