Preferred Bank Reports Quarterly and Annual Earnings

LOS ANGELES, Jan. 19, 2023 (GLOBE NEWSWIRE) — Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter and year ended December 31, 2023. Preferred Bank (“the Bank”) reported net income of $26.4 million or $1.80 per diluted share for the fourth quarter of 2023. This is an increase of $5.5 million or 26.5% over the same quarter last year and up from the $26.1 million or $1.76 per share posted in the third quarter of 2023. The primary reasons for the increase compared to the prior year was a $4.2 million provision for credit losses recorded in the fourth quarter of last year as compared to a reversal of $900,000 in allowance for credit losses (“ACL”) this quarter, a difference of $5.1 million. In comparison to the third quarter of 2023, net interest income increased $1.7 million, noninterest income was down $818,000 and noninterest expense decreased $564,000.

Fourth Quarter 2023 highlights:

  • Net income of $26.4 million, or $1.80 per diluted share (company all-time high)
  • Linked quarter loan growth (Ex-PPP) of 2.9%
  • Return on average assets (“ROA”) of 1.72%
  • Return on beginning equity (“ROBE”) of 18.65%
  • Pre-provision, pre-tax (“PPPT”) ROBE of 25.82% 1
  • Efficiency ratio of 28.82%

1 This is a non-GAAP measure and linking to the reconciliation on page 5.

Full Year 2023 highlights:

  • Net income of $95.2 million, or $6.41 per diluted share (company all-time high)
  • Loan growth (Ex-PPP) of 10.5%
  • Deposit growth of 17.6%
  • Return on average assets (“ROA”) of 1.74%
  • Return on beginning equity (“ROBE”) of 18.13%
  • Efficiency ratio of 31.40%

Li Yu, Chairman and CEO, commented, “I am very pleased to report fourth quarter 2023 earnings of $26.4 million or $1.80 per diluted share and record full year earnings of $95.2 million or $6.41 per diluted share. Pre-provision, pre-tax revenue (“PPPT”) also was a record this year for Preferred Bank.

“In the midst of this COVID-19 pandemic, the Bank recorded strong growth in loans, deposits and total assets. Loan growth for the quarter, excluding PPP, was 2.9% and for the year was 10.5%. Deposit growth was only 0.6% for the quarter but was a robust 17.6% for the year. Of the $783 million in deposit growth in 2023, almost 90% was in DDA and money market accounts.

“The net interest margin for the fourth quarter was 3.28%, down from last quarter’s 3.36% but this was due to loan growth in the fourth quarter mostly taking place in the latter part of the quarter. The larger asset base and our highly asset sensitive balance sheet bode well for NIM expansion for 2023 and 2023.

“During the quarter, we successfully resolved a $9.2 million nonperforming loan which did not require the use of the set aside allowance for credit loss that was anticipated. Also, in early January of 2023, a $23 million loan which was deemed a troubled debt restructuring (“TDR”) paid off in full. With these two loans resolved, the Bank’s credit quality is close to pristine levels.

“Looking to 2023, we see potential concerns. Inflation is running at levels not seen in decades and thus will result in higher operating costs. The Omicron variant is another major concern although ultimately the data regarding the severity of this variant appears to be encouraging. We must remain confident that our Country will deal with these issues effectively. Meanwhile, we will apply our best efforts to meet these new challenges.”

Results of Operations – Quarter

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $49.4 million for the fourth quarter of 2023. This was an increase from the $47.8 million recorded in the third quarter of 2023 and was well ahead of the $46.1 million recorded in the fourth quarter of 2020. Loan growth was the primary driver of the increase in net interest income as was an increase in investment securities along with a decline in interest expense. The taxable equivalent margin was 3.28% for the fourth quarter of 2023, as compared to 3.36% in the third quarter of 2023 and versus 3.66% for the same period last year.

Noninterest Income. For the fourth quarter of 2023, noninterest income was $1,966,000 compared with $1,356,000 for the same quarter last year and compared to $2,784,000 for the third quarter of 2023. The increase compared to last year was due to a $663,000 loss on sale of securities recorded in the fourth quarter of last year. The decrease from the third quarter of 2023 was mainly due to letter of credit (“LC”) fees which were down by $858,000 from the third quarter of 2023.

Noninterest Expense. Total noninterest expense was $14.8 million for the fourth quarter of 2023. This is up compared to the $14.2 million recorded in the same quarter last year but a decline on a linked-quarter basis of $564,000 from the third quarter of 2023. Salaries and benefits expense totaled $10.3 million for the fourth quarter of 2023, an increase of $838,000 from the fourth quarter of 2020 and a decrease of $642,000 from the $10.9 million recorded in the third quarter of 2023. The increase over the prior year was due mainly to staff expansion and a corresponding increase in the Bank’s payroll tax expense and the decrease from the third quarter of 2023 was primarily due lower incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was relatively flat compared to both the prior quarter and when compared to the same quarter last year. Professional services expense was $1.1 million for the fourth quarter of 2023, essentially flat when comparted to both prior periods. Other expenses were $1.3 million for the fourth quarter of 2023, down from the $1.4 million recorded last quarter and also a decline from the $1.6 million posted in the fourth quarter of 2020. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended December 31, 2023, the Bank’s efficiency ratio was a record 28.8%, down from last quarter’s 30.4% mark and slightly below the 29.9% ratio achieved in the same period last year.

Income Taxes. The Bank recorded a provision for income taxes of $11.1 million for the fourth quarter of 2023. This represents an effective tax rate (“ETR”) of 29.5% and slightly above the ETR of 28.7% in the prior quarter and also up from the ETR of 28.1% in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.

Results of Operations – Year

Net income for 2023 was $95.2 million, or $6.41 per diluted share. This compares to $69.5 million or $4.65 per diluted share for the year 2020. This represents an increase in net income of $25.8 million or 37.1% and an increase in diluted EPS of $1.75 per share or 37.7%. The primary drivers for the large increase year over year is a reversal of provision for credit losses of $1.0 million in 2023 versus a provision for credit losses in 2020 of $26.0 million. In addition, net interest income increased by $11.7 million or 6.7% over 2020 levels. Also, noninterest income increased by $1.7 million or 27.7% over 2020 and offsetting these was an increase in noninterest expense of $3.4 million or 6.0%. The Bank’s net interest margin was 3.46% for 2023 compared to 3.62% in 2020.

Balance Sheet Summary

Total gross loans at December 31, 2023 were $4.42 billion, an increase of $390 million or 9.7% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.23 billion, an increase of $783 million or 17.6% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $6.04 billion, an increase of $901 million or 17.5% over the total of $5.14 billion as of December 31, 2020.

Asset Quality

As of December 31, 2023, nonaccrual loans totaled $14.8 million, well off of the $20.9 million reported as of September 30, 2023 and down from the $20.5 million as of December 31, 2020. Total net charge-offs for the fourth quarter of 2023 were $267,000 as compared to $1.0 million in the prior quarter and compared to net charge-offs of $2.0 million in the fourth quarter of 2020.

Allowance for Credit Losses

The (reversal of) provision for credit losses for the fourth quarter of 2023 was ($900,000) as compared to a reversal of ($1.5 million) in the prior quarter and compared to the $4.2 million provision for credit losses posted in the fourth quarter of 2020. A consistently improving economic outlook, among other factors such as credit quality led to a lower allowance requirement. The Bank’s allowance coverage ratio now stands at 1.37% of total loans (excluding PPP loans).

Capitalization

As of December 31, 2023, the Bank’s leverage ratio was 9.49%, the common equity tier 1 capital ratio was 11.21% and the total capital ratio stood at 15.32%. As of December 31, 2020, the Bank’s leverage ratio was 10.08%, the common equity tier 1 ratio was 11.21% and the total risk-based capital ratio was 14.64%.

GAAP – Non-GAAP Reconciliation -Fourth Quarter 2023 PPPT ROBE
   
Net Income $ 26,421  
Add: Reversal of provision for credit losses   (900 )
Add: Income tax expense   11,056  
Pre-provision and pre-tax income $ 36,577  
   
Total equity – 9/30/21 $ 562,021  
Pre-provision and pre-tax ROBE   25.82 %

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2023 financial results will be held tomorrow, January 20, 2023 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank’s website at www.preferredbank.com. Web participants are encouraged to go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Preferred Bank’s Chairman and Chief Executive Officer Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will be present to discuss Preferred Bank’s financial results, business highlights and outlook. After the live webcast, a replay will remain available in the Investor Relations section of Preferred Bank’s website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through February 3, 2023; the passcode is 4300401.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)) and one branch in Flushing, New York. In addition, the Bank operates a Loan Production Office in the Houston, Texas suburb of Sugar Land. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank’s results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2020 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

Financial Tables to Follow

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
             
             
    For the Quarter Ended
    December 31,   September 30,   December 31,
      2021       2021       2020  
Interest income:            
Loans, including fees   $ 51,906     $ 50,866     $ 51,299  
Investment securities     2,867       2,725       2,320  
Fed funds sold     18       20       30  
Total interest income     54,791       53,611       53,649  
             
Interest expense:            
Interest-bearing demand     1,511       1,486       1,499  
Savings     17       3       21  
Time certificates     2,521       3,045       4,534  
Subordinated debt     1,325       1,324       1,532  
Total interest expense     5,374       5,858       7,586  
Net interest income     49,417       47,753       46,063  
(Reversal of) provision for credit losses     (900 )     (1,500 )     4,200  
Net interest income after (reversal of) provision for credit losses            
      50,317       49,253       41,863  
             
Noninterest income:            
Fees & service charges on deposit accounts     581       581       456  
Letters of credit fee income     719       1,576       1,004  
BOLI income     99       98       96  
Net gain on called and sale of investment securities           41       (663 )
Other income     567       488       463  
Total noninterest income     1,966       2,784       1,356  
             
Noninterest expense:            
Salary and employee benefits     10,278       10,920       9,440  
Net occupancy expense     1,396       1,430       1,378  
Business development and promotion expense     280       98       204  
Professional services     1,075       1,075       1,084  
Office supplies and equipment expense     498       467       454  
Other     1,279       1,380       1,617  
Total noninterest expense     14,806       15,370       14,177  
Income before provision for income taxes     37,477       36,667       29,042  
Income tax expense     11,056       10,522       8,162  
Net income   $ 26,421     $ 26,145     $ 20,880  
             
Dividend and earnings allocated to participating securities     (3 )     (3 )     (42 )
Net income available to common shareholders   $ 26,418     $ 26,142     $ 20,838  
             
Income per share available to common shareholders            
Basic   $ 1.80     $ 1.76     $ 1.40  
Diluted   $ 1.80     $ 1.76     $ 1.40  
             
Weighted-average common shares outstanding            
Basic     14,677,515       14,884,570       14,895,925  
Diluted     14,677,515       14,884,570       14,895,925  
             
Cash dividends per common share   $ 0.43     $ 0.38     $ 0.30  
             
PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
             
             
    For the Year Ended    
    December 31,   December 31,   Change
      2021       2020     %
Interest income:            
Loans, including fees   $ 200,537     $ 203,093     -1.3 %
Investment securities     10,417       10,954     -4.9 %
Fed funds sold     81       215     -62.4 %
Total interest income     211,035       214,262     -1.5 %
             
Interest expense:            
Interest-bearing demand     5,964       7,761     -23.2 %
Savings     57       72     -20.1 %
Time certificates     12,812       26,151     -51.0 %
Subordinated debt     6,325       6,124     3.3 %
Total interest expense     25,158       40,108     -37.3 %
Net interest income     185,877       174,154     6.7 %
(Reversal of) provision for credit losses     (1,000 )     26,000     -103.8 %
Net interest income after (reversal of) provision for credit losses            
      186,877       148,154     26.1 %
             
Noninterest income:            
Fees & service charges on deposit accounts     2,113       1,627     29.9 %
Letters of credit fee income     3,914       3,284     19.2 %
BOLI income     391       381     2.5 %
Net (loss) gain on called and sale of investment securities     41       (761 )   -105.4 %
Net (loss) gain on sale of loans     (640 )     15     -4363.5 %
Other income     1,924       1,517     26.8 %
Total noninterest income     7,743       6,063     27.7 %
             
Noninterest expense:            
Salary and employee benefits     42,606       39,563     7.7 %
Net occupancy expense     5,656       5,525     2.4 %
Business development and promotion expense     568       564     0.7 %
Professional services     4,127       4,078     1.2 %
Office supplies and equipment expense     1,879       1,845     1.8 %
Other     5,956       5,783     3.0 %
Total noninterest expense     60,792       57,358     6.0 %
Income before provision for income taxes     133,828       96,859     38.2 %
Income tax expense     38,588       27,391     40.9 %
Net income   $ 95,240     $ 69,468     37.1 %
             
Dividend and earnings allocated to participating securities   $ (11 )   $ (194 )   -94.1 %
Net income available to common shareholders   $ 95,229     $ 69,274     37.5 %
             
Income per share available to common shareholders            
Basic   $ 6.41     $ 4.65     37.6 %
Diluted   $ 6.41     $ 4.65     37.6 %
             
Weighted-average common shares outstanding            
Basic     14,866,000       14,885,230     -0.1 %
Diluted     14,866,000       14,885,230     -0.1 %
             
Dividends per share   $ 1.57     $ 1.20     30.8 %
             
PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
       
       
  December 31,   December 31,
    2021       2020  
  (Unaudited)   (Audited)
Assets      
Cash and due from banks $ 1,030,610     $ 739,465  
Fed funds sold   20,000       20,000  
Cash and cash equivalents   1,050,610       759,465  
       
Securities held to maturity, at amortized cost   13,962       6,568  
Securities available-for-sale, at fair value   451,911       239,682  
Loans   4,424,992       4,035,394  
Less allowance for credit losses   (59,969 )     (63,426 )
Less amortized deferred loan fees, net   (6,316 )     (4,574 )
Loans, net   4,358,707       3,967,394  
       
Customers’ liability on acceptances   10,188       3,596  
Bank furniture and fixtures, net   10,533       11,825  
Bank-owned life insurance   10,088       9,828  
Accrued interest receivable   14,646       23,692  
Investment in affordable housing partnerships   59,018       62,521  
Federal Home Loan Bank stock, at cost   15,000       15,000  
Deferred tax assets   25,288       24,466  
Operating lease right-of-use assets   21,969       16,106  
Other assets   2,997       3,498  
Total assets $ 6,044,917     $ 5,143,641  
       
Liabilities and Shareholders’ Equity      
Deposits:      
Non-interest bearing demand deposits $ 1,305,691     $ 938,911  
Interest-bearing deposits:   2,032,820       1,700,818  
Savings   37,839       34,702  
Time certificates of $250,000 or more   934,444       912,546  
Other time certificates   914,717       855,503  
Total deposits   5,225,511       4,442,480  
       
Acceptances outstanding   10,188       3,596  
Subordinated debt issuance, net   147,758       99,334  
Commitments to fund investment in affordable housing partnerships   22,606       30,715  
Operating lease liabilities   22,861       18,682  
Accrued interest payable   715       1,245  
Other liabilities   31,545       22,142  
Total liabilities   5,461,184       4,618,194  
       
Shareholders’ equity   583,733       525,447  
Total liabilities and shareholders’ equity $ 6,044,917     $ 5,143,641  
       
Book value per common share $ 39.76     $ 35.19  
Number of common shares outstanding   14,679,769       14,931,861  
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
           
           
  For the Quarter Ended
           
  December 31, September 30, June 30, March 31, December 31,
    2021     2021     2021     2021     2020  
Unaudited historical quarterly operations data:          
Interest income $ 54,791   $ 53,611   $ 50,473   $ 52,160   $ 53,649  
Interest expense   5,374     5,858     7,112     6,814     7,586  
Interest income before provision for credit losses   49,417     47,753     43,361     45,346     46,063  
(Reversal of) provision for credit losses   (900 )   (1,500 )       1,400     4,200  
Noninterest income   1,966     2,784     1,646     1,347     1,356  
Noninterest expense   14,806     15,370     14,964     15,652     14,177  
Income tax expense   11,056     10,522     8,563     8,447     8,162  
Net income $ 26,421   $ 26,145   $ 21,480   $ 21,194   $ 20,880  
           
Earnings per share          
Basic $ 1.80   $ 1.76   $ 1.44   $ 1.42   $ 1.40  
Diluted $ 1.80   $ 1.76   $ 1.44   $ 1.42   $ 1.40  
           
Ratios for the period:          
Return on average assets   1.72 %   1.80 %   1.58 %   1.65 %   1.63 %
Return on beginning equity   18.65 %   18.56 %   15.98 %   16.36 %   16.49 %
Net interest margin (Fully-taxable equivalent)   3.28 %   3.36 %   3.25 %   3.61 %   3.66 %
Noninterest expense to average assets   0.97 %   1.06 %   1.10 %   1.22 %   1.10 %
Efficiency ratio   28.82 %   30.41 %   33.25 %   33.52 %   29.90 %
Net charge-offs (recoveries) to average loans (annualized)   0.03 %   0.10 %   0.12 %   -0.01 %   0.20 %
           
Ratios as of period end:          
Tier 1 leverage capital ratio   9.49 %   9.64 %   10.07 %   10.26 %   10.08 %
Common equity tier 1 risk-based capital ratio   11.21 %   11.19 %   11.28 %   11.34 %   11.21 %
Tier 1 risk-based capital ratio   11.21 %   11.19 %   11.28 %   11.34 %   11.21 %
Total risk-based capital ratio   15.32 %   15.47 %   15.61 %   14.73 %   14.64 %
Allowances for credit losses to loans at end of period   1.36 %   1.41 %   1.49 %   1.56 %   1.57 %
Allowance for credit losses to non-performing loans   404.55 %   292.84 %   290.58 %   294.74 %   308.96 %
           
Average balances:          
Total securities $ 470,811   $ 401,641   $ 269,000   $ 242,200   $ 251,284  
Total loans   4,218,699     4,156,289     4,130,190     4,044,800     3,971,537  
Total earning assets   5,984,055     5,659,678     5,364,598     5,102,291     5,018,031  
Total assets   6,079,919     5,760,056     5,467,678     5,200,079     5,110,065  
Total time certificate of deposits   1,915,117     1,959,514     1,893,247     1,820,461     1,764,528  
Total interest bearing deposits   3,945,276     3,783,704     3,704,771     3,531,358     3,508,276  
Total deposits   5,277,508     4,971,607     4,724,104     4,486,399     4,426,326  
Total interest bearing liabilities   4,093,003     3,931,375     3,815,964     3,630,705     3,607,595  
Total equity   576,462     569,624     553,561     538,282     518,567  
           
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
       
       
       
  For the Year Ended
  December 31,   December 31,
    2021       2020  
       
Interest income $ 211,035     $ 214,262  
Interest expense   25,158       40,108  
Interest income before provision for credit losses   185,877       174,154  
(Reversal of) provision for credit losses   (1,000 )     26,000  
Noninterest income   7,743       6,063  
Noninterest expense   60,792       57,358  
Income tax expense   38,588       27,391  
Net income $ 95,240     $ 69,468  
       
Earnings per share      
Basic $ 6.41     $ 4.65  
Diluted $ 6.41     $ 4.65  
       
Ratios for the period:      
Return on average assets   1.74 %     1.41 %
Return on beginning equity   18.13 %     14.78 %
Net interest margin (Fully-taxable equivalent)   3.46 %     3.62 %
Noninterest expense to average assets   1.11 %     1.16 %
Efficiency ratio   31.40 %     31.83 %
Net charge-offs to average loans   0.06 %     0.14 %
       
Average balances:      
Total securities $ 304,865     $ 246,715  
Total loans   4,110,835       3,891,530  
Total earning assets   5,377,565       4,828,445  
Total assets   5,477,989       4,926,887  
Total time certificate of deposits   1,891,583       1,782,558  
Total interest bearing deposits   3,674,201       3,414,045  
Total deposits   4,729,147       4,267,334  
Total interest bearing liabilities   3,793,782       3,513,315  
Total equity   553,937       496,164  
       
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
                     
                     
    As of
                     
    December 31,   September 30,   June 30,   March 31,   December 31,
      2021       2021       2021       2021       2020  
Unaudited quarterly statement of financial position data:                  
Assets:                  
Cash and cash equivalents $ 1,050,610     $ 1,082,634     $ 896,474     $ 943,126     $ 759,465  
Securities held-to-maturity, at amortized cost   13,962       15,294       15,749       6,039       6,568  
Securities available-for-sale, at fair value   451,911       461,356       278,460       228,635       239,682  
Loans:                  
Real estate – Mortgage:                     
Real estate—Residential    $ 536,286     $ 540,725     $ 558,147     $ 541,313     $ 523,789  
Real estate—Commercial      2,267,063       2,093,692       2,019,995       1,925,554       1,911,485  
   Total Real Estate – Mortgage      2,803,349       2,634,417       2,578,142       2,466,867       2,435,274  
Real estate – Construction:                     
R/E Construction — Residential      130,842       122,382       120,363       123,302       148,825  
R/E Construction — Commercial      202,482       213,833       224,323       229,933       215,032  
   Total real estate construction loans      333,324       336,215       344,686       353,235       363,857  
Commercial and industrial      1,245,734       1,286,995       1,259,668       1,248,550       1,165,990  
PPP      42,467       63,897       95,765       95,434       70,234  
Consumer and others      118       6       143       155       39  
Gross loans      4,424,992       4,321,529       4,278,403       4,164,241       4,035,394  
Allowance for credit losses on loans   (59,969 )     (61,135 )     (63,635 )     (64,883 )     (63,426 )
Net deferred loan fees   (6,316 )     (5,498 )     (5,329 )     (4,872 )     (4,574 )
Net loans    $ 4,358,707     $ 4,254,896     $ 4,209,439     $ 4,094,486     $ 3,967,394  
                     
Investment in affordable housing partnerships   59,018       53,399       55,452       59,824       62,521  
Federal Home Loan Bank stock, at cost   15,000       15,000       15,000       15,000       15,000  
Other assets   95,709       97,261       105,334       100,894       93,011  
Total assets    $ 6,044,917     $ 5,979,840     $ 5,575,908     $ 5,448,004     $ 5,143,641  
                     
Liabilities:                  
Deposits:                  
Demand    $ 1,305,691     $ 1,349,114     $ 1,063,472     $ 1,026,260     $ 938,911  
Interest-bearing demand      2,032,820       1,861,334       1,774,668       1,751,951       1,700,818  
Savings      37,839       33,417       32,560       37,551       34,702  
Time certificates of $250,000 or more      934,444       959,826       930,976       927,043       912,546  
Other time certificates      914,717       990,228       994,630       979,694       855,503  
    Total deposits    $ 5,225,511     $ 5,193,919     $ 4,796,306     $ 4,722,499     $ 4,442,480  
                     
Acceptances outstanding $ 10,188     $ 7,697     $ 7,797     $ 9,670     $ 3,596  
Subordinated debt issuance, net   147,758       147,699       147,787       99,365       99,334  
Commitments to fund investment in affordable housing partnerships     22,606       17,900       19,197       27,918       30,715  
Other liabilities   55,121       50,604       45,852       49,283       42,069  
Total liabilities    $ 5,461,184     $ 5,417,819     $ 5,016,939     $ 4,908,735     $ 4,618,194  
                     
Equity:                    
Net common stock, no par value $ 205,855     $ 203,844     $ 219,958     $ 218,593     $ 217,444  
Retained earnings   372,952       352,843       332,276       316,481       300,969  
Accumulated other comprehensive income   4,926       5,334       6,735       4,195       7,034  
Total shareholders’ equity    $ 583,733     $ 562,021     $ 558,969     $ 539,269     $ 525,447  
Total liabilities and shareholders’ equity    $ 6,044,917     $ 5,979,840     $ 5,575,908     $ 5,448,004     $ 5,143,641  
                     
      PREFERRED BANK  
      Quarter-To-Date Average Balances, Yield And Rates  
      (Unaudited)  
                             
                         
      Three months ended December 31,   Three months ended September 30,   Three months ended December 31,  
        2021       2021       2020    
        Interest Average     Interest Average     Interest Average  
      Average Income or Yield/   Average Income or Yield/   Average Income or Yield/  
      Balance Expense Rate   Balance Expense Rate   Balance Expense Rate  
ASSETS (Dollars in thousands)  
Interest-earning assets:                        
  Loans (1,2) $ 4,218,699     51,906 4.88 %   $ 4,156,289   $ 50,866 4.86 %     3,974,599   $ 51,299 5.13 %  
  Investment securities (3)   470,811     2,228 1.88 %     401,641     2,163 2.14 %     251,284     1,936 3.07 %  
  Federal funds sold   20,380     18 0.36 %     21,837     20 0.36 %     22,939     30 0.51 %  
  Other earning assets   1,274,165     752 0.23 %     1,079,911     679 0.25 %     769,209     487 0.25 %  
    Total interest-earning assets   5,984,055     54,904 3.64 %     5,659,678     53,728 3.77 %     5,018,031     53,752 4.26 %  
  Deferred loan fees, net   (5,530 )         (5,176 )         (4,162 )      
  Allowance for credit losses on loans   (61,123 )         (63,608 )         (60,875 )      
Noninterest earning assets:                        
  Cash and due from banks   11,933           14,457           8,214        
  Bank furniture and fixtures   10,810           11,123           11,892        
  Right of use assets   21,150           21,136           16,272        
  Other assets   118,624           122,446           120,693        
    Total assets $ 6,079,919         $ 5,760,056         $ 5,110,065        
                             
LIABILITIES AND SHAREHOLDERS’ EQUITY                        
Interest-bearing liabilities:                        
  Deposits:                        
    Interest-bearing demand and savings   2,030,159   $ 1,528 0.30 %     1,824,190   $ 1,489 0.32 %   $ 1,743,748   $ 1,520 0.35 %  
    TCD $250K or more   942,201     1,151 0.48 %     964,656     1,542 0.63 %     923,079     2,298 0.99 %  
    Other time certificates   972,916     1,370 0.56 %     994,858     1,503 0.60 %     841,449     2,236 1.06 %  
    Total interest-bearing deposits   3,945,276     4,049 0.41 %     3,783,704     4,534 0.48 %     3,508,276     6,054 0.69 %  
Short-term borrowings   3     0 0.22 %         0.00 %     3     0 0.20 %  
Subordinated debt, net   147,724     1,325 3.56 %     147,671     1,324 3.56 %     99,316     1,532 6.14 %  
    Total interest-bearing liabilities   4,093,003     5,374 0.52 %     3,931,375     5,858 0.59 %     3,607,595     7,586 0.84 %  
Non-interest bearing liabilities:                        
  Demand deposits   1,332,232           1,187,903           918,050        
  Lease Liability   22,298           22,747           18,936        
  Other liabilities   55,924           48,407           46,917        
    Total liabilities   5,503,457           5,190,432           4,591,498        
Shareholders’ equity   576,462           569,624           518,567        
    Total liabilities and shareholders’ equity $ 6,079,919         $ 5,760,056         $ 5,110,065        
Net interest income   $ 49,530       $ 47,870       $ 46,166    
Net interest spread     3.12 %       3.18 %       3.42 %  
Net interest margin     3.28 %       3.36 %       3.66 %  
                             
Cost of Deposits:                        
  Noninterest bearing demand deposits $ 1,332,232         $ 1,187,903         $ 918,050        
  Interest bearing deposits   3,945,276     4,049 0.41 %     3,783,704     4,534 0.48 %     3,508,276     6,054 0.69 %  
    Total Deposits $ 5,277,508   $ 4,049 0.30 %   $ 4,971,607   $ 4,534 0.36 %   $ 4,426,326   $ 6,054 0.54 %  
                             
(1) Includes non-accrual loans and loans held for sale                      
(2) Net loan fee income of $1.1 million, $823,000 and $1.1 million for the quarter ended December 31, 2023, September 30, 2023 and December 31, 2020, respectively, are included in the yield computations  
(3) Yields on securities have been adjusted to a tax-equivalent basis                    
PREFERRED BANK
Year-To-Date Average Balances, Yield And Rates
(Unaudited)
                   
                   
      Year ended December 31,
        2021   2020  
        Interest Average     Interest Average
      Average Income or Yield/   Average Income or Yield/
      Balance Expense Rate   Balance Expense Rate
ASSETS (Dollars in thousands)
Interest-earning assets:              
  Loans (1,2) $ 4,111,596   $ 200,537 4.88 %   $ 3,892,811   $ 203,093 5.22 %
  Investment securities (3)   304,865     8,333 2.73 %     246,715     8,130 3.30 %
  Federal funds sold   21,251     81 0.38 %     25,301     215 0.85 %
  Other earning assets   939,853     2,520 0.27 %     663,618     3,223 0.49 %
    Total interest-earning assets   5,377,565     211,471 3.93 %     4,828,445     214,661 4.45 %
  Deferred loan fees, net   (4,818 )         (3,788 )    
  Allowance for credit losses on loans   (63,967 )         (51,971 )    
Noninterest earning assets:              
  Cash and due from banks   11,683           7,545      
  Bank furniture and fixtures   11,452           12,002      
  Right of use assets   19,255           16,648      
  Other assets   126,819           118,006      
    Total assets $ 5,477,989         $ 4,926,887      
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Interest-bearing liabilities:              
  Deposits:              
    Interest-bearing demand/ savings   1,782,618   $ 6,021 0.34 %     1,631,487   $ 7,833 0.48 %
    TCD $250K or more   936,825     6,299 0.67 %     956,269     13,767 1.44 %
    Other time certificates   954,758     6,513 0.68 %     826,289     12,384 1.50 %
    Total interest-bearing deposits   3,674,201     18,833 0.51 %     3,414,045     33,984 1.00 %
Subordinated debt, net   119,581     6,325 5.29 %     99,269     6,124 6.17 %
    Total interest-bearing liabilities   3,793,782     25,158 0.66 %     3,513,315     40,108 1.14 %
Non-interest bearing liabilities:              
  Demand deposits   1,054,946           853,289      
  Lease Liability   21,280           19,620      
  Other liabilities   54,044           44,499      
    Total liabilities   4,924,052           4,430,723      
Shareholders’ equity   553,937           496,164      
    Total liabilities and shareholders’ equity $ 5,477,989         $ 4,926,887      
Net interest income   $ 186,313       $ 174,553  
Net interest spread     3.27 %       3.31 %
Net interest margin     3.46 %       3.62 %
                   
Cost of Deposits:              
  Noninterest bearing demand deposits $ 1,054,946         $ 853,289      
  Interest bearing deposits   3,674,201     18,833 0.51 %     3,414,045     33,984 1.00 %
    Total Deposits $ 4,729,147   $ 18,833 0.40 %   $ 4,267,334   $ 33,984 0.80 %
                   
(1) Includes non-accrual loans and loans held for sale              
(2) Net loan fee income of $3.1 million and $3.0 million for the year ended December 31, 2023 and 2020, respectively, are included in the yield computations
(3) Yields on securities have been adjusted to a tax-equivalent basis            
Preferred Bank
Loan and Credit Quality Information
         
Allowance For Credit Losses History
    Year Ended   Year Ended
    December 31, 2023   December 31, 2020
     
     (Dollars in 000’s)
Allowance For Credit Losses        
Balance at Beginning of Period   $ 63,426     $ 34,830  
Charge-Offs        
Commercial & Industrial     1,697       1,661  
Mini-perm Real Estate     817       1,900  
Others            
 Total Charge-Offs     2,514       3,561  
         
Recoveries        
Commercial & Industrial     57        
Construction – Commercial           193  
 Total Recoveries     57       193  
         
Net Charge-Offs     2,457       3,368  
(Reversal of) Provision for Credit Losses:        
CECL Cumulative Effect Adjustment           8,000  
Current (Reversal) Provision     (1,000 )     21,800  
Balance at End of Period   $ 59,969     $ 61,262  
Average Loans Held for Investment   $ 4,110,835     $ 3,864,667  
Loans Held for Investment at End of Period   $ 4,424,992     $ 3,949,721  
Net Charge-Offs (Recoveries) to Average Loans     0.06 %     0.12 %
Allowances for Credit Losses to Loans at End of Period     1.36 %     1.55 %
         

 

AT THE COMPANY: AT FINANCIAL PROFILES:
Edward J. Czajka Jeffrey Haas
Executive Vice President General Information
Chief Financial Officer (310) 622-8240
(213) 891-1188 [email protected]

Preferred Bank