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Preferred Bank Reports Quarterly and Annual Earnings

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LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter and year ended December 31, 2021. Preferred Bank (“the Bank”) reported net income of $26.4 million or $1.80 per diluted share for the fourth quarter of 2021. 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 2021. 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 2021, net interest income increased $1.7 million, noninterest income was down $818,000 and noninterest expense decreased $564,000.

Fourth Quarter 2021 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 2021 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 2021 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 2021, 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 2022 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 2022, 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 2022, 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 2021. This was an increase from the $47.8 million recorded in the third quarter of 2021 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 2021, as compared to 3.36% in the third quarter of 2021 and versus 3.66% for the same period last year.

Noninterest Income. For the fourth quarter of 2021, 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 2021. 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 2021 was mainly due to letter of credit (“LC”) fees which were down by $858,000 from the third quarter of 2021.

Noninterest Expense. Total noninterest expense was $14.8 million for the fourth quarter of 2021. 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 2021. Salaries and benefits expense totaled $10.3 million for the fourth quarter of 2021, 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 2021. 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 2021 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 2021, essentially flat when comparted to both prior periods. Other expenses were $1.3 million for the fourth quarter of 2021, 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, 2021, 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 2021. 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 2021 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 2021 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 2021 compared to 3.62% in 2020.

Balance Sheet Summary

Total gross loans at December 31, 2021 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, 2021, nonaccrual loans totaled $14.8 million, well off of the $20.9 million reported as of September 30, 2021 and down from the $20.5 million as of December 31, 2020. Total net charge-offs for the fourth quarter of 2021 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 2021 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, 2021, 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 2021 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 2021 financial results will be held tomorrow, January 20, 2022 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, 2022; 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, 2021, September 30, 2021 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, 2021 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, 2021

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

PFBC@finprofiles.com