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Preferred Bank Reports Quarterly Earnings

LOS ANGELES, Oct. 20, 2021 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2021. Preferred Bank (“the Bank”) reported net income of $26.1 million or $1.76 per diluted share for the third quarter of 2021. This is an increase of $4.7 million or 21.7% over the prior quarter and up significantly from the $17.1 million or $1.15 per share posted in the same quarter of last year. The primary reason for the increase compared to the prior year was a $9.0 million provision for credit losses recorded in the third quarter of last year as compared to a reversal of $1.5 million in allowance for credit losses (“ACL”) this quarter, a difference of $10.5 million. In comparison to the second quarter of 2021, net interest income increased $4.4 million, the beneficial change in the provision for credit losses was $1.5 million and noninterest income increased by $1.1 million.

Third quarter 2021 highlights:

  • Net income of $26.1 million, or $1.76 per diluted share (company all-time high)

  • Linked quarter deposit growth of 8.3%

  • Linked quarter loan growth (Ex-PPP) of 1.8%

  • Return on average assets (“ROA”) of 1.80%

  • Return on beginning equity (“ROBE”) of 18.56%

  • Pre-provision, pre-tax (“PPPT”) ROBE of 25.0%

Li Yu, Chairman and CEO, commented, “I am pleased to report third quarter 2021 net income of $26.1 million or $1.76 per share. Excluding a release of allowance for credit losses in the amount of $1.5 million, our net interest income and net income set new quarterly records for our Bank.

“This quarter we experienced significant asset growth. Total assets are approaching $6 billion, principally due to the $398 million or 8.3% linked-quarter deposit growth.

“Loan growth for the quarter was $77 million excluding PPP, or 1.8% on a linked quarter basis. We continue to experience moderate margin compression. Together with the strong deposit growth, our net interest margin for the quarter came in at 3.36%.

“Our loan quality was stable. There are no deferred loans granted under the CARES Act as of September 30, 2021. Total PPP balances have been reduced to $64 million as of that date.

“Non-interest income increased $1.1 million from the prior quarter principally due to increased letter of credit (“LC”) fees. Operating expenses continue to be under control for the quarter, as our efficiency ratio clocked in at 30.4%.

“We are highly encouraged by this quarter’s results considering the current low interest rate environment and the slow progress, nationally of controlling the delta variant. We are optimistic that both of these will improve gradually”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $47.8 million for the third quarter of 2021. This was an increase from the $43.4 million recorded in the second quarter of 2021 and was also ahead of the $44.1 million recorded in the third quarter of 2020. The second quarter of 2021 was negatively impacted by a $2.29 million interest reversal on our troubled debt restructured loan as well as a charge of $614,000 to interest expense related to the unamortized issuance costs of the subordinated notes that were called in the second quarter of 2021. These two items drove the Bank’s taxable equivalent net interest margin down to 3.25%, excluding these items, the Bank’s margin would have been 3.47%. The taxable equivalent margin was 3.36% for the third quarter of 2021, as compared to 3.47% (adjusted, see table below) in the second quarter of 2021 and versus 3.54% for the same period last year.

Noninterest Income. For the third quarter of 2021, noninterest income was $2,784,000 compared with $1,605,000 for the same quarter last year and compared to $1,646,000 for the second quarter of 2021. The increase compared to last year was due to LC fee income which increased by $886,000 and service charges on deposits which increased by $153,000 over last year. When compared to the second quarter of 2021, LC fees increased by $765,000 and in the prior quarter the Bank recorded a loss on sale of loans of $261,000 which did not recur this quarter.

Noninterest Expense. Total noninterest expense was $15.4 million for the third quarter of 2021. This is up compared to the $13.7 million recorded in the same quarter last year and also up from the $15.0 million posted in the second quarter of 2021. Salaries and benefits expense totaled $10.9 million for the third quarter of 2021, an increase of $1.8 million from the third quarter of 2020 and an increase of $635,000 over the $10.3 million posted in the second quarter of 2021. The increase over the prior year was due mainly to staff expansion and an increase in the Bank’s incentive compensation expense and the increase over the second quarter of 2021 was mainly due to higher incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was flat compared to the prior quarter’s $1.4 million and down slightly from the $1.5 million recorded in the third quarter of last year. Professional services expense was $1.1 million for the third quarter of 2021, a slight increase of $79,000 over the prior quarter and an increase of $101,000 over the same period last year. Other expenses were $1.4 million for the third quarter of 2021, down from the $1.7 million recorded last quarter and also up from the $1.6 million recorded in the same quarter last year. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended September 30, 2021, the Bank’s efficiency ratio was 30.4%, down slightly from last quarter’s 33.2% mark and just slightly over the remarkable 29.9% ratio achieved in the same period last year.

Income Taxes. The Bank recorded a provision for income taxes of $10.5 million for the third quarter of 2021. This represents an effective tax rate (“ETR”) of 28.7% and just slightly over the ETR of 28.5% in the prior quarter but up from the ETR of 25.7% 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.

Balance Sheet Summary

Total gross loans at September 30, 2021 were $4.32 billion, an increase of $286 million or 7.1% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.2 billion, an increase of $751 million or 16.9% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $5.98 billion, an increase of $836 million or 16.3% over the total of $5.14 billion as of December 31, 2020.

Asset Quality

As of September 30, 2021, nonaccrual loans totaled $20.9 million, up slightly from the $20.2 million reported as of June 30, 2021. Total net charge-offs for the third quarter of 2021 were $1.0 million compared to $1.2 million in the prior quarter and compared to net charge-offs of $3.5 million in the third quarter of 2020.

At September 30, 2021, the Bank had no loans remaining on COVID-19 deferral status. Also important to note that as of September 30, 2021, the Bank had recouped 78% of all interest deferred during the deferral period.

Allowance for Credit Losses

The provision for (release of) credit losses for the third quarter of 2021 was ($1.5 million) compared to $0 recorded last quarter and compared to $9.0 million posted in the third quarter of 2020. A consistently improving economic outlook led to a lower allowance requirement. The Bank’s allowance coverage ratio now stands at 1.44% of total loans (excluding PPP loans).

Capitalization

As of September 30, 2021, the Bank’s leverage ratio was 9.64%, the common equity tier 1 capital ratio was 11.19% and the total capital ratio stood at 15.47%. 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%. In accordance with the Bank’s stock repurchase plan, during the third quarter, the Bank repurchased a total of 282,949 common shares at a total cost of $17.47 million.

GAAP – Non-GAAP Reconciliation -Second Quarter 2021 NIM

Net interest margin - GAAP

3.25

%

Add: $2.3MM loan interest income

0.17

%

Add: $614K unamortized $100M sub-debt issuance cost

0.05

%

Net interest margin - non-GAAP

3.47

%

GAAP – Non-GAAP Reconciliation -Third Quarter 2021 PPPT ROBE

Net Income

$

26,145

Add: Reversal of credit losses

(1,500

)

Add: Income tax expense

10,522

Pre-provision and pre-tax income

$

35,167

Total equity - 6/30/21

$

558,969

Pre-provision and pre-tax ROBE

24.96

%

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2021 financial results will be held tomorrow, October 21, 2021 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 November 4, 2021; the passcode is 10161195.

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

September 30,

June 30,

September 30,

2021

2021

2020

Interest income:

Loans, including fees

$

50,866

$

47,906

$

50,417

Investment securities

2,725

2,548

2,335

Fed funds sold

20

19

30

Total interest income

53,611

50,473

52,782

Interest expense:

Interest-bearing demand

1,486

1,530

1,432

Savings

3

18

20

Time certificates

3,045

3,419

5,681

Subordinated debt

1,324

2,145

1,530

Total interest expense

5,857

7,112

8,663

Net interest income

47,754

43,361

44,119

(Reversal of) provision for credit losses

(1,500

)

-

9,000

Net interest income after (reversal of) provision for

credit losses

49,254

43,361

35,119

Noninterest income:

Fees & service charges on deposit accounts

581

525

428

Letters of credit fee income

1,576

811

690

BOLI income

98

98

96

Net gain on called and sale of investment securities

41

-

15

Net loss on sale of loans

-

(261

)

-

Other income

488

473

376

Total noninterest income

2,784

1,646

1,605

Noninterest expense:

Salary and employee benefits

10,920

10,285

9,126

Net occupancy expense

1,430

1,429

1,455

Business development and promotion expense

98

117

95

Professional services

1,075

996

974

Office supplies and equipment expense

467

476

443

Other

1,380

1,661

1,570

Total noninterest expense

15,370

14,964

13,663

Income before provision for income taxes

36,668

30,043

23,061

Income tax expense

10,522

8,563

5,936

Net income

$

26,146

$

21,480

$

17,125

Dividend and earnings allocated to participating securities

(3

)

(3

)

(53

)

Net income available to common shareholders

$

26,143

$

21,477

$

17,072

Income per share available to common shareholders

Basic

$

1.76

$

1.44

$

1.15

Diluted

$

1.76

$

1.44

$

1.15

Weighted-average common shares outstanding

Basic

14,884,570

14,954,688

14,893,774

Diluted

14,884,570

14,954,688

14,893,774

Cash dividends per common share

$

0.38

$

0.38

$

0.30


PREFERRED BANK

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except for net income per share and shares)

For the Nine Months Ended

September 30,

September 30,

Change

2021

2020

%

Interest income:

Loans, including fees

$

148,631

$

151,794

-2.1

%

Investment securities

7,550

8,634

-12.6

%

Fed funds sold

63

185

-66.2

%

Total interest income

156,244

160,613

-2.7

%

Interest expense:

Interest-bearing demand

4,453

6,262

-28.9

%

Savings

40

51

-22.3

%

Time certificates

10,291

21,617

-52.4

%

Subordinated debt

5,000

4,592

8.9

%

Total interest expense

19,783

32,522

-39.2

%

Net interest income

136,461

128,091

6.5

%

(Reversal of) provision for credit losses

(100

)

21,800

-100.5

%

Net interest income after (reversal of) provision for

credit losses

136,561

106,291

28.5

%

Noninterest income:

Fees & service charges on deposit accounts

1,532

1,172

30.7

%

Letters of credit fee income

3,195

2,280

40.1

%

BOLI income

292

285

2.5

%

Net (loss) gain on called and sale of investment securities

41

(98

)

-141.9

%

Net (loss) gain on sale of loans

(640

)

15

-4363.5

%

Other income

1,357

1,053

28.9

%

Total noninterest income

5,777

4,707

22.7

%

Noninterest expense:

Salary and employee benefits

32,328

30,123

7.3

%

Net occupancy expense

4,260

4,147

2.7

%

Business development and promotion expense

288

360

-20.0

%

Professional services

3,052

2,994

1.9

%

Office supplies and equipment expense

1,381

1,391

-0.7

%

Other

4,677

4,166

12.3

%

Total noninterest expense

45,986

43,181

6.5

%

Income before provision for income taxes

96,352

67,817

42.1

%

Income tax expense

27,532

19,229

43.2

%

Net income

$

68,820

$

48,588

41.6

%

Dividend and earnings allocated to participating securities

$

(8

)

$

(153

)

-94.6

%

Net income available to common shareholders

$

68,812

$

48,435

42.1

%

Income per share available to common shareholders

Basic

$

4.61

$

3.25

41.6

%

Diluted

$

4.61

$

3.25

41.6

%

Weighted-average common shares outstanding

Basic

14,929,519

14,881,381

0.3

%

Diluted

14,929,519

14,881,381

0.3

%

Dividends per share

$

1.14

$

0.90

26.7

%


PREFERRED BANK

Condensed Consolidated Statements of Financial Condition

(unaudited)

(in thousands)

September 30,

December 31,

2021

2020

(Unaudited)

(Audited)

Assets

Cash and due from banks

$

1,060,634

$

739,465

Fed funds sold

22,000

20,000

Cash and cash equivalents

1,082,634

759,465

Securities held to maturity, at amortized cost

15,294

6,568

Securities available-for-sale, at fair value

461,356

239,682

Loans

4,321,529

4,035,394

Less allowance for credit losses

(61,135

)

(63,426

)

Less amortized deferred loan fees, net

(5,498

)

(4,574

)

Loans, net

4,254,896

3,967,394

Customers' liability on acceptances

7,697

3,596

Bank furniture and fixtures, net

10,955

11,825

Bank-owned life insurance

10,022

9,828

Accrued interest receivable

16,551

23,692

Investment in affordable housing partnerships

53,399

62,521

Federal Home Loan Bank stock, at cost

15,000

15,000

Deferred tax assets

25,128

24,466

Income tax receivable

1,192

-

Operating lease right-of-use assets

20,598

16,106

Other assets

5,118

3,498

Total assets

$

5,979,840

$

5,143,641

Liabilities and Shareholders' Equity

Deposits:

Non-interest bearing demand deposits

$

1,349,114

$

938,911

Interest-bearing deposits:

1,861,334

1,700,818

Savings

33,417

34,702

Time certificates of $250,000 or more

959,826

912,546

Other time certificates

990,228

855,503

Total deposits

5,193,919

4,442,480

Acceptances outstanding

7,697

3,596

Subordinated debt issuance, net

147,699

99,334

Commitments to fund investment in affordable housing partnerships

17,900

30,715

Operating lease liabilities

21,933

18,682

Accrued interest payable

2,081

1,245

Other liabilities

26,590

22,142

Total liabilities

5,417,819

4,618,194

Shareholders' equity

562,021

525,447

Total liabilities and shareholders' equity

$

5,979,840

$

5,143,641

Book value per common share

$

38.29

$

31.47

Number of common shares outstanding

14,679,215

14,931,861


PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

For the Quarter Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2021

2021

2021

2020

2020

Unaudited historical quarterly operations data:

Interest income

$

53,611

$

50,473

$

52,160

$

53,649

$

52,782

Interest expense

5,857

7,112

6,814

7,586

8,663

Interest income before provision for credit losses

47,754

43,361

45,346

46,063

44,119

(Reversal of) provision for credit losses

(1,500

)

-

1,400

4,200

9,000

Noninterest income

2,784

1,646

1,347

1,356

1,605

Noninterest expense

15,370

14,964

15,652

14,177

13,663

Income tax expense

10,522

8,563

8,447

8,162

5,936

Net income

$

26,146

$

21,480

$

21,194

$

20,880

$

17,125

Earnings per share

Basic

$

1.76

$

1.44

$

1.42

$

1.40

$

1.15

Diluted

$

1.76

$

1.44

$

1.42

$

1.40

$

1.15

Ratios for the period:

Return on average assets

1.80

%

1.58

%

1.65

%

1.63

%

1.34

%

Return on beginning equity

18.56

%

15.98

%

16.36

%

16.49

%

13.94

%

Net interest margin (Fully-taxable equivalent)

3.36

%

3.25

%

3.61

%

3.66

%

3.54

%

Noninterest expense to average assets

1.06

%

1.10

%

1.22

%

1.10

%

1.07

%

Efficiency ratio

30.41

%

33.25

%

33.52

%

29.90

%

29.88

%

Net charge-offs (recoveries) to average loans (annualized)

0.10

%

0.12

%

-0.01

%

0.20

%

0.35

%

Ratios as of period end:

Tier 1 leverage capital ratio

9.64

%

10.07

%

10.26

%

10.08

%

9.75

%

Common equity tier 1 risk-based capital ratio

11.19

%

11.28

%

11.34

%

11.21

%

11.02

%

Tier 1 risk-based capital ratio

11.19

%

11.28

%

11.34

%

11.21

%

11.02

%

Total risk-based capital ratio

15.47

%

15.61

%

14.73

%

14.64

%

14.51

%

Allowances for credit losses to loans at end of period

1.41

%

1.49

%

1.56

%

1.57

%

1.55

%

Allowance for credit losses to non-performing loans

292.84

%

290.58

%

294.74

%

308.96

%

243.56

%

Average balances:

Total securities

$

401,641

$

269,000

$

242,200

$

251,284

$

237,801

Total loans

4,156,289

4,130,190

4,044,800

3,971,537

3,956,145

Total earning assets

5,659,678

5,364,598

5,102,291

5,018,031

4,975,005

Total assets

5,760,056

5,467,678

5,200,079

5,110,065

5,073,548

Total time certificate of deposits

1,959,514

1,893,247

1,820,461

1,764,528

1,841,901

Total interest bearing deposits

3,783,704

3,704,771

3,531,358

3,508,276

3,501,275

Total deposits

4,971,607

4,724,104

4,486,399

4,426,326

4,408,882

Total interest bearing liabilities

3,931,375

3,815,964

3,630,705

3,607,592

3,600,560

Total equity

569,624

553,561

538,282

518,567

503,421


PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

For the Nine Months Ended

September 30,

September 30,

2021

2020

Interest income

$

156,244

$

160,613

Interest expense

19,783

32,522

Interest income before provision for credit losses

136,461

128,091

(Reversal of) provision for credit losses

(100

)

21,800

Noninterest income

5,777

4,707

Noninterest expense

45,986

43,181

Income tax expense

27,532

19,229

Net income

$

68,820

$

48,588

Earnings per share

Basic

$

4.61

$

3.25

Diluted

$

4.61

$

3.25

Ratios for the period:

Return on average assets

1.68

%

1.33

%

Return on beginning equity

17.51

%

13.81

%

Net interest margin (Fully-taxable equivalent)

3.40

%

3.60

%

Noninterest expense to average assets

1.12

%

1.19

%

Efficiency ratio

32.33

%

32.52

%

Net charge-offs to average loans

0.07

%

0.12

%

Average balances:

Total securities

$

304,865

$

245,181

Total loans

4,110,835

3,864,667

Total earning assets

5,377,565

4,764,789

Total assets

5,477,989

4,865,382

Total time certificate of deposits

1,891,583

1,788,612

Total interest bearing deposits

3,674,201

3,382,405

Total deposits

4,729,147

4,213,950

Total interest bearing liabilities

3,793,782

3,481,659

Total equity

553,937

488,641


PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

As of

September 30,

June 30,

March 31,

December 31,

September 30,

2021

2021

2021

2020

2020

Unaudited quarterly statement of financial position data:

Assets:

Cash and cash equivalents

$

1,082,634

$

896,474

$

943,126

$

759,465

$

807,791

Securities held-to-maturity, at amortized cost

15,294

15,749

6,039

6,568

6,727

Securities available-for-sale, at fair value

461,356

278,460

228,635

239,682

219,778

Loans:

Real estate – Mortgage:

Real estate—Residential

$

540,725

$

558,147

$

541,313

$

523,789

$

528,371

Real estate—Commercial

2,093,692

2,019,995

1,925,554

1,911,485

1,808,200

Total Real Estate – Mortgage

2,634,417

2,578,142

2,466,867

2,435,274

2,336,571

Real estate – Construction:

R/E Construction — Residential

122,382

120,363

123,302

148,825

170,773

R/E Construction — Commercial

213,833

224,323

229,933

215,032

223,706

Total real estate construction loans

336,215

344,686

353,235

363,857

394,480

Commercial and industrial

1,286,995

1,259,668

1,248,550

1,165,990

1,144,051

PPP

63,897

95,765

95,434

70,234

74,551

Consumer and others

6

143

155

39

68

Gross loans

4,321,529

4,278,403

4,164,241

4,035,394

3,949,721

Allowance for credit losses on loans

(61,135

)

(63,635

)

(64,883

)

(63,426

)

(61,262

)

Net deferred loan fees

(5,498

)

(5,329

)

(4,872

)

(4,574

)

(4,411

)

Net loans, excluding loans held for sale

$

4,254,896

$

4,209,439

$

4,094,486

$

3,967,394

$

3,884,048

Loans held for sale

$

-

$

-

$

-

$

-

$

-

Net loans

$

4,254,896

$

4,209,439

$

4,094,486

$

3,967,394

$

3,884,048

Investment in affordable housing partnerships

53,399

55,452

59,824

62,521

47,917

Federal Home Loan Bank stock, at cost

15,000

15,000

15,000

15,000

15,000

Other assets

97,261

105,334

100,894

93,011

104,313

Total assets

$

5,979,840

$

5,575,908

$

5,448,004

$

5,143,641

$

5,085,574

Liabilities:

Deposits:

Demand

$

1,349,114

$

1,063,472

$

1,026,260

$

938,911

$

926,166

Interest-bearing demand

1,861,334

1,774,668

1,751,951

1,700,818

1,620,495

Savings

33,417

32,560

37,551

34,702

32,830

Time certificates of $250,000 or more

959,826

930,976

927,043

912,546

977,821

Other time certificates

990,228

994,630

979,694

855,503

857,113

Total deposits

$

5,193,919

$

4,796,306

$

4,722,499

$

4,442,480

$

4,414,425

Acceptances outstanding

$

7,697

$

7,797

$

9,670

$

3,596

$

7,463

Subordinated debt issuance, net

147,699

147,787

99,365

99,334

99,304

Commitments to fund investment in affordable housing partnerships

17,900

19,197

27,918

30,715

16,689

Other liabilities

50,604

45,852

49,283

42,069

43,826

Total liabilities

$

5,417,819

$

5,016,939

$

4,908,735

$

4,618,194

$

4,581,707

Equity:

Net common stock, no par value

$

203,844

$

219,958

$

218,593

$

217,444

$

213,519

Retained earnings

352,843

332,276

316,481

300,969

284,568

Accumulated other comprehensive income

5,334

6,735

4,195

7,034

5,780

Total shareholders' equity

$

562,021

$

558,969

$

539,269

$

525,447

$

503,867

Total liabilities and shareholders' equity

$

5,979,840

$

5,575,908

$

5,448,004

$

5,143,641

$

5,085,574


PREFERRED BANK

Quarter-to-Date Average Balances, Yield and Rates

(unaudited)

Three months ended September 30,

Three months ended June 30,

Three months ended September 30,

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)

$

4,156,289

50,866

4.86

%

$

4,132,451

$

47,906

4.65

%

$

3,956,145

$

50,417

5.07

%

Investment securities (3)

401,641

2,163

2.14

%

269,000

2,058

3.07

%

237,801

1,967

3.29

%

Federal funds sold

21,837

20

0.36

%

20,437

19

0.36

%

23,828

30

0.50

%

Other earning assets

1,079,911

679

0.25

%

942,710

597

0.25

%

757,231

474

0.25

%

Total interest-earning assets

5,659,678

53,728

3.77

%

5,364,598

50,580

3.78

%

4,975,005

52,888

4.23

%

Deferred loan fees, net

(5,176

)

(4,924

)

(4,713

)

Allowance for credit losses on loans

(63,608

)

(64,842

)

(55,822

)

Noninterest earning assets:

Cash and due from banks

14,457

10,620

7,355

Bank furniture and fixtures

11,123

11,468

11,856

Right of use assets

21,136

19,735

16,550

Other assets

122,446

131,023

123,317

Total assets

$

5,760,056

$

5,467,678

$

5,073,548

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Deposits:

Interest-bearing demand and savings

1,824,190

$

1,489

0.32

%

1,811,524

$

1,548

0.34

%

$

1,659,374

$

1,452

0.35

%

TCD $250K or more

964,656

1,542

0.63

%

926,161

1,688

0.73

%

987,631

2,993

1.21

%

Other time certificates

994,858

1,503

0.60

%

967,086

1,731

0.72

%

854,270

2,688

1.25

%

Total interest-bearing deposits

3,783,704

4,534

0.48

%

3,704,771

4,967

0.54

%

3,501,275

7,133

0.81

%

Subordinated debt, net

147,671

1,324

3.56

%

111,193

2,145

7.74

%

99,285

1,530

6.13

%

Total interest-bearing liabilities

3,931,375

5,858

0.59

%

3,815,964

7,112

0.75

%

3,600,560

8,663

0.96

%

Non-interest bearing liabilities:

Demand deposits

1,187,903

1,019,333

907,607

Lease Liability

22,747

21,765

19,400

Other liabilities

48,407

57,055

42,560

Total liabilities

5,190,432

4,914,117

4,570,127

Shareholders’ equity

569,624

553,561

503,421

Total liabilities and shareholders’ equity

$

5,760,056

$

5,467,678

$

5,073,548

Net interest income

$

47,870

$

43,468

$

44,225

Net interest spread

3.18

%

3.03

%

3.27

%

Net interest margin

3.36

%

3.25

%

3.54

%

Cost of Deposits:

Noninterest bearing demand deposits

$

1,187,903

$

1,019,333

$

907,607

Interest bearing deposits

3,783,704

4,534

0.48

%

3,704,771

4,967

0.54

%

3,501,275

7,133

0.81

%

Total Deposits

$

4,971,607

$

4,534

0.36

%

$

4,724,104

$

4,967

0.42

%

$

4,408,882

$

7,133

0.64

%

(1)

Includes non-accrual loans and loans held for sale

(2)

Net loan fee income of $823,000, $669,000 and $683,000 for the quarter ended September 30, 2021, June 30, 2021, September 30, 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)

Nine Months ended September 30,

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

$

148,631

4.83

%

$

3,865,350

$

151,794

5.25

%

Investment securities (3)

304,865

6,104

2.68

%

245,181

6,193

3.37

%

Federal funds sold

21,251

63

0.39

%

26,093

185

0.95

%

Other earning assets

939,853

1,769

0.25

%

628,165

2,736

0.58

%

Total interest-earning assets

5,377,565

156,567

3.89

%

4,764,789

160,908

4.51

%

Deferred loan fees, net

(4,818

)

(3,662

)

Allowance for credit losses on loans

(63,967

)

(48,981

)

Noninterest earning assets:

Cash and due from banks

11,683

7,321

Bank furniture and fixtures

11,452

12,039

Right of use assets

19,255

16,774

Other assets

126,819

117,102

Total assets

$

5,477,989

$

4,865,382

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Deposits:

Interest-bearing demand/ savings

1,782,618

$

4,492

0.34

%

1,593,793

$

6,313

0.53

%

TCD $250K or more

936,825

5,148

0.73

%

967,413

11,469

1.58

%

Other time certificates

954,758

5,143

0.72

%

821,199

10,148

1.65

%

Total interest-bearing deposits

3,674,201

14,783

0.54

%

3,382,405

27,930

1.10

%

Subordinated debt, net

119,581

5,000

5.59

%

99,254

4,592

6.18

%

Total interest-bearing liabilities

3,793,782

19,783

0.70

%

3,481,659

32,522

1.25

%

Non-interest bearing liabilities:

Demand deposits

1,054,946

831,545

Lease Liability

21,280

19,850

Other liabilities

54,044

43,687

Total liabilities

4,924,052

4,376,741

Shareholders’ equity

553,937

488,641

Total liabilities and shareholders’ equity

$

5,477,989

$

4,865,382

Net interest income

$

136,784

$

128,386

Net interest spread

3.20

%

3.26

%

Net interest margin

3.40

%

3.60

%

Cost of Deposits:

Noninterest bearing demand deposits

$

1,054,946

$

831,545

Interest bearing deposits

3,674,201

14,783

0.54

%

3,382,405

27,930

1.10

%

Total Deposits

$

4,729,147

$

14,783

0.42

%

$

4,213,950

$

27,930

0.89

%

(1)

Includes non-accrual loans and loans held for sale

(2)

Net loan fee income of $2.0 million and $1.9 million for the nine months ended September 30, 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

Nine Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

(Dollars in 000's)

Allowance For Credit Losses

Balance at Beginning of Period

$

63,426

$

34,830

Charge-Offs

Commercial & Industrial

1,431

1,661

Mini-perm Real Estate

817

1,900

Total Charge-Offs

2,248

3,561

Recoveries

Commercial & Industrial

57

-

Construction - Commercial

-

193

Total Recoveries

57

193

Net Charge-Offs

2,191

3,368

(Reversal of) Provision for Credit Losses:

CECL Cumulative Effect Adjustment

-

8,000

Current (Reversal) Provision

(100

)

21,800

Balance at End of Period

$

61,135

$

61,262

Average Loans Held for Investment

$

4,110,835

$

3,864,667

Loans Held for Investment at End of Period

$

4,321,529

$

3,949,721

Net Charge-Offs (Recoveries) to Average Loans

0.07

%

0.12

%

Allowances for Credit Losses to Loans at End of Period

1.41

%

1.55

%

AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188

AT FINANCIAL PROFILES:
Jeffrey Haas
General Information
(310) 622-8240
PFBC@finprofiles.com


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