Preferred Bank Reports Fourth Quarter Results

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| Source: Preferred Bank

LOS ANGELES, Jan. 22, 2014 (GLOBE NEWSWIRE) -- Preferred Bank (Nasdaq:PFBC), an independent commercial bank focusing on the diversified California market, today reported results for the quarter and year ended December 31, 2013. Preferred Bank ("the Bank") reported net income of $5.9 million or $0.44 per diluted share for the fourth quarter of 2013. This compares to net income of $4.9 million or $0.37 per diluted share for the fourth quarter of 2012 and compares to net income of $5.0 million or $0.37 per diluted share for the third quarter of 2013. Net income for the year was $19.2 million or $1.42 per diluted share. This compares to net income of $23.9 million or $1.78 per diluted share for 2012. Results for 2012 were aided by a $20.2 million reversal of the Bank's valuation allowance on its deferred tax asset. Pre tax income for 2013 was $31.5 million compared to $3.3 million for 2012.

Highlights from the fourth quarter of 2013:

  • Quarterly net income reached $5.9 million
  • OREO disposition activities resulted in a net gain of $2.2 million.
  • Linked quarter loan growth was $40.0 million
  • The net interest margin remained strong at 3.85%.
  • ROA of 1.33%
  • ROE of 10.71%
  • Continued reduction of non-performing assets, which now comprise only 0.80% of total assets (excluding loans held for sale)
  • Efficiency ratio declined to 32.6%

Li Yu, Chairman and CEO commented, "We are very pleased to report continued loan growth, deposit growth and further improvements in efficiency during the fourth quarter of 2013. This resulted in net income of $5.9 million or $0.44 per diluted share compared to net income of $5.0 million or $0.37 per diluted share just one quarter ago.

"Nonperforming asset ("NPA") levels continue to decline. As of December 31, 2013, total NPA's were $14.1 million (excluding loans held for sale) compared to $23.3 million at September 30, 2013 for a reduction of $9.2 million or 39.3%. Furthermore, these NPA dispositions resulted in a net gain of $2.2 million.

"During the quarter, we also elected to divest our investment portfolio of the three trust preferred CDO's which would have been prohibited holdings under the (early December 2013) version of the Volcker Rule of the Dodd-Frank Act.  In addition, we also elected to sell other investment securities which were most sensitive to rising long term interest rates. The former resulted in a loss of $364,000 and the latter resulted in a loss of $741,000.

"New loan production for the quarter was slightly less than what we achieved in the third quarter but growth was still satisfactory considering the holiday season. Deposit growth, however, exceeded loan growth and when added to the disposition of securities and NPA's, our cash balances increased substantially and thus caused our net interest margin to compress slightly but still remain at a comfortable 3.85%.

"For the year 2013 we are pleased to report net income of $19.2 million or $1.42 per diluted share compared to $23.9 million or $1.78 per diluted share for 2012 (2012 net results were aided by a $20.2 million tax benefit). Measured on a pre-tax basis, we earned $31.5 million in 2013 as compared to $3.3 million in 2012. With the substantial improvement in NPA's, we believe the Bank has fully recovered from the prior credit cycle and our earnings are now exceeding peer averages.

"In 2013, we also achieved:

  • Loan growth of $199 million or 17.5%
  • Deposit growth of $172 million or 12.7%
  • OREO reduction of $22.7 million or 80.2%
  • NPL reduction of $10.5 million or 55.2%
  • Maintained the net interest margin at 3.95%, relatively flat from 2012 in a margin compressing environment
  • Efficiency ratio improved from 59.7% to 45.7%
  • Increase in total assets from $1.55 billion to $1.77 billion, or 14.0%
  • Total equity capital increased $19.1 million from 2012

"In 2013, the Southern California housing market saw an impressive recovery. Rental vacancies have declined, tourism activity has increased substantially, export activity at the ports of Los Angeles and Long Beach are operating at their highest levels and California State's finances have improved. At this time, we do not see any significant economic headwinds in the near future and our staff is well-prepared to take advantage of market expansion opportunities in 2014.

"Our loan portfolio consists of approximately 86% adjustable rate loans. Of the remaining 14%, most of that is either matched off with CD's or FHLB advances. Our balance sheet is in a very strategically advantageous position to capitalize on rising interest rates.

"Management would like to continue to express our optimistic outlook which we have maintained since the end of 2012. We believe that we will be able to continue to execute our plan in 2014."

Fourth Quarter        

Operating Results

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $16.4 million compared to $14.2 million recorded in the fourth quarter of 2012 and a slight decrease from the $16.5 million recorded in the third quarter of 2013. The increase over 2012 is due primarily to loan growth and the decrease from the prior quarter was mainly due to an increase in interest expense as well as a decrease in investment income. The Bank's taxable equivalent net interest margin was 3.85% for the fourth quarter of 2013, a 6 basis point decrease from the 3.91% achieved in the fourth quarter of 2012 and a 25 basis point decrease from the 4.10% recorded in the third quarter of 2013. The decrease in the margin was primarily due to average cash balances which were $69 million higher in the fourth quarter versus the third quarter of 2013 and $38 million higher than in the fourth quarter of 2012. These cash balances only earn 0.25% so the level of cash on the balance sheet has a significant impact on the calculated margin.

Noninterest Income. For the fourth quarter of 2013, noninterest income was $214,000 compared with $749,000 for the same quarter last year and compared to $213,000 for the third quarter of 2013.  Noninterest income was negatively impacted this quarter by a loss on sale of securities of $1.1 million and by $497,000 in the third quarter of 2013.  Of the losses on securities, $364,000 was due to the sale of the Bank's trust preferred CDO's (TruP) which were divested in conjunction with the implementation of the final Volcker Rule. The remaining securities losses were the sales of longer dated securities which within the portfolio had the most sensitivity to higher interest rates. Service charges on deposits was up in the fourth quarter compared to last year and compared to the third quarter of 2013. Other income was up significantly in the fourth quarter over both comparable periods due to a $514,000 gain on the sale of a note.

Noninterest Expense. Total noninterest expense was $5.4 million for the fourth quarter of 2013, down significantly from the $8.2 million recorded in the same period last year and $7.8 million for the third quarter of 2013. Salaries and benefits expense totaled $4.0 million for the fourth quarter of 2013 compared to $3.3 million for the same period last year and compared to $4.0 million for the third quarter of 2013. The increase over the fourth quarter of 2012 was due to higher bonus expense as well as higher staffing levels.  Occupancy expense was $801,000 compared to the $753,000 recorded in the same period in 2012 and $833,000 recorded in the third quarter of 2013. The increase over 2012 was due primarily to the new San Francisco branch occupancy costs.  Professional services expense was $899,000 for the fourth quarter of 2013 compared to $1.0 million for the same quarter of 2012 and $1.0 million recorded in the third quarter of 2013.  Other real estate owned ("OREO") related and loans held for sale ("LHFS") expenses totaled $(2.1 million) for the fourth quarter of 2013 (consisting of $71,000 in operating expenses, valuation charges of $413,000 which were more than offset by net gains on sale of OREO of $2.6 million). This represented a significant decrease from the $1.7 million of expense recorded in the same quarter last year and a decrease from the $73,000 posted in the third quarter of 2013.  Other expenses were $1.5 million in the fourth quarter of 2013, an increase of $466,000 over the same period in 2012 and flat compared to the third quarter of 2013. The variance compared to the same period last year was primarily due to $188,000 of charges related to the depreciation of the Bank's investment in a Low Income Housing Tax Credit fund.

Income Taxes

The Bank recorded a provision for income taxes of $3.5 million for the fourth quarter of 2013. This represents an effective tax rate ("ETR") of 37.6% for the quarter. The provision for income taxes (and thus the ETR) were increased by a $122,000 adjustment to the Bank's deferred tax asset ("DTA"). This adjustment to the DTA was due to the sale of the Bank's CDO's as the Bank had recognized a tax benefit on prior other than temporary impairment losses on the securities which could not be fully realized.

Year Results

Highlights for 2013:

  • Pre tax income of $31.5 million
  • OREO balances declined from $28.3 million to $5.6 million.
  • Loan growth reached $198.6 million, or 17.5%
  • The net interest margin held relatively flat at 3.95%.
  • ROA of 1.18%
  • ROE of 9.75%
  • Efficiency ratio declined to 45.7%

Operating Results

For the year ended December 31, 2013, the Bank reported net income of $19.2 million or $1.42 per diluted share as compared to $23.9 million or $1.78 per diluted share for 2012. Results for 2012 were significantly aided by a $20.2 million reversal of the Bank's valuation allowance on its deferred tax asset. Pre tax income for 2013 was $31.5 million compared to $3.3 million for 2012. The substantial improvement in pre tax earnings from 2012 to 2013 was due to better performance in nearly all areas of the income statement. Net interest income increased, the provision for loan losses decreased and non-interest expense decreased.

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $62.0 million compared to $53.8 million recorded in 2012. This represents an increase of $8.2 million or 15.3% and was primarily due to the increase in total loans from year to year. Interest income on investments was down from 2012 by $162,000 due to a decrease in total average investment securities as the Bank sold certain securities during the year in order to reduce interest rate risk. Even though total deposits grew by $171.8 million in 2013, interest expense was down slightly in 2013 due to the continued decline on rates paid on deposits. The Bank's taxable equivalent net interest margin was 3.95% for 2013, relatively flat from the 3.96% achieved in 2012. Although yields on earning assets declined year over year by 9 basis points, the Bank's cost of funds declined by 16 basis points from 2012.

Noninterest Income. For 2013, noninterest income was $2.0 million compared with $3.5 million in 2012. This decrease was due to losses on sales of investment securities of $1.96 million recorded in 2013. During the course of 2013, management elected to sell $37.2 million of securities which had the most price sensitivity to rising rates. On these sales, the Bank incurred losses of $1.6 million. In December of 2013, after the final Volcker Rule was released, management elected to divest of the three trust preferred CDO's ($1.9 million book value) at a loss of $361,000.  Service charges on deposits totaled $2.1 million in 2013 compared to $1.8 million in 2012. Trade finance income was also up during 2013, posting an increase of $303,000 or 98.2% due to a large increase in letter of credit origination. Other income for 2013 was $916,000, an increase of $413,000 over 2012. This was due primarily to a $514,000 gain on the sale of a note.

Noninterest Expense. Total noninterest expense for 2013 was $29.3 million, down significantly from the $34.2 million recorded in 2012. Salaries and benefits expense totaled $16.2 million compared to $12.5 million for 2012. The increase over 2012 was due to higher bonus expense as well as higher staffing levels due to the new San Francisco branch as well as additions to business development and support staff over the course of 2013. Occupancy expense was $3.2 million compared to the $3.0 million recorded in 2012 and the increase was due primarily to the new San Francisco branch occupancy costs. Professional services expense was $3.6 million in 2013 compared to $3.2 million in 2012 and the $370,000 increase was primarily due to an increase in legal expenses. Other real estate owned ("OREO") related and loans held for sale ("LHFS") expenses totaled $(449,000) for 2013 (consisting of $563,000 in net operating expenses, OREO valuation charges of $2.0 million and LHFS valuation charges of $775,000 which were more than offset by net gains on sale of OREO of $3.8 million). This represented a significant decrease from the $9.0 million of expense recorded in 2012. Other expenses were $5.1 million in 2013, an increase of $123,000 over 2012 and was primarily due to $376,000 of charges related to the depreciation of the Bank's investment in a Low Income Housing Tax Credit fund.

Balance Sheet Summary

Total gross loans and leases (including loans held for sale) at December 31, 2013 were $1.33 billion, an increase of $198.6 million or 17.5% over the total of $1.13 billion as of December 31, 2012.  The tables below indicate loans by type as compared to the end of 2012 as well as the end of last quarter:

Loans by Type – Year over Year (ooo's)
 
Loan Type  (000's) December 31, 2013 December 31, 2012 $ Change % Change
R/E – Residential/Multifamily $ 228,490 $ 152,388 $ 76,102 49.9%
R/E – Land 21,368 27,158 (5,790) -21.3%
R/E – Commercial 621,681 493,101 128,580 26.1%
R/E – Construction 73,602 74,410 (808) -1.1%
Commercial & Industrial 378,965 372,496 6,469 1.7%
Loans Held for Sale 6,207 12,150 (5,943) -48.9%
Total $ 1,330,313 $ 1,131,703 $ 198,610 17.5%
 
 
Loans by Type – Quarter over Quarter (ooo's)
 
Loan Type   December 31, 2013 September 30, 2013 $ Change % Change
R/E – Residential/Multifamily $ 228,490 $ 197,119 $ 31,371 15.9%
R/E – Land 21,368 10,709 10,659 99.5%
R/E – Commercial 621,681 610,764 10,917 1.8%
R/E – Construction 73,602 66,044 7,558 11.4%
Commercial & Industrial 378,965 394,328 (15,363) -3.9%
Loans Held for Sale 6,207 11,329 (5,122) -45.2%
Total $ 1,330,313 $1,290,293 $ 40,020 3.1%

Total deposits as of December 31, 2013 were $1.53 billion, an increase of $171.8 million from the $1.36 billion at December 31, 2012.  In the early part of 2013, the Bank elected to reduce DDA deposits which would have required collateral of government securities to maintain. The process of reducing these deposits finalized in the third quarter as evidenced by the stabilization of those balances. As of December 31, 2013 compared to December 31, 2012: noninterest-bearing demand deposits decreased by $108.2 million or 24.2%, interest-bearing demand and savings deposits increased by $146.1 million or 42.1% and time deposits increased by $133.9 million or 23.7%.  In reviewing the quarter, total deposits increased $59.2 million or 4.0%. Total demand deposits were flat at $339 million, interest bearing demand and savings deposits increased from $432.5 million to $493.0 million, an increase of $60.4 million or 14.0%. Total certificates of deposit decreased slightly from $699.0 million to $697.8 million quarter to quarter. Total assets were $1.77 billion, a $217.9 million or 14.0% increase from the total of $1.55 billion as of December 31, 2012.

Asset Quality

As of December 31, 2013 total nonaccrual loans (excluding loans held for sale) decreased to $8.5 million compared to $19.0 million as of December 31, 2012.  Total net charge-offs (recoveries) for the fourth quarter of 2013 were $(25,000) compared to net charge-offs of $867,000 for the third quarter of 2013. The Bank recorded a provision for loan losses of $1.8 million for the fourth quarter of 2013. Although nonperforming loan and economic trends continue to be positive, management believes that this provision is appropriate in order to maintain an allowance level deemed sufficient. This compares to a provision of $2.3 million in the fourth quarter of 2012 and $1.2 million in the third quarter of 2013.  The allowance for loan loss at December 31, 2013 was $20.2 million or 1.52% of total loans compared to $20.6 million or 1.84% of total loans at December 31, 2012.

NPA Migration    
Non-Performing Assets Migration  – Q4 2013
   
Non Accrual Loans
 
OREO
Balance,  September 30, 2013 $ 11,340 $ 11,936
Additions 47 --
Transfer to OREO -- --
Loans Cured -- --
Sales/Payoffs (2,874) (6,221)
Charge-off -- (113)
Balance,  December 31, 2013 $ 8,513 $ 5,602
     
NPA Migration    
Non-Performing Assets Migration – YEAR 2013
   
Non Accrual Loans
 
OREO
Balance, December 31, 2012 $ 18,995 $ 28,280
Additions 6,197 --
Transfer to OREO -- --
Loans Cured -- --
Sales/Payoffs (11,566) (20,973)
Charge-off (5,113) (1,705)
Balance, December 31, 2013 $ 8,513 $ 5,602

The tables above exclude loans held for sale and TDR's that are on accrual status.  Performing TDR's totaled $403,000 as of December 31, 2013.  The $6.2 million in loans held for sale consist of one nonaccrual loan for $6.2 million.

OREO

Total OREO decreased to $5.6 million compared to $28.3 million as of December 31, 2012.  During the fourth quarter of 2013, the Bank's OREO disposition efforts resulted in a net gain of $2.2 million.

Capitalization

As of December 31, 2013, the Bank's tier 1 leverage ratio was 12.38%, the tier 1 risk based capital ratio was 13.78% and the total risk-based capital ratio was 15.03%. This compares to 11.96%, 13.73% and 14.98% as of December 31, 2012, respectively.  

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank's fourth quarter 2013 financial results will be held tomorrow, January 23, at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 800-762-8779 (domestic) or 480-629-9645 (international). The passcode for the call is 4660880. 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 CEO Li Yu,  President and COO Wellington Chen, Chief Financial Officer Edward J. Czajka and Chief Credit Officer Louie Couto 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 800-406-7325 (domestic) or 303-590-3030 (international) through January 30, 2014; the passcode is 4660880.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks in Southern California with a multi-ethnic focus. 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 ten full-service branch banking offices in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Anaheim, Pico Rivera and San Francisco, California. 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. 

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 2012 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.

 PREFERRED BANK 
 Condensed Consolidated Statements of Operations 
 (unaudited) 
 (in thousands, except for net income per share and shares) 
       
  For the Three Months Ended
  December 31,
2013
December 31,
2012
September 30,
2013
Interest income:       
Loans, including fees   $ 17,111  $ 14,504  $ 16,982
Investment securities   1,380  1,496  1,471
Fed funds sold   22  10  27
Total interest income   18,513  16,010  18,480
       
Interest expense:       
Interest-bearing demand   618  489  542
Savings   24  20  22
Time certificates   1,436  1,297  1,371
FHLB borrowings   33  --  32
Total interest expense   2,112  1,806  1,967
       
Net interest income   16,401  14,204  16,513
       
Provision for loan losses   1,800  2,300  1,200
       
Net interest income after provision for loan losses   14,601  11,904  15,313
       
Noninterest income:       
Fees & service charges on deposit accounts   507  480  477
Trade finance income   128  87  133
BOLI income   84  83  83
Net loss on sale of investment securities   (1,103)  21  (497)
Other income   598  78  17
Total noninterest income   214  749  213
       
Noninterest expense:       
Salary and employee benefits   3,960  3,316  4,017
Net occupancy expense   801  753  833
Business development and promotion expense   99  104  89
Professional services   899  1,003  1,015
Office supplies and equipment expense   278  281  301
Total other-than-temporary impairment losses   --  --  --
Portion of loss recognized in other comprehensive income   --  --  --
Other real estate owned related expense (income) and valuation allowance on LHFS   (2,092)  1,696  73
Other   1,467  1,001  1,462
Total noninterest expense   5,412  8,154  7,790
       
Income before provision for income taxes   9,403  4,499  7,736
       
Income tax expense (benefit)   3,535  (416)  2,705
Net income   $ 5,868  $ 4,915  $ 5,032
       
Income allocated to participating securities   (34)  (63)  (55)
Net income available to common shareholders   $ 5,834  $ 4,852  $ 4,977
       
       
Income per share available to common shareholders       
Basic   $ 0.44  $ 0.37  $ 0.38
Diluted   $ 0.44  $ 0.37  $ 0.37
       
Weighted-average common shares outstanding       
Basic   13,196,071  13,065,227  13,112,835
Diluted   13,394,535  13,291,592  13,370,223
 
 
 PREFERRED BANK 
 Condensed Consolidated Statements of Operations 
 (unaudited) 
 (in thousands, except for net income per share and shares) 
       
  For the Twelve Months Ended
  December 31,
2013
December 31,
2012
Change
%
Interest income:       
Loans, including fees   $ 63,718  $ 55,400 15.0%
Investment securities   5,953  6,116 -2.7%
Fed funds sold   55  26 109.3%
Total interest income   69,726  61,542 13.3%
       
Interest expense:       
Interest-bearing demand   2,199  1,746 26.0%
Savings   89  75 18.4%
Time certificates   5,373  5,868 -8.4%
FHLB borrowings   68  -- 100.0%
Senior debt   --  94 -100.0%
       
Total interest expense   7,729  7,783 -0.7%
       
Net interest income   61,997  53,759 15.3%
       
Provision for credit losses   3,250  19,800 -83.6%
       
Net interest income after provision for loan losses   58,747  33,959 73.0%
       
Noninterest income:       
Fees & service charges on deposit accounts   2,101  1,792 17.2%
Trade finance income   612  309 98.2%
BOLI income   331  329 0.4%
Net (loss) gain on sale of investment securities   (1,957)  575 -440.1%
Other income   916  503 82.3%
Total noninterest income   2,003  3,508 -42.9%
       
Noninterest expense:       
Salary and employee benefits   16,226  12,523 29.6%
Net occupancy expense   3,206  2,990 7.2%
Business development and promotion expense   366  294 24.4%
Professional services   3,597  3,227 11.4%
Office supplies and equipment expense   1,186  1,154 2.8%
Total other-than-temporary impairment losses   99  24 312.5%
Portion of loss recognized in other comprehensive income   (92)  -- -100.0%
Other real estate owned related expense and valuation allowance on LHFS   (449)  8,968 -105.0%
Other   5,122  4,999 2.5%
Total noninterest expense   29,261  34,178 -14.4%
       
Income before provision for income taxes   31,489  3,289 857.5%
       
Income tax expense (benefit)   12,290  (20,583) -159.7%
       
Net income   $ 19,199  $ 23,872 -19.6%
       
Income allocated to participating securities   (201)  (323) -37.8%
Net income available to common shareholders   $ 18,998  $ 23,549 -19.3%
       
       
Income per share available to common shareholders       
Basic   $ 1.45  $ 1.80 -19.7%
Diluted   $ 1.42  $ 1.78 -20.0%
       
Weighted-average common shares outstanding       
Basic   13,116,713  13,050,559 0.5%
Diluted   13,364,320  13,247,389 0.9%
 
 
 PREFERRED BANK 
 Condensed Consolidated Statements of Financial Condition 
 (unaudited) 
 (in thousands) 
     
  December 31,
2013
December 31,
2012
Assets     
     
Cash and due from banks   $ 226,615  $ 151,995
Fed funds sold   20,000  -- 
Cash and cash equivalents   246,615  151,995
     
Securities held to maturity, at amortized cost   --   979
Securities available-for-sale, at fair value   142,670  210,742
Loans and leases   1,324,106  1,119,553
Less allowance for loan and lease losses   (20,169)  (20,607)
Less net deferred loan fees   (2,563)  (2,019)
Net loans and leases   1,301,374  1,096,927
     
Loans held for sale, at lower of cost or fair value   6,207  12,150
     
Other real estate owned   5,602  28,280
Customers' liability on acceptances   2,061  1,961
Bank furniture and fixtures, net   4,205  4,383
Bank-owned life insurance   8,290  8,049
Accrued interest receivable   5,378  5,646
Investment in affordable housing   6,411  --
Federal Home Loan Bank stock   5,296  4,282
Deferred tax assets   22,879  26,975
Income tax receivable   2,236  542
Other asset   9,735  1,945
Total assets   $ 1,768,959  $ 1,554,856
     
     
Liabilities and Shareholders' Equity     
     
Liabilities:     
Deposits:     
Demand   $ 338,530  $ 446,734
Interest-bearing demand  469,976 325,018
Savings  22,984 21,844
Time certificates of $250,000 or more  213,362 185,001
Other time certificates  484,462 378,930
Total deposits   $ 1,529,314  $ 1,357,527
Acceptances outstanding   2,061  1,961
Advances from Federal Home Loan Bank   20,000  --
Accrued interest payable   983  968
Other liabilities   9,685  6,562
Total liabilities   1,562,043  1,367,018
     
Commitments and contingencies     
Shareholders' equity:     
Preferred stock. Authorized 25,000,000 shares; no issued and outstanding shares at December 31, 2013 and December 31, 2012  —  — 
Common stock, no par value. Authorized 20,000,000 shares; issued and outstanding 13,269,403 and 13,280,653 shares at December 31, 2013 and December 31, 2012, respectively   163,237  162,927
Treasury stock   (19,115)  (19,115)
Additional paid-in-capital   25,974  24,544
Accumulated income   36,680  17,481
Accumulated other comprehensive income (loss):   --  --
Non-credit portion of loss recognized, net of tax of $0 and $133 at December 31, 2013 and December 31, 2012, respectively   --  (184)
Unrealized gain(loss) on securities, available-for-sale, net of tax of $102 and $1,585 at December 31, 2013 and December 31, 2012  140  2,185
Total shareholders' equity   206,916  187,838
Total liabilities and shareholders' equity   $ 1,768,959  $ 1,554,856
 
 
PREFERRED BANK 
Selected Consolidated Financial Information 
(unaudited) 
(in thousands, except for ratios) 
         
  For the Three Months Ended
         
  December 31,
2013
September 30,
2013
June 30,
2013
December 31,
2012
For the period:         
Return on average assets  1.33% 1.20% 1.09% 1.29%
Return on average equity  10.71% 10.11% 8.77% 10.00%
Net interest margin (Fully-taxable equivalent)  3.85% 4.10% 3.85% 3.91%
Noninterest expense to average assets  1.22% 1.86% 1.84% 2.14%
Efficiency ratio  32.57% 46.58% 47.67% 54.53%
Net charge-offs (recoveries) to average loans (annualized)  -0.01% 0.28% 0.83% 1.20%
         
         
Period end:         
Tier 1 leverage capital ratio  12.38% 11.84% 12.18% 11.96%
Tier 1 risk-based capital ratio  13.78% 13.34% 13.51% 13.73%
Total risk-based capital ratio  15.03% 14.58% 14.76% 14.98%
Allowances for credit losses to loans and leases at end of period **  1.52% 1.43% 1.48% 1.84%
Allowance for credit losses to non-performing loans and leases  137.02% 103.47% 71.79% 78.82%
         
Average balances:         
Total loans and leases*   $ 1,283,590  $ 1,245,753  $ 1,198,818  $ 1,089,719
Earning assets   $ 1,700,907  $ 1,608,366  $ 1,520,024  $ 1,456,965
Total assets   $ 1,754,579  $ 1,665,591  $ 1,572,529  $ 1,518,085
Total deposits   $ 1,507,940  $ 1,436,385  $ 1,362,295  $ 1,312,027
         
Period end:         
Loans and Leases:         
Real estate - Single and multi-family residential   $ 228,490  $ 197,119  $ 190,037  $ 152,388
Real estate - Land for housing   13,611  9,149  23,079  25,560
Real estate - Land for income properties   1,550  1,560  1,571  1,598
Real estate - Commercial   627,888  610,764  549,907  493,101
Real estate - For sale housing construction   24,997  22,631  25,177  36,347
Real estate - Other construction   48,605  43,413  46,061  38,063
Commercial and industrial   339,039  346,261  328,676  324,753
Trade finance and other   39,926  48,067  49,917  47,743
Gross loans   1,324,106  1,278,964  1,214,425  1,119,553
Allowance for loan and lease losses   (20,169)  (18,344)  (18,011)  (20,607)
Net deferred loan fees   (2,563)  (2,429)  (2,197)  (2,019)
Loans excluding loans held for sale   1,301,374  1,258,191  1,194,217  1,096,927
Loans held for sale   6,207  11,329  14,685  12,150
Total loans, net   $ 1,307,581  $ 1,269,520  $ 1,208,902  $ 1,109,077
         
Deposits:         
Noninterest-bearing demand   $ 338,530  $ 338,579  $ 350,641  $ 446,734
Interest-bearing demand and savings   492,960  432,542  400,073  346,862
Total core deposits   831,490  771,121  750,714  793,596
Time deposits   697,824  699,016  681,529  563,931
Total deposits   $ 1,529,314  $ 1,470,137  $ 1,432,243  $ 1,357,527
         
* Loans held for sale are included 
** Loans held for sale are excluded 
 
 
Preferred Bank
Loan and Credit Quality Information
     
Allowance For Credit Losses & Loss History
     
  Year Ended
December 31, 2013
Year Ended
December 31, 2012
   (Dollars in 000's)
Allowance For Credit Losses    
Balance at Beginning of Period  $ 20,607  $ 23,718
Charge-Offs    
Commercial & Industrial  3,800  10,525
Mini-perm Real Estate  1,668  3,903
Construction - Residential  2,121  -- 
Construction - Commercial  --   2,185
Land - Residential  --   592
Land - Commercial  --   6,276
Others  --   -- 
Total Charge-Offs  7,589  23,481
     
Recoveries    
Commercial & Industrial  366  63
Mini-perm Real Estate  1,379  296
Construction - Residential  1,951  2
Construction - Commercial  163  145
Land - Residential  38  57
Land - Commercial  4  7
Total Recoveries  3,901  570
     
Net Loan Charge-Offs  3,688  22,911
Provision for Credit Losses  3,250  19,800
Balance at End of Period  $ 20,169  $ 20,607
Average Loans and Leases*  $ 969,877  $ 1,018,366
Loans and Leases at end of Period*  $ 1,324,106  $ 1,119,553
Net Charge-Offs to Average Loans and Leases 0.30% 2.25%
Allowances for credit losses to loans and leases at end of period * 1.52% 1.84%
     
 * Loans held for sale are excluded 
AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188

AT FINANCIAL PROFILES:
Kristen McNally
General Information
(310) 663-8007