Preferred Bank Reports Quarterly Earnings

LOS ANGELES, California, UNITED STATES


LOS ANGELES, July 20, 2021 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2021. Preferred Bank (“the Bank”) reported net income of $21.5 million or $1.44 per diluted share for the second quarter of 2021. This is up slightly from net income of $21.2 million or $1.42 per diluted share for the first quarter of 2021 and easily tops recorded net income of $15.3 million or $1.03 per diluted share for the second quarter of 2020. The primary reasons for the increase compared to the prior year is a $7.5 million decrease in the provision for credit losses this quarter, an increase in net interest income of $1.2 million, partially offset by an increase in noninterest expense of $630,000. When compared to the prior quarter, the provision for credit losses decreased by $1.4 million, noninterest income increased by $299,000 and noninterest expense decreased by $689,000. Net interest income however, decreased from the prior quarter due to a loan interest accrual adjustment of $2.29 million.

Second quarter 2021 Highlights:

  • Net income of $21.4 million, or $1.44 per diluted share
  • Linked quarter loan growth (non - PPP) of 2.7%
  • Linked quarter deposit growth of 1.6%
  • Return on average assets (“ROA”) of 1.58%
  • Return on beginning equity (“ROE”) of 15.98%

Li Yu, Chairman and CEO, commented, “Preferred Bank’s second quarter 2021 net income was $21.5 million or $1.44 a share.

“Second quarter net income was negatively impacted by a reversal of interest income of $2.29 million and a charge of $614,000 for unamortized issuance costs on our $100 million of subordinated notes which we called on June 18, 2021. Net interest income and loan revenue continue their positive trend, excluding these items.

“The current low interest rate environment has continued to pressure the Bank’s net interest margin (“NIM”). Second quarter NIM was 3.47% normalized, (see non-GAAP reconciliation) compared to 3.61% for the first quarter. Excluding the two previously mentioned charges, the Bank however, has been able to increase net interest income.

“Loan growth for the second quarter was $114 million (excl. PPP) or 2.7% sequentially. We have seen increased loan origination activities but see increased payoff activities as well. Deposit growth was $74 million or 1.6% on a linked quarter basis. Going forward, we look to continue to increase our deployment of excess liquidity.

Expenses remain in control with efficiency ratio at 33.2%. We are now seeing inflationary pressures in personnel and other expense items. While we may not pass on cost increases to customers, we were able to keep our peer-group leading assets per full time employee (FTE) at $19.5 million and revenue per FTE at approximately $702,000.

Recent Federal Reserve Open Market Committee minutes revealed that our economy is “expanding at a record pace”. We share this optimism and are prepared to take the opportunities presented to us.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $43.4 million for the second quarter of 2021. This was down slightly from the $45.3 million recorded in the first quarter of 2021 and was slightly ahead of the $42.2 million recorded in the second quarter of 2020. This quarter’s loan interest income was negatively impacted by a $2.29 million adjustment to the accrued interest on our troubled debt restructured loan. This amount was reversed in the second quarter of 2021 and is the reason for the lowered net interest income against expectations. Also negatively impacting net interest income this quarter, the Bank called its $100 million of 6% subordinated notes (“sub debt”) as of June 18, 2021. Simultaneously, the Bank issued $150 million of subordinated notes due June 15, 2031 at a coupon rate of 3.375%. In conjunction with the call of the existing $100 million of notes, the Bank incurred a charge of $614,000 to interest expense related to the unamortized issuance costs of the old notes. Although we incurred the charge this quarter for the calling of the sub debt, the far lower coupon of the new notes (3.375% versus 6.0%) will result in over $900,000 of interest savings annually while increasing the size of the borrowing by $50 million. The aforementioned items (loan interest reversal and recognition of unamortized debt issuance costs) drove the Bank’s taxable equivalent net interest margin down to 3.25%. Excluding these two items the taxable equivalent margin would have been 3.47%, versus 3.61% for the prior quarter and 3.57% for the same period last year.

Noninterest Income. For the second quarter of 2021, noninterest income was $1,646,000 compared with $1,430,000 for the same quarter last year and compared to $1,347,000 for the first quarter of 2021. The increase compared to last year was due to service charges on deposits which increased by $186,000 over last year. This was partially offset by an increase in the loss on sale of loans which was $261,000 in the second quarter of 2021 versus a loss on sale of investment securities of $113,000 in the second quarter of 2020. On a linked quarter basis, service charges on deposits increased by $98,000 while the loss on sale of loans decreased from a loss of $379,000 last quarter to a loss of $261,000 this quarter.

Noninterest Expense. Total noninterest expense was $15.0 million for the second quarter of 2021. This is up compared to the $14.3 million recorded in the same quarter last year but is a decrease from the $15.7 million posted in the first quarter of 2021. Salaries and benefits expense totaled $10.3 million for the second quarter of 2021, an increase of $190,000 from the second quarter of 2020 but a decline from the $11.1 million posted in the first quarter of 2021. The increase over the prior year was due mainly to annual merit increases and the decrease from the first quarter of 2021 was mainly due to higher payroll taxes posted in the first quarter due to incentive compensation distributions. Occupancy expense totaled $1.4 million for the quarter which relatively flat from the prior quarter’s $1.4 million and up over the $1.3 million recorded in the second quarter of last year. The new Houston office and annual lease rate increases are responsible for the year-over-year change. Professional services expense was $996,000 for the second quarter of 2021, flat compared to last quarter’s $981,000 and flat compared to the $1.0 million recorded in the second quarter of 2020. Significant I.T initiatives or large legal cases usually drive the variations in this line item and there have been none in the periods compared. Other expenses were $1.7 million for the second quarter of 2021, fairly close to the $1.6 million recorded last quarter and up from the $1.4 over the same period last year. The increase over last year was mainly due to FDIC premiums increasing commensurately with the Bank’s asset size. For the quarter ended June 30, 2021, the Bank’s efficiency ratio was 33.2%, down slightly from last quarter and a small increase from the 32.9% recorded in the same period last year.

Income Taxes. The Bank recorded a provision for income taxes of $8.6 million for the second quarter of 2021. This represents an effective tax rate (“ETR”) of 28.5% and is consistent with the ETR of 28.5% for the prior quarter but a decrease from the ETR of 29.7% 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 June 30, 2021 were $4.28 billion, an increase of $243 million or 6.0% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $4.80 billion, an increase of $354 million or 8.0% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $5.58 billion, an increase of $432.3 million or 8.4% over the total of $5.14 billion as of December 31, 2020.

Asset Quality

As of June 30, 2021, nonaccrual loans totaled $20.2 million, down slightly from the $22.0 million reported as of March 31, 2021. In addition, there are $1.7 million in loans that are 90+ days past due and still accruing. These are two loans that are well-secured and in the process of collection. Total net charge-offs (recoveries) for the second quarter of 2021 were $1.2 million compared to a net recovery of ($57,000) in the prior quarter and compared to a net recovery of ($132,000) in the second quarter of 2020.

At June 30, 2021, the Bank had just one loan for $1.5 million still on COVID-19 deferral status. It’s critical to note that as of June 30, 2021, the Bank had recouped 67% of all interest deferred during the deferral period.

Allowance for Credit Losses

The provision for credit losses for the second quarter of 2021 was $0 compared to the $1.4 million recorded last quarter and the $7.5 million posted in the same period last year. Between the adoption of the new accounting standard for credit losses (CECL) in the first quarter of last year, and the heightened provisions for credit losses throughout 2020, the Bank’s allowance coverage ratio has increased to 1.52% of total non-PPP loans as of June 30, 2021 from a total coverage level of 0.94% as of December 31, 2019 which was the last quarter end prior to the pandemic.

Capitalization

As of June 30, 2021, the Bank’s leverage ratio was 10.07%, the common equity tier 1 capital ratio was 11.28% and the total capital ratio climbed to 15.61%. 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

Net interest margin - GAAP3.25%Add: $2.3MM loan interest income0.17%Add: $614K unamortized $100M sub-debt issuance cost 0.05%Net interest margin - non-GAAP3.47%

Net interest margin - GAAP3.25% 
Add: $2.3MM loan interest income0.17% 
Add: $614K unamortized $100M sub-debt issuance cost0.05% 
Net interest margin - non-GAAP3.47% 

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2021 financial results will be held tomorrow, July 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 August 4, 2021; the passcode is 10158785.

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 
     June 30, March 31, June 30, 
      2021   2021   2020  
Interest income:       
 Loans, including fees $47,906  $49,859  $49,813  
 Investment securities  2,548   2,277   2,320  
 Fed funds sold  19   24   31  
  Total interest income  50,473   52,160   52,164  
           
Interest expense:       
 Interest-bearing demand  1,530   1,437   1,462  
 Savings  18   19   17  
 Time certificates  3,419   3,827   6,973  
 Subordinated debit  2,145   1,531   1,531  
  Total interest expense  7,112   6,814   9,983  
  Net interest income  43,361   45,346   42,181  
Provision for credit losses  -   1,400   7,500  
  Net interest income after provision for       
   credit losses  43,361   43,946   34,681  
           
Noninterest income:       
 Fees & service charges on deposit accounts  525   426   339  
 Letters of credit fee income  811   808   742  
 BOLI income  98   96   95  
 Net gain (loss) on called and sale of investment securities  -   -   (113) 
 Net gain (loss) on sale of loans  (261)  (379)  -  
 Other income  473   396   367  
  Total noninterest income  1,646   1,347   1,430  
           
Noninterest expense:       
 Salary and employee benefits  10,285   11,123   10,095  
 Net occupancy expense  1,429   1,401   1,296  
 Business development and promotion expense  117   73   114  
 Professional services  996   981   1,006  
 Office supplies and equipment expense  476   438   459  
 Other   1,661   1,636   1,364  
  Total noninterest expense  14,964   15,652   14,334  
  Income before provision for income taxes  30,043   29,641   21,777  
Income tax expense  8,563   8,447   6,468  
  Net income $21,480  $21,194  $15,309  
           
Dividend and earnings allocated to participating securities  (3)  (3)  (49) 
Net income available to common shareholders $21,477  $21,191  $15,260  
           
Income per share available to common shareholders       
  Basic $1.44  $1.42  $1.03  
  Diluted $1.44  $1.42  $1.03  
           
Weighted-average common shares outstanding       
  Basic  14,954,688   14,950,019   14,879,383  
  Diluted  14,954,688   14,950,019   14,879,383  
           
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 Six Months Ended  
     June 30, June 30, Change
      2021   2020  %
Interest income:      
 Loans, including fees $97,765  $101,377  -3.6%
 Investment securities  4,825   6,299  -23.4%
 Fed funds sold  43   156  -72.7%
  Total interest income  102,633   107,832  -4.8%
          
Interest expense:      
 Interest-bearing demand  2,967   4,830  -38.6%
 Savings  37   31  17.8%
 Time certificates  7,246   15,936  -54.5%
 Subordinated debit  3,676   3,062  20.0%
  Total interest expense  13,926   23,859  -41.6%
  Net interest income  88,707   83,973  5.6%
Provision for credit losses  1,400   12,800  -89.1%
  Net interest income after provision for      
   credit losses  87,307   71,173  22.7%
          
Noninterest income:      
 Fees & service charges on deposit accounts  951   744  27.8%
 Letters of credit fee income  1,619   1,590  1.8%
 BOLI income  194   189  2.9%
 Net gain (loss) on called and sale of investment securities  -   (113) -100.0%
 Net gain (loss) on sale of loans  (640)  15  -4363.5%
 Other income  869   677  28.4%
  Total noninterest income  2,993   3,102  -3.5%
          
Noninterest expense:      
 Salary and employee benefits  21,408   20,997  2.0%
 Net occupancy expense  2,830   2,692  5.1%
 Business development and promotion expense  190   265  -28.3%
 Professional services  1,977   2,020  -2.1%
 Office supplies and equipment expense  914   948  -3.6%
 Other   3,297   2,597  27.0%
  Total noninterest expense  30,616   29,519  3.7%
  Income before provision for income taxes  59,684   44,756  33.4%
Income tax expense  17,010   13,293  28.0%
  Net income $42,674  $31,463  35.6%
          
Dividend and earnings allocated to participating securities $(3) $(51) -95.0%
Net income available to common shareholders $42,671  $31,412  35.8%
          
Income per share available to common shareholders      
  Basic $2.85  $2.11  35.3%
  Diluted $2.85  $2.11  35.3%
          
Weighted-average common shares outstanding      
  Basic  14,952,366   14,875,049  0.5%
  Diluted  14,952,366   14,875,049  0.5%
          
Dividends per share $0.76  $0.60  26.7%
          


PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
        
        
    June 30, December 31, 
     2021   2020  
    (Unaudited) (Audited) 
Assets    
Cash and due from banks$876,474  $739,465  
Fed funds sold 20,000   20,000  
 Cash and cash equivalents 896,474   759,465  
        
Securities held to maturity, at amortized cost 15,749   6,568  
Securities available-for-sale, at fair value 278,460   239,682  
Loans 4,278,403   4,035,394  
 Less allowance for credit losses (63,635)  (63,426) 
 Less amortized deferred loan fees, net (5,329)  (4,574) 
 Loans, net 4,209,439   3,967,394  
        
Customers' liability on acceptances 7,797   3,596  
Bank furniture and fixtures, net 11,208   11,825  
Bank-owned life insurance 9,957   9,828  
Accrued interest receivable 18,316   23,692  
Investment in affordable housing partnerships 55,452   62,521  
Federal Home Loan Bank stock, at cost 15,000   15,000  
Deferred tax assets 24,583   24,466  
Income tax receivable 5,736   -  
Operating lease right-of-use assets 21,502   16,106  
Other assets 6,235   3,498  
 Total assets$5,575,908  $5,143,641  
        
Liabilities and Shareholders' Equity    
Deposits:    
 Non-interest bearing demand deposits$1,063,472  $938,911  
 Interest-bearing deposits: 1,774,668   1,700,818  
  Savings 32,560   34,702  
  Time certificates of $250,000 or more 930,976   912,546  
  Other time certificates 994,630   855,503  
  Total deposits 4,796,306   4,442,480  
        
Acceptances outstanding 7,797   3,596  
Subordinated debt issuance, net 147,787   99,334  
Commitments to fund investment in affordable housing partnerships 19,197   30,715  
Operating lease liabilities 23,287   18,682  
Accrued interest payable 914   1,245  
Other liabilities 21,651   22,142  
 Total liabilities 5,016,939   4,618,194  
        
Shareholders' equity 558,969   525,447  
 Total liabilities and shareholders' equity$5,575,908  $5,143,641  
        
Book value per common share$37.36  $31.47  
Number of common shares outstanding 14,962,164   14,931,861  


PREFERRED BANK 
Selected Consolidated Financial Information 
(unaudited) 
(in thousands, except for ratios) 
          
          
          
    For the Quarter Ended 
          
    June 30,March 31,December 31,September 30,June 30, 
     2021  2021  2020  2020  2020  
Unaudited historical quarterly operations data:      
 Interest income$50,473 $52,160 $53,649 $52,782 $52,164  
 Interest expense 7,112  6,814  7,586  8,663  9,983  
  Interest income before provision for credit losses 43,361  45,346  46,063  44,119  42,181  
 Provision for credit losses -  1,400  4,200  9,000  7,500  
 Noninterest income 1,646  1,347  1,356  1,605  1,430  
 Noninterest expense 14,964  15,652  14,177  13,663  14,334  
 Income tax expense 8,563  8,447  8,162  5,936  6,468  
  Net income$21,480 $21,194 $20,880 $17,125 $15,309  
          
 Earnings per share      
  Basic$1.44 $1.42 $1.40 $1.15 $1.03  
  Diluted$1.44 $1.42 $1.40 $1.15 $1.03  
          
Ratios for the period:      
 Return on average assets 1.58% 1.65% 1.63% 1.34% 1.26% 
 Return on beginning equity 15.98% 16.36% 16.49% 13.94% 13.00% 
 Net interest margin (Fully-taxable equivalent) 3.25% 3.61% 3.66% 3.54% 3.57% 
 Noninterest expense to average assets 1.10% 1.22% 1.10% 1.07% 1.18% 
 Efficiency ratio 33.25% 33.52% 29.90% 29.88% 32.87% 
 Net charge-offs (recoveries) to average loans (annualized) 0.12% -0.01% 0.20% 0.35% -0.01% 
          
Ratios as of period end:      
 Tier 1 leverage capital ratio 10.07% 10.26% 10.08% 9.75% 9.87% 
 Common equity tier 1 risk-based capital ratio 11.28% 11.34% 11.21% 11.02% 10.39% 
 Tier 1 risk-based capital ratio 11.28% 11.34% 11.21% 11.02% 10.39% 
 Total risk-based capital ratio 15.61% 14.73% 14.64% 14.51% 13.80% 
 Allowances for credit losses to loans at end of period 1.49% 1.56% 1.57% 1.55% 1.41% 
 Allowance for credit losses to non-performing loans 290.58% 294.74% 308.96% 243.56% 211.08% 
          
Average balances:      
 Total securities$269,000 $242,200 $251,284 $237,801 $250,134  
 Total loans$4,130,190 $4,044,800 $3,971,537 $3,956,145 $3,919,674  
 Total earning assets$5,364,598 $5,102,291 $5,018,031 $4,975,005 $4,768,537  
 Total assets$5,467,678 $5,200,079 $5,110,065 $5,073,548 $4,868,356  
 Total time certificate of deposits$1,893,247 $1,820,461 $1,764,528 $1,841,901 $1,757,531  
 Total interest bearing deposits$3,704,771 $3,531,358 $3,508,276 $3,501,275 $3,399,924  
 Total deposits$4,724,104 $4,486,399 $4,426,326 $4,408,882 $4,220,197  
 Total interest bearing liabilities$3,815,964 $3,630,705 $3,607,592 $3,600,560 $3,499,178  
 Total equity$553,561 $538,282 $518,567 $503,421 $486,931  
          


PREFERRED BANK 
Selected Consolidated Financial Information 
(unaudited) 
(in thousands, except for ratios) 
        
        
        
    For the Six Months Ended 
    June 30, June 30, 
     2021   2020  
        
 Interest income$102,633  $107,832  
 Interest expense 13,926   23,859  
  Interest income before provision for credit losses 88,707   83,973  
 Provision for credit losses 1,400   12,800  
 Noninterest income 2,993   3,102  
 Noninterest expense 30,616   29,519  
 Income tax expense 17,010   13,293  
  Net income$42,674  $31,463  
        
 Earnings per share    
  Basic$2.85  $2.11  
  Diluted$2.85  $2.11  
        
Ratios for the period:    
 Return on average assets 1.61%  1.33% 
 Return on beginning equity 16.38%  13.46% 
 Net interest margin (Fully-taxable equivalent) 3.43%  3.63% 
 Noninterest expense to average assets 1.16%  1.25% 
 Efficiency ratio 33.39%  33.90% 
 Net charge-offs (recoveries) to average loans 0.06%  -0.01% 
        
Average balances:    
 Total securities$255,675  $248,912  
 Total loans$4,087,731  $3,818,424  
 Total earning assets$5,234,170  $4,658,524  
 Total assets$5,334,618  $4,760,156  
 Total time certificate of deposits$1,857,055  $1,761,674  
 Total interest bearing deposits$3,618,543  $3,322,318  
 Total deposits$4,605,908  $4,115,413  
 Total interest bearing liabilities$3,723,846  $3,421,556  
 Total equity$545,964  $481,170  
        


PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
             
    As of
             
    June 30, March 31, December 31, September 30, June 30,
     2021   2021   2020   2020   2020 
Unaudited quarterly statement of financial position data:         
Assets:         
 Cash and cash equivalents$896,474  $943,126  $759,465  $807,791  $656,183 
 Securities held-to-maturity, at amortized cost 15,749   6,039   6,568   6,727   6,922 
 Securities available-for-sale, at fair value 278,460   228,635   239,682   219,778   270,667 
 Loans:         
  Real estate – Mortgage:         
   Real estate—Residential$558,147  $541,313  $523,789  $528,371  $511,354 
   Real estate—Commercial 2,019,995   1,925,554   1,911,485   1,808,200   1,781,660 
   Total Real Estate – Mortgage 2,578,142   2,466,867   2,435,274   2,336,571   2,293,014 
  Real estate – Construction:         
   R/E Construction — Residential 120,363   123,302   148,825   170,773   187,083 
   R/E Construction — Commercial 224,323   229,933   215,032   223,706   217,729 
   Total real estate construction loans 344,686   353,235   363,857   394,480   404,812 
  Commercial and industrial 1,259,668   1,248,550   1,165,990   1,144,051   1,192,056 
  PPP 95,765   95,434   70,234   74,551   73,524 
  Consumer and others 143   155   39   68   241 
   Gross loans 4,278,403   4,164,241   4,035,394   3,949,721   3,963,647 
 Allowance for credit losses on loans (63,635)  (64,883)  (63,426)  (61,262)  (55,762)
 Net deferred loan fees (5,329)  (4,872)  (4,574)  (4,411)  (5,097)
  Net loans, excluding loans held for sale$4,209,439  $4,094,486  $3,967,394  $3,884,048  $3,902,788 
 Loans held for sale$-  $-  $-  $-  $- 
  Net loans$4,209,439  $4,094,486  $3,967,394  $3,884,048  $3,902,788 
             
 Investment in affordable housing partnerships 55,452   59,824   62,521   47,917   49,658 
 Federal Home Loan Bank stock, at cost 15,000   15,000   15,000   15,000   15,000 
 Other assets 105,334   100,894   93,011   104,313   103,239 
  Total assets$5,575,908  $5,448,004  $5,143,641  $5,085,574  $5,004,457 
             
Liabilities:         
 Deposits:         
  Demand$1,063,472  $1,026,260  $938,911  $926,166  $934,764 
  Interest-bearing demand 1,774,668   1,751,951   1,700,818   1,620,495   1,594,682 
  Savings 32,560   37,551   34,702   32,830   27,737 
  Time certificates of $250,000 or more 930,976   927,043   912,546   977,821   970,649 
  Other time certificates 994,630   979,694   855,503   857,113   822,404 
  Total deposits$4,796,306  $4,722,499  $4,442,480  $4,414,425  $4,350,236 
             
 Acceptances outstanding$7,797  $9,670  $3,596  $7,463  $6,112 
 Subordinated debt issuance, net 147,787   99,365   99,334   99,304   99,273 
 Commitments to fund investment in affordable housing partnerships
 19,197   27,918   30,715   16,689   17,536 
 Other liabilities 45,852   49,283   42,069   43,826   42,571 
  Total liabilities$5,016,939  $4,908,735  $4,618,194  $4,581,707  $4,515,728 
             
Equity:          
 Net common stock, no par value$219,958  $218,593  $217,444  $213,519  $212,187 
 Retained earnings 332,276   316,481   300,969   284,568   271,923 
 Accumulated other comprehensive income 6,735   4,195   7,034   5,780   4,619 
  Total shareholders' equity$558,969  $539,269  $525,447  $503,867  $488,729 
  Total liabilities and shareholders' equity$5,575,908  $5,448,004  $5,143,641  $5,085,574  $5,004,457 
             


PREFERRED BANK
Quarter-to-Date Average Balances, Yields and Rates
(Unaudited)
              
            
   Three months ended June 30, Three months ended March 31, Three months ended June 30,
    2021   2020   2020 
    InterestAverage  InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
  
ASSETS(Dollars in thousands)
Interest-earning assets:           
 Loans (1,2)$4,132,451  47,9064.65% $4,044,823 $49,8595.00% $3,921,694 $49,8135.11%
 Investment securities (3) 269,000  2,0583.07%  242,200  1,8843.16%  250,134  2,0983.37%
 Federal funds sold 20,437  190.36%  21,474  240.45%  24,324  310.52%
 Other earning assets 942,710  5970.25%  793,794  4930.25%  572,385  3180.23%
  Total interest-earning assets 5,364,598  50,5803.78%  5,102,291  52,2604.15%  4,768,537  52,2604.41%
 Deferred loan fees, net (4,924)    (4,344)    (3,182)  
 Allowance for credit losses on loans (64,842)    (63,450)    (48,247)  
Noninterest earning assets:           
 Cash and due from banks 10,620     9,923     8,274   
 Bank furniture and fixtures 11,468     11,772     11,993   
 Right of use assets 19,735     16,847     16,768   
 Other assets 131,023     127,040     114,213   
  Total assets$5,467,678    $5,200,079    $4,868,356   
              
LIABILITIES AND SHAREHOLDERS' EQUITY           
Interest-bearing liabilities:           
 Deposits:           
  Interest-bearing demand and savings 1,811,524 $1,5480.34%  1,710,897 $1,4560.35% $1,642,393 $1,4790.36%
  TCD $250K or more 926,161  1,6880.73%  919,155  1,9180.85%  945,043  3,6241.54%
  Other time certificates 967,086  1,7310.72%  901,306  1,9090.86%  812,488  3,3491.66%
  Total interest-bearing deposits 3,704,771  4,9670.54%  3,531,358  5,2830.61%  3,399,924  8,4521.00%
Subordinated debt, net 111,193  2,1457.74%  99,347  1,5316.25%  99,254  1,5316.20%
  Total interest-bearing liabilities 3,815,964  7,1120.75%  3,630,705  6,8140.76%  3,499,178  9,9831.15%
Non-interest bearing liabilities:           
 Demand deposits 1,019,333     955,041     820,273   
 Lease Liability 21,765     19,289     19,841   
 Other liabilities 57,055     56,762     42,133   
  Total liabilities 4,914,117     4,661,797     4,381,425   
Shareholders’ equity 553,561     538,282     486,931   
  Total liabilities and shareholders’ equity$5,467,678    $5,200,079    $4,868,356   
Net interest income $43,468   $45,446   $42,277 
Net interest spread  3.03%   3.39%   3.26%
Net interest margin  3.25%   3.61%   3.57%
              
Cost of Deposits:           
 Noninterest bearing demand deposits$1,019,333    $955,041    $820,273   
 Interest bearing deposits 3,704,771  4,9670.54%  3,531,358  5,2830.61%  3,399,924  8,4521.00%
  Total Deposits$4,724,104 $4,9670.42% $4,486,399 $5,2830.48% $4,220,197 $8,4520.81%
              
            
(1)Includes non-accrual loans and loans held for sale          
(2)Net loan fee income of $699,000, $539,000 and $542,000 for the quarter ended June 30, 2021, March 31, 2021, June 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, Yields and Rates
(Unaudited)
          
          
   Six Months ended June 30,
    2021 2020 
    InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest-earning assets:       
 Loans (1,2)$4,088,879 $97,7654.82% $3,819,453 $101,3775.34%
 Investment securities (3) 255,675  3,9423.11%  248,912  4,2253.41%
 Federal funds sold 20,953  430.41%  27,238  1561.15%
 Other earning assets 868,663  1,0900.25%  562,921  2,2630.81%
  Total interest-earning assets 5,234,170  102,8403.96%  4,658,524  108,0214.66%
 Deferred loan fees, net (4,636)    (3,131)  
 Allowance for credit losses on loans (64,150)    (45,523)  
Noninterest earning assets:       
 Cash and due from banks 10,273     7,304   
 Bank furniture and fixtures 11,619     12,131   
 Right of use assets 18,299     16,887   
 Other assets 129,042     113,964   
  Total assets$5,334,618    $4,760,156   
          
LIABILITIES AND SHAREHOLDERS' EQUITY       
Interest-bearing liabilities:       
 Deposits:       
  Interest-bearing demand/ savings 1,761,488 $3,0040.34%  1,560,644 $4,8610.63%
  TCD $250K or more 922,677  3,6060.79%  957,193  8,4761.78%
  Other time certificates 934,378  3,6400.79%  804,481  7,4601.86%
  Total interest-bearing deposits 3,618,543  10,2500.57%  3,322,318  20,7971.26%
Subordinated debt, net 105,303  3,6767.04%  99,238  3,0626.20%
  Total interest-bearing liabilities 3,723,846  13,9260.75%  3,421,556  23,8591.40%
Non-interest bearing liabilities:       
 Demand deposits 987,365     793,095   
 Lease Liability 20,534     20,077   
 Other liabilities 56,909     44,258   
  Total liabilities 4,788,654     4,278,986   
Shareholders’ equity 545,964     481,170   
  Total liabilities and shareholders’ equity$5,334,618    $4,760,156   
Net interest income $88,914   $84,162 
Net interest spread  3.21%   3.26%
Net interest margin  3.43%   3.63%
          
Cost of Deposits:       
 Noninterest bearing demand deposits$987,365    $793,095   
 Interest bearing deposits 3,618,543  10,2500.57%  3,322,318  20,7971.26%
  Total Deposits$4,605,908 $10,2500.45% $4,115,413 $20,7971.02%
          
(1) Includes non-accrual loans and loans held for sale       
(2) Net loan fee income of $1.2 million for the six months ended June 30, 2021 and 2020 is 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
     Six Months Ended Year ended
     June 30, 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  431   3,700 
  Mini-perm Real Estate  817   1,900 
  Others  -   7 
     Total Charge-Offs  1,248   5,607 
        
 Recoveries    
  Commercial & Industrial  57   - 
  Construction - Commercial  -   194 
  Land - Commercial  -   9 
     Total Recoveries  57   203 
        
 Net Charge-Offs (Recoveries)  1,191   5,404 
 Provision for Credit Losses:    
  CECL Cumulative Effect Adjustment  -   8,000 
  Current Provision  1,400   26,000 
Balance at End of Period $63,635  $63,426 
Average Loans Held for Investment $4,044,823  $3,892,811 
Loans Held for Investment at End of Period $4,278,403  $4,035,394 
Net Charge-Offs (Recoveries) to Average Loans  0.06%  0.14%
Allowances for Credit Losses to Loans at End of Period  1.49%  1.57%
        


AT THE COMPANY:AT FINANCIAL PROFILES:
Edward J. Czajka Jeffrey Haas
Executive Vice PresidentGeneral Information
Chief Financial Officer  (310) 622-8240
(213) 891-1188  PFBC@finprofiles.com 


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