Preferred Bank Reports Quarterly and Annual Results


LOS ANGELES, Jan. 24, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended December 31, 2023. Preferred Bank (“the Bank”) reported net income of $35.8 million or $2.60 per diluted share for the fourth quarter of 2023. This represents a decrease in net income of $3.7 million or 9.4% from the same quarter last year and down from the third quarter of 2023 as well. The primary driver of the decrease compared to both periods was net interest income which decreased by $4.7 million or 6.4% from the same period last year and was down by $3.6 million or 4.9% from the prior quarter. In addition to that, the Bank incurred a $929,000 loss this quarter on the sale of approximately $29 million of investment securities. The decline in net interest income was due to interest expense on deposits, which increased compared to both comparable periods. Partially offsetting the decrease in net interest income was non-interest expense, which came in lower than both comparable periods.

Overall, results were very strong and the Bank also provided for $3.5 million in provision for credit losses which has driven the allowance for credit losses to total loans up to 1.49%.

Highlights for the Quarter:

  • Return on average assets was 2.15%
  • Return on beginning equity of 21.21%
  • Net interest margin was 4.24%
  • Total loans increased $145 million or 2.83% for the quarter
  • Efficiency ratio was 25.0%
  • Quarter-end cash and equivalents continues to be strong at $911 million or 16.0% of total deposits

Highlights for the Year:

  • Return on average assets was 2.28%
  • Return on beginning equity of 23.80%
  • Net interest margin was 4.49%
  • Total loans increased $199 million or 3.92%
  • Efficiency ratio was 25.8%

Li Yu, Chairman and CEO, commented, “Our fourth quarter net income was $35.8 or $2.60 per share and closed out the full year 2023 with record earnings of $150.04 million or $10.52 per diluted share. We attribute the record performance to active margin management and continuous effective cost control.

“Credit quality remains generally stable in the fourth quarter. Total criticized loans reduced from $98.6 million (1.92% of total loans) at September 30, 2023 to $83.0 million (1.57% of total loans). However, non-performing loans have increased from $19.4 million on September 30, 2023 to $28.7 million on December 31, 2023. The quarterly increase does not appear systemic. There were no loan charge-offs recorded during the fourth quarter. Provision expense for the quarter was $3.5 million, which has increased the allowance for credit losses to 1.49% of total loans at December 31, 2023.

“Loan and deposit growth for the year was below the historical standards of Preferred Bank but in-line with industry performance. The year 2023 was a year marked by high inflation, the last of the unprecedented Federal Reserve rate hikes and the regional Bank meltdown events of March. Looking forward, we expect that loan demand will gradually recover and that deposit costs will ease.

“During the quarter, the Bank announced an increase in our dividend by 27.3% to $2.80 per annum. In January, we have also announced the buyback of another $50 million of our common stock. With lower loan demand, we have been and will continue to deploy excess cash flow for the benefit of our shareholders. During the fourth quarter, we have also begun to restructure our securities portfolio by selling off some low yielding securities and replacing them with higher yielding securities. The loss on sale of $929,000 will not however, affect our capital ratios.

“Looking ahead, the year 2024 will likely be a less eventful year in banking than 2023. It seems to us that the banking industry will begin to have a “back to normal” process. We are hopeful to return to our historical growth pattern.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $69.4 million for the fourth quarter of 2023. This was a decrease from the $74.1 million recorded in the same quarter last year and down from the $73.0 million posted in the third quarter of 2023. As the FOMC rate hikes appear to be at an end, the lag effect of increasing deposit costs has manifested itself in the form of higher deposit costs as the yield on earning assets has remained relatively flat since the last rate hike. The Bank’s taxable equivalent net interest margin declined by 15 basis points to 4.24%, from 4.39% last quarter. Comparing to the same quarter last year, which was close to the Bank’s peak NIM, the margin was down by 51 basis points from the 4.75% NIM posted in the fourth quarter of 2022.

Noninterest Income. For the fourth quarter of 2023, noninterest income was $2.1 million compared with $2.8 million for the same quarter last year and compared to 3.0 million for the third quarter of 2023. The decrease from both comparable periods was due to a $929,000 loss on sale of approximately $29 million in investment securities in the fourth quarter of 2023. This was done to reposition part of the portfolio into higher-yielding instruments. Service charges on deposits was up by $226,000 over the same period last year but down a bit from the $939,000 recorded in the third quarter of 2023. Letter of Credit (“LC”) fee income was $1.5 million for the quarter compared to $1.4 million in the prior quarter and compared to $1.2 million in the same quarter of last year. The increase is due to increased credit enhancement activity.

Noninterest Expense. Total noninterest expense was $17.9 million for the fourth quarter of 2023 compared to $19.0 million for the third quarter of 2023 and compared to the $20.0 million recorded in the same period last year. Comparing this quarter to the fourth quarter of last year, the major variances were; personnel expense decreased by $895,000 or 6.9%, occupancy expense was up by $92,000 or 6.4% due to the opening of the Bank’s new Irvine branch, other professional services increased by $327,000 due mainly to legal fees and other expense increased by $332,000 due to ICS reciprocal fees and higher FDIC premiums and finally, OREO expense was down by $1.8 million as the Bank recorded a $1.9 million valuation adjustment in the fourth quarter of 2022. In comparing the fourth quarter of 2023 to the prior quarter; personnel expense decreased by $950,000 or 7.3%, OREO expenses increased by $154,000 and other expense was down by $287,000 or 12.6%. For the quarter ended December 31, 2023, the Bank’s efficiency ratio was 25.0%, equaling the 25.0% posted last quarter and better than the 26.0% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $14.3 million for the fourth quarter of 2023. This represents an effective tax rate (“ETR”) of 28.5% and the same for the third quarter of 2023 but up from the 28.0% ETR recorded in the fourth quarter of 2022. 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 December 31, 2023 were $5.28 billion, an increase of $198.7 million from the total of $5.07 billion as of December 31, 2022. Total deposits increased to $5.71 billion from the $5.56 billion as of December 31, 2022, an increase of $152.3 million. Total assets were $6.66 billion, an increase of $233.9 million over the total of $6.43 billion as of December 31, 2022.

Asset Quality

As of December 31, 2023, nonaccrual loans increased to $28.7 million, from $19.4 million reported as of September 30, 2023 and up from the $5.5 million reported as of December 31, 2022. Although an increase from September levels, we are confident in the expedient and low cost resolution of these credits. OREO and repossessed assets totaled $16.7 million as of December 31, 2023, no change from September 30, 2023. Classified and criticized assets declined from $115.3 million as of September 30, 2023 to $99.7 million as of December 31, 2023. Total net (recoveries) charge-offs were ($6,000) for the fourth quarter of 2023 as compared to net charge offs of $80,000 last quarter and compared to $0 for the fourth quarter last year. Management is acutely aware that commercial real estate is under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, this weakness has yet to appear. We will be vigilant going forward.

Allowance for Credit Losses

The provision for credit losses for the fourth quarter of 2023 was $3.5 million compared to $3.5 million last quarter and compared to $2.0 million in the same quarter last year. Loan growth was the primary driver of the provision for the quarter. The Bank’s allowance coverage ratio now stands at 1.49% of total loans.

Capitalization

As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 capital ratio was 11.57% and the total capital ratio stood at 15.18%. As of December 31, 2022, the Bank’s leverage ratio was 10.30%, the common equity tier 1 ratio was 10.81% and the total risk-based capital ratio was 14.39%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2023 financial results will be held tomorrow, January 25, 2024 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.

Preferred Bank's Chairman and CEO 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 discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through February 8, 2024; the passcode is 5055246.

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 twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch 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 2022 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

Financial Tables to Follow


PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
       
       
 For the Quarter Ended
 December 31, September 30, December 31, 
  2023   2023   2022 
Interest income:      
Loans, including fees$107,709  $106,695  $87,159 
Investment securities 16,973   18,556   11,028 
Fed funds sold 282   278   192 
Total interest income 124,964   125,529   98,379 
       
Interest expense:      
Interest-bearing demand 21,716   20,257   13,906 
Savings 72   67   32 
Time certificates 32,455   29,369   9,004 
FHLB borrowings -   1,557   - 
Subordinated debt 1,325   1,325   1,325 
Total interest expense 55,568   52,575   24,267 
Net interest income 69,396   72,954   74,112 
Provision for credit losses 3,500   3,500   2,000 
Net interest income after provision for      
credit losses 65,896   69,454   72,112 
       
Noninterest income:      
Fees & service charges on deposit accounts 857   939   631 
Letters of credit fee income 1,486   1,412   1,245 
BOLI income 105   103   102 
Net (loss) gain on called and sale of investment securities (929)  -   297 
Net gain on sale of loans 205   21   - 
Other income 382   497   533 
Total noninterest income 2,106   2,972   2,808 
       
Noninterest expense:      
Salary and employee benefits 12,058   13,008   12,953 
Net occupancy expense 1,536   1,563   1,444 
Business development and promotion expense 239   193   320 
Professional services 1,355   1,423   1,028 
Office supplies and equipment expense 391   395   460 
Loss on sale of OREO, valuation allowance and related expense 294   140   2,103 
Other
 2,000   2,287   1,668 
Total noninterest expense 17,873   19,009   19,976 
Income before provision for income taxes 50,129   53,417   54,944 
Income tax expense 14,290   15,225   15,384 
Net income$35,839  $38,192  $39,560 
       
Income per share available to common shareholders      
Basic$2.63  $2.74  $2.76 
Diluted$2.60  $2.71  $2.71 
       
Weighted-average common shares outstanding      
Basic 13,617,225   13,925,994   14,357,326 
Diluted 13,804,315   14,105,915   14,617,377 
       
Cash dividends per common share$0.70  $0.55  $0.55 
       



PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
      
      
 For the Year Ended  
 December 31, December 31, Change
  2023   2022  %
Interest income:     
Loans, including fees$412,505  $269,011   53.3%
Investment securities 64,427   24,997   157.7%
Fed funds sold 1,056   374   182.3%
Total interest income 477,988   294,382   62.4%
      
Interest expense:     
Interest-bearing demand 75,417   24,221   211.4%
Savings 225   91   147.4%
Time certificates 103,853   17,412   496.4%
FHLB borrowings 3,819   -   100.0%
Subordinated debt 5,300   5,300   -0.0%
Total interest expense 188,614   47,024   301.1%
Net interest income 289,374   247,358   17.0%
Provision for credit losses 10,000   7,350   36.1%
Net interest income after provision for credit losses 279,374   240,008   16.4%
      
Noninterest income:     
Fees & service charges on deposit accounts 3,333   2,728   22.2%
Letters of credit fee income 5,798   4,463   29.9%
BOLI income 412   401   2.7%
Net (loss) gain on called and sale of investment securities (5,046)  297   -1798.9%
Net gain on sale of loans 752   -   100.0%
Other income 1,864   1,973   -5.5%
Total noninterest income 7,113   9,862   -27.9%
      
Noninterest expense:     
Salary and employee benefits 51,314   48,607   5.6%
Net occupancy expense 6,049   5,759   5.0%
Business development and promotion expense 737   811   -9.1%
Professional services 5,270   4,892   7.7%
Office supplies and equipment expense 1,588   1,864   -14.8%
Loss on sale of OREO, valuation allowance and related expense 3,344   2,818   18.7%
Other 8,332   5,922   40.7%
Total noninterest expense 76,634   70,673   8.4%
Income before provision for income taxes 209,853   179,197   17.1%
Income tax expense 59,813   50,352   18.8%
Net income$150,040  $128,845   16.4%
      
Dividend and earnings allocated to participating securities$-  $(2)  100.0%
Net income available to common shareholders$150,040  $128,843   16.5%
      
Income per share available to common shareholders     
Basic$10.64  $8.84   20.4%
Diluted$10.52  $8.70   20.9%
      
Weighted-average common shares outstanding     
Basic 14,095,745   14,579,132   -3.3%
Diluted 14,261,644   14,809,416   -3.7%
      
Dividends per share$2.35  $1.84   27.7%
      



PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
    
    
 December 31, December 31,
  2023   2022 
 (Unaudited) (Audited)
Assets   
Cash and due from banks$890,852  $747,526 
Fed funds sold 20,000   20,000 
Cash and cash equivalents 910,852   767,526 
    
Securities held-to-maturity, at amortized cost 21,171   22,459 
Securities available-for-sale, at fair value 313,842   428,295 
Loans 5,273,498   5,074,793 
Less allowance for credit losses (78,355)  (68,472)
Less amortized deferred loan fees, net (11,079)  (9,939)
Loans, net 5,184,064   4,996,382 
    
Loans held for sale, at lower of cost or fair value 360   - 
    
Other real estate owned and repossessed assets 16,716   21,990 
Customers' liability on acceptances 315   1,731 
Bank furniture and fixtures, net 9,694   8,999 
Bank-owned life insurance 10,632   10,357 
Accrued interest receivable 33,892   23,593 
Investment in affordable housing partnerships 65,276   61,173 
Federal Home Loan Bank stock, at cost 15,000   15,000 
Deferred tax assets 44,446   43,218 
Income tax receivable 6,936   - 
Operating lease right-of-use assets 22,050   21,718 
Other assets 4,030   2,917 
Total assets$6,659,276  $6,425,358 
    
Liabilities and Shareholders' Equity   
Deposits:   
Noninterest bearing demand deposits$786,995  $1,192,091 
Interest bearing deposits: 2,075,156   2,295,212 
Savings 29,167   39,527 
Time certificates of $250,000 or more 1,317,862   1,138,727 
Other time certificates 1,500,162   891,440 
Total deposits 5,709,342   5,556,997 
    
Acceptances outstanding 315   1,731 
Subordinated debt issuance, net 148,232   147,995 
Commitments to fund investment in affordable housing partnerships 30,824   27,490 
Operating lease liabilities 19,766   20,949 
Accrued interest payable 16,124   2,608 
Other liabilities 39,568   37,162 
Total liabilities 5,964,171   5,794,932 
    
Shareholders' equity 695,105   630,426 
Total liabilities and shareholders' equity$6,659,276  $6,425,358 
    
Book value per common share$50.54  $43.91 
Number of common shares outstanding 13,753,246   14,358,145 



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
      
      
      
 For the Quarter Ended
 December 31,September 30,June 30,March 31,December 31,
  2023  2023  2023  2023  2022 
Unaudited historical quarterly operations data:     
Interest income$124,964 $125,529 $118,411 $109,084 $98,379 
Interest expense 55,568  52,575  45,102  35,369  24,267 
Interest income before provision for credit losses 69,396  72,954  73,309  73,715  74,112 
Provision for credit losses 3,500  3,500  2,500  500  2,000 
Noninterest income 2,106  2,972  3,101  (1,066) 2,808 
Noninterest expense 17,873  19,009  20,852  18,899  19,976 
Income tax expense 14,290  15,225  15,122  15,176  15,384 
Net income$35,839 $38,192 $37,936 $38,074 $39,560 
      
Earnings per share     
Basic$2.63 $2.74 $2.63 $2.64 $2.76 
Diluted$2.60 $2.71 $2.61 $2.61 $2.71 
      
Ratios for the period:     
Return on average assets 2.15% 2.25% 2.32% 2.41% 2.48%
Return on beginning equity 21.21% 22.66% 23.18% 24.49% 26.58%
Net interest margin (Fully-taxable equivalent) 4.24% 4.39% 4.58% 4.77% 4.75%
Noninterest expense to average assets 1.07% 1.12% 1.28% 1.20% 1.25%
Efficiency ratio 25.00% 25.04% 27.29% 26.01% 25.97%
Net charge-offs (recoveries) to average loans (annualized) -0.00% 0.01% -0.00% 0.00% 0.00%
      
Ratios as of period end:     
Tier 1 leverage capital ratio 10.85% 10.46% 10.61% 10.63% 10.30%
Common equity tier 1 risk-based capital ratio 11.57% 11.63% 11.51% 11.30% 10.81%
Tier 1 risk-based capital ratio 11.57% 11.63% 11.51% 11.30% 10.81%
Total risk-based capital ratio 15.18% 15.32% 15.14% 14.91% 14.39%
Allowances for credit losses to loans at end of period 1.49% 1.46% 1.40% 1.36% 1.35%
Allowance for credit losses to non-performing loans2.73x3.86x13.86x254.56x12.49x
      
Average balances:     
Total securities$349,863 $368,968 $397,905 $442,852 $434,830 
Total loans 5,126,918  5,086,241  5,044,004  5,012,862  4,981,561 
Total earning assets 6,499,469  6,597,557  6,432,950  6,276,630  6,193,330 
Total assets 6,627,349  6,719,859  6,558,651  6,400,849  6,328,017 
Total time certificate of deposits 2,767,385  2,680,854  2,617,872  2,209,370  1,872,239 
Total interest bearing deposits 4,906,947  4,800,227  4,549,519  4,451,299  4,287,287 
Total deposits 5,689,713  5,654,350  5,481,457  5,479,945  5,468,562 
Total interest bearing liabilities 5,055,143  5,069,014  4,847,596  4,630,982  4,435,245 
Total equity 683,141  678,020  677,306  650,963  613,729 
      



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
    
    
    
 For the Year Ended
 December 31,
 December 31,
  2023   2022 
    
Interest income$477,988  $294,382 
Interest expense 188,614   47,024 
Interest income before provision for credit losses 289,374   247,358 
Provision for credit losses 10,000   7,350 
Noninterest income 7,113   9,862 
Noninterest expense 76,634   70,673 
Income tax expense 59,813   50,352 
Net income$150,040  $128,845 
    
Earnings per share   
Basic$10.64  $8.84 
Diluted$10.52  $8.70 
    
Ratios for the period:   
Return on average assets 2.28%  2.08%
Return on beginning equity 23.80%  21.96%
Net interest margin (Fully-taxable equivalent) 4.49%  4.09%
Noninterest expense to average assets 1.17%  1.14%
Efficiency ratio 25.85%  27.48%
Net charge-off (recoveries) to average loans 0.00%  -0.02%
    
Average balances:   
Total securities$389,584  $432,777 
Total loans 5,067,870   4,760,815 
Total earning assets 6,452,661   6,054,932 
Total assets 6,577,690   6,181,138 
Total time certificate of deposits 2,570,706   1,825,307 
Total interest bearing deposits 4,678,893   4,048,450 
Total deposits 5,577,155   5,340,533 
Total interest bearing liabilities 4,902,616   4,196,321 
Total equity 672,461   603,878 
    



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
          
 As of
          
 December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
Unaudited quarterly statement of financial position data:         
Assets:         
Cash and cash equivalents$910,852  $1,021,108  $1,049,745  $885,691  $767,526 
Securities held-to-maturity, at amortized cost 21,171   21,474   21,818   22,155   22,459 
Securities available-for-sale, at fair value 313,842   335,608   352,548   367,492   428,295 
Loans:         
Real estate – Mortgage:         
Real estate—Residential$688,057  $663,021  $631,795  $612,907  $609,292 
Real estate—Commercial 2,760,762   2,688,148   2,744,074   2,813,681   2,730,726 
Total Real Estate – Mortgage 3,448,819   3,351,169   3,375,879   3,426,588   3,340,018 
Real estate – Construction:         
R/E Construction — Residential 246,201   226,482   186,239   175,286   193,027 
R/E Construction — Commercial 179,775   164,666   153,418   142,319   204,478 
Total real estate construction loans 425,976   391,148   339,657   317,605   397,505 
Commercial and industrial 1,393,830   1,377,675   1,388,865   1,299,325   1,320,830 
SBA 3,469   2,424   4,427   7,306   11,339 
Trade finance 1,041   5,541   9,348   6,885   4,521 
Consumer and others 363   285   345   19   580 
Gross loans 5,273,498   5,128,242   5,118,511   5,057,728   5,074,793 
Allowance for credit losses on loans (78,355)  (74,849)  (71,429)  (68,929)  (68,472)
Net deferred loan fees (11,079)  (10,240)  (10,464)  (10,286)  (9,939)
Net loans, excluding loans held for sale$5,184,064  $5,043,153  $5,036,618  $4,978,513  $4,996,382 
Loans held for sale$360  $-  $176  $-  $- 
Net loans$5,184,424  $5,043,153  $5,036,794  $4,978,513  $4,996,382 
          
Other real estate owned and repossessed assets$16,716  $16,716  $16,728  $18,628  $21,990 
Investment in affordable housing partnerships 65,276   54,679   56,844   59,009   61,173 
Federal Home Loan Bank stock, at cost 15,000   15,000   15,000   15,000   15,000 
Other assets 131,995   124,793   118,465   115,049   112,533 
Total assets$6,659,276  $6,632,530  $6,667,942  $6,461,537  $6,425,358 
          
Liabilities:         
Deposits:         
Demand$786,995  $838,300  $870,282  $1,050,992  $1,192,091 
Interest bearing demand 2,075,156   2,091,384   2,005,298   1,751,439   2,295,212 
Savings 29,167   30,427   32,089   33,861   39,527 
Time certificates of $250,000 or more 1,317,862   1,283,461   1,244,128   1,329,720   1,138,727 
Other time certificates 1,500,162   1,439,699   1,437,194   1,241,754   891,440 
Total deposits$5,709,342  $5,683,271  $5,588,991  $5,407,766  $5,556,997 
          
Acceptances outstanding$315  $103  $448  $107  $1,731 
Advance from Federal Home Loan Bank -   -   150,000   150,000   - 
Subordinated debt issuance, net 148,232   148,173   148,114   148,055   147,995 
Commitments to fund investment in affordable housing partnerships 30,824   20,824   20,930   26,709   27,490 
Other liabilities 75,458   109,651   90,692   72,359   60,074 
Total liabilities$5,964,171  $5,962,022  $5,999,175  $5,804,996  $5,794,287 
          
Equity:         
Net common stock, no par value$134,534  $143,584  $167,404  $181,208  $184,604 
Retained earnings 592,325   566,027   535,373   505,207   475,072 
Accumulated other comprehensive income (31,754)  (39,103)  (34,010)  (29,874)  (28,605)
Total shareholders' equity $695,105  $670,508  $668,767  $656,541  $631,071 
Total liabilities and shareholders' equity $6,659,276  $6,632,530  $6,667,942$6,461,537  $6,425,358 
          



PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(unaudited)
            
          
 Three months ended December 31, Three months ended September 30, Three months ended December 31,
  2023   2023   2022 
  InterestAverage  InterestAverage  InterestAverage
 AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/
 BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:           
Loans(1,2)$5,127,935 $107,7098.33% $5,086,302 $106,6958.32% $4,981,561 $87,1596.94%
Investment securities(3) 349,863  3,3353.78%  368,968  3,4223.68%  434,830  3,9933.64%
Federal funds sold 20,028  2825.58%  20,111  2785.48%  20,000  1923.81%
Other earning assets 1,001,643  13,7395.44%  1,122,176  15,2355.39%  756,939  7,1393.74%
Total interest earning assets 6,499,469  125,0657.63%  6,597,557  125,6307.55%  6,193,330  98,4836.31%
Deferred loan fees, net (10,421)    (10,071)    (10,003)  
Allowance for credit losses on loans (74,965)    (71,503)    (66,515)  
Noninterest earning assets:           
Cash and due from banks 12,376     12,101     11,569   
Bank furniture and fixtures 9,243     8,814     9,237   
Right of use assets 20,338     21,491     22,002   
Other assets 171,309     161,470     168,397   
Total assets$6,627,349    $6,719,859    $6,328,017   
            
LIABILITIES AND SHAREHOLDERS' EQUITY           
Interest bearing liabilities:           
Deposits:           
Interest bearing demand and savings$2,139,562 $21,7884.04% $2,119,373 $20,3243.80% $2,415,048 $13,9382.29%
TCD $250K or more 1,294,531  15,6004.78%  1,251,397  14,0854.47%  1,017,302  6,0142.35%
Other time certificates 1,472,854  16,8554.54%  1,429,457  15,2844.24%  854,937  2,9901.39%
Total interest bearing deposits 4,906,947  54,2434.39%  4,800,227  49,6934.11%  4,287,287  22,9422.12%
Short-term borrowings 2  06.08%  -  -0.00%  -  -0.00%
Advance from Federal home loan bank -  -0.00%  120,652  1,5575.12%  -  -0.00%
Subordinated debt, net 148,194  1,3253.55%  148,135  1,3253.55%  147,958  1,3253.55%
Total interest bearing liabilities 5,055,143  55,5684.36%  5,069,014  52,5754.11%  4,435,245  24,2672.17%
Noninterest bearing liabilities:           
Demand deposits 782,766     854,123     1,181,275   
Lease Liability 18,179     19,759     21,542   
Other liabilities 88,120     98,943     76,212   
Total liabilities 5,944,208     6,041,839     5,714,274   
Shareholders’ equity 683,141     678,020     613,743   
Total liabilities and shareholders’ equity$6,627,349    $6,719,859    $6,328,017   
Net interest income $69,497   $73,055   $74,216 
Net interest spread  3.27%   3.44%   4.14%
Net interest margin  4.24%   4.39%   4.75%
            
Cost of Deposits:           
Noninterest bearing demand deposits$782,766    $854,123    $1,181,275   
Interest bearing deposits 4,906,947  54,2434.39%  4,800,227  49,6934.11%  4,287,287  22,9422.12%
Total Deposits$5,689,713 $54,2433.78% $5,654,350 $49,6933.49% $5,468,562 $22,9421.66%
            
(1) Includes non-accrual loans and loans held for sale          
(2) Net loan fee income of $1.0 million, $1.1 million and $972,000 for the quarter ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively, are included in the yield computations
(3) Yields on securities have been adjusted to a tax-equivalent basis         



PREFERRED BANK
Year-to-Date Average Balances, Yield and Rates
(unaudited)
        
        
 Year ended December 31,
  2023 2022 
  InterestAverage  InterestAverage
 AverageIncome orYield/ AverageIncome orYield/
 BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:       
Loans(1,2)$5,068,486 $412,5058.14% $4,760,815 $269,0115.65%
Investment securities(3) 389,584  14,4613.71%  432,777  11,5842.68%
Federal funds sold 20,090  1,0565.25%  20,070  3741.86%
Other earning assets 974,501  50,3725.17%  841,270  13,8371.64%
Total interest earning assets 6,452,661  478,3947.41%  6,054,932  294,8064.87%
Deferred loan fees, net (10,212)    (8,697)  
Allowance for credit losses on loans (70,992)    (61,645)  
Noninterest earning assets:       
Cash and due from banks 11,978     11,068   
Bank furniture and fixtures 9,010     9,826   
Right of use assets 21,417     21,612   
Other assets 163,828     154,042   
Total assets$6,577,690    $6,181,138   
        
LIABILITIES AND SHAREHOLDERS' EQUITY       
Interest bearing liabilities:       
Deposits:       
Interest bearing demand/ savings$2,108,187 $75,6423.59% $2,223,143 $24,3121.09%
TCD $250K or more 1,267,859  53,2004.20%  938,491  10,7681.15%
Other time certificates 1,302,847  50,6533.89%  886,816  6,6440.75%
Total interest \bearing deposits 4,678,893  179,4953.84%  4,048,450  41,7241.03%
Short-term borrowings 1  03.06%  -  -0.00%
Advance from Federal home loan bank 75,616  3,8195.05%  147,871  5,3003.58%
Subordinated debt, net 148,106  5,3003.58%  -  -0.00%
Total interest bearing liabilities 4,902,616  188,6143.85%  4,196,321  47,0241.12%
Noninterest bearing liabilities:       
Demand deposits 898,262     1,292,083   
Lease Liability 19,902     21,731   
Other liabilities 84,449     67,125   
Total liabilities 5,905,229     5,577,260   
Shareholders’ equity 672,461     603,878   
Total liabilities and shareholders’ equity$6,577,690    $6,181,138   
Net interest income $289,780   $247,782 
Net interest spread  3.57%   3.75%
Net interest margin  4.49%   4.09%
        
Cost of Deposits:       
Noninterest bearing demand deposits$898,262    $1,292,083   
Interest bearing deposits 4,678,893  179,4953.84%  4,048,450  41,7241.03%
Total Deposits$5,577,155 $179,4953.22% $5,340,533 $41,7240.78%
        
(1) Includes non-accrual loans and loans held for sale       
(2) Net loan fee income of $4.2 million and $3.8 million for the year ended December 31, 2023 and 2022, respectively, are included in the yield computations
(3) Yields on securities have been adjusted to a tax-equivalent basis      



Preferred Bank
Loan and Credit Quality Information
    
Allowance For Credit Losses History
 Year ended
 December 31, 2023 December 31, 2022
 (Dollars in 000's)
Allowance For Credit Losses   
Balance at Beginning of Period$68,472  $59,969 
Charge-Offs   
Commercial & Industrial 124   1,222 
Mini-perm Real Estate -   1 
Total Charge-Offs 124   1,223 
    
Recoveries   
Commercial & Industrial 7   - 
Mini-perm Real Estate -   2,376 
Total Recoveries 7   2,376 
    
Net Charge-Offs (recoveries) 117   (1,153)
Provision for Credit Losses: 10,000   7,350 
Balance at End of Period$78,355  $68,472 
    
Average Loans Held for Investment$5,067,870  $4,760,815 
Loans Held for Investment at End of Period$5,273,498  $5,074,793 
Net Charge-Offs (recoveries) to Average Loans 0.00%  -0.02%
Allowances for Credit Losses to Loans at End of Period 1.49%  1.35%
    


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