LOS ANGELES, Oct. 19, 2016 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), an independent commercial bank, today reported results for the quarter ended September 30, 2016. Preferred Bank (“the Bank”) reported net income of $9.9 million or $0.69 per diluted share for the third quarter of 2016. This compares to net income of $7.9 million or $0.57 per diluted share for the third quarter of 2015 and compares to net income of $8.6 million or $0.61 per diluted share for the second quarter of 2016.
Highlights from the third quarter of 2016:
| Total assets | $3.11 billion | |||
| Linked quarter loan growth | $160.4 million or 7.1% | |||
| Linked quarter deposit growth | $144.1 million or 5.7% | |||
| Return on average assets | 1.31 | % | ||
| Return on beginning equity | 13.92 | % | ||
| Efficiency ratio | 37.7 | % | ||
| Net interest margin | 3.59 | % | ||
Li Yu, Chairman and CEO commented, “I am very pleased to report that net income for the third quarter reached $9.9 million, or $0.69 per diluted share. This represents a quarterly earnings record for the Bank.
“During the quarter, the Bank issued an additional $37.5 million in subordinated notes. That, along with the original second quarter issuance of $62.5 million brings the total size of the debt issuance to $100 million. With this new source of funding, we purchased a total of $70.4 million in home mortgages in the quarter as we continue to diversify our loan portfolio as well. The additional issuance of subordinated debt, although somewhat offset by the home mortgage pools purchased, has greatly affected our net interest margin for the quarter. The cost of the debt is 6% and the yield on the pools of loans purchased was approximately 4.2%. That, together with the organic deposit and loan growth put the NIM at 3.59% for the third quarter. Without those items, the NIM level would have been closer to that of prior quarters. However the additional issuance of subordinated debt does allow us to continue to originate commercial real estate loans at our current pace.
“Total loan growth for the quarter was $160.4 million. Excluding the $70.4 million in home mortgages purchased, organic loan growth amounted to $90.0 million, or 4.0% on a linked quarter. Total deposit growth again outpaced organic loan growth as the increase for the quarter was $144.1 million or 5.7% from June 30, 2016 totals. We are extremely pleased with the deposit growth as that allows us to continue to grow the loan portfolio.
“The efficiency ratio for the quarter was 37.7% which was the result of strong growth in net interest income coupled with a legal cost recovery of $415,000 due to a favorable legal settlement.
“The Bank’s total assets grew to $3.1 billion. To further the growth of the Bank, we will continue to make investments in both systems and human resources both on the front line and in the support areas. Also on the drawing board is the ongoing development of a home mortgage origination platform and new potential branch locations.”
Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $26.5 million for the third quarter of 2016. This compares favorably to the $21.6 million recorded in the third quarter of 2015 and to the $25.7 million recorded in the second quarter of 2016. The increase over both comparable periods is due primarily to growth in interest income on loans partially offset by an increase in interest expense on deposits and borrowings. The Bank’s taxable equivalent net interest margin was 3.59% for the third quarter of 2016, a 41 basis point decrease from the 4.00% achieved in the third quarter of 2015 and a 28 basis point decrease from the 3.87% recorded in the second quarter of 2016. The decrease compared to both periods was almost exclusively due to the issuance of $100 million in subordinated debt; $62.5 million of which was issued in late June 2016, then another $10.0 million in early July and then the final $27.5 million on September 30. So for the majority of the quarter, the Bank had interest expenses related to $72.5 million of subordinated debt at a rate of 6.0% per annum.
Noninterest Income. For the third quarter of 2016, noninterest income was $1,350,000 compared with $940,000 for the same quarter last year and compared to $1,660,000 for the second quarter of 2016. The increase over the third quarter of 2015 is due to letter of credit fee income as that activity has increased year over year. The decrease from the second quarter of 2016 is due to a decrease in other income of $306,000 as unutilized line fees on loans decreased from that period. Service charges on deposits were fairly consistent but were up by $32,000 compared to this quarter last year but down by $16,000 compared to the second quarter of 2016.
Noninterest Expense. Total noninterest expense was $10.5 million for the third quarter of 2016, an increase of $1.7 million over the same period last year and down from the $10.8 million recorded in the second quarter of 2016. Salaries and benefits expense totaled $6.1 million for the third quarter of 2016, an increase over the $4.9 million recorded for the same period last year and flat when compared to the second quarter of 2016. The increase over the same period last year is primarily due to the acquisition of United International Bank (“UIB”), as well as regular staffing and merit increases. Occupancy expense totaled $1.2 million for the quarter, an increase of $253,000 over the $908,000 recorded in the same period in 2015 but down slightly from the $1.3 million recorded in the second quarter of 2016. The increase over the prior year was due mainly to the addition of the New York office with the UIB acquisition as well as a new administrative office which the Bank opened in November 2015 in El Monte, California. Professional services expense was $1.4 million for the third quarter of 2016 compared to $1.3 million for the same quarter of 2015 and $1.4 million recorded in the second quarter of 2016. The Bank incurred $196,000 in costs related to its one OREO property. This compares to a gain of $19,000 in the third quarter of 2015 and expense of $243,000 in the second quarter of 2016. Other expenses were $1.1 million for the third quarter of 2016 compared to $1.3 million for the same period last year and $1.3 million for the second quarter of 2016. The decrease from last year was mainly due to the recording of $415,000 in acquisition related costs in the third quarter of 2015.
Income Taxes
The Bank recorded a provision for income taxes of $6.1 million for the third quarter of 2016. This represents an effective tax rate (“ETR”) of 38.1% for the quarter. This is down from the ETR of 40.0% for the third quarter of 2015 and down from the 40.6% ETR recorded in the second quarter of 2016. The decrease from both periods is due to adjustments made to the provision calculation as a result of the finalization and filing of the Bank’s 2015 tax returns. The Bank expects that in the fourth quarter of 2016, the ETR will be similar to that of the third quarter but will likely return to historical levels in 2017. The difference between the statutory rate (Federal and State combined) of 42.05% and the ETR is due to tax deductible items as well as the Bank’s investments in municipal bonds and various Low Income Housing Income Tax Credit (“LIHTC”) funds.
Balance Sheet Summary
Total gross loans and leases at September 30, 2016 were $2.43 billion, an increase of $373.3 million or 18.1% over the total of $2.06 billion as of December 31, 2015. Total deposits reached $2.66 billion, an increase of $373.4 million or 16.3% over the total of $2.29 billion as of December 31, 2015. Total assets reached $3.11 billion as of September 30, 2016, an increase of $511.6 million or 19.7% over the total of $2.60 billion as of December 31, 2015.
Asset Quality
As of September 30, 2016 nonaccrual loans totaled $1.7 million, a decrease of $306,000 from the $2.0 million total as of December 31, 2015. Total net charge-offs for the third quarter of 2016 were $827,000 compared to $2.0 million in the second quarter of 2016 and compared to a net charge off of $203,000 for the third quarter of 2015. The Bank recorded a provision for loan loss of $1.4 million for the third quarter of 2016, compared to a provision of $500,000 recorded in the same quarter last year and compared to the $2.3 million provision recorded in the second quarter of 2016. The allowance for loan loss at September 30, 2016 was $24.6 million or 1.01% of total loans compared to $22.7 million or 1.10% of total loans at December 31, 2015.
OREO
As of September 30, 2016 and December 31, 2015, the Bank held one OREO property, a $4.1 million multi-family property located outside of California.
Capitalization
As of September 30, 2016, the Bank’s leverage ratio was 9.47%, the common equity tier 1 capital ratio was 10.05% and the total capital ratio was 14.48%. As of December 31, 2015, the Bank’s leverage ratio was 10.46%, the common equity tier 1 ratio was 11.03% and the total risk based capital ratio was 12.00%.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2016 financial results will be held tomorrow, October 20th at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 866-652-5200 (domestic) or 412-317-6060 (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 CEO Li Yu, President and COO Wellington Chen, Chief Financial Officer Edward J. Czajka, and Chief Credit Officer Nick Pi will be present to discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will remain available in the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 4, 2016; the passcode is 10094338.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks 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 Company conducts its banking business from its main office in Los Angeles, California, and through eleven full-service branch banking offices in the California cities of Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco, and one office in Flushing New York. 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 2015 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.
Financial Tables to Follow
| PREFERRED BANK | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in thousands, except for net income per share and shares) | |||||||||||||||
| For the Quarter Ended | |||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||
| 2016 | 2016 | 2015 | |||||||||||||
| Interest income: | |||||||||||||||
| Loans, including fees | $ | 29,547 | $ | 27,892 | $ | 22,812 | |||||||||
| Investment securities | 2,216 | 1,722 | 1,531 | ||||||||||||
| Fed funds sold | 125 | 109 | 37 | ||||||||||||
| Total interest income | 31,889 | 29,723 | 24,380 | ||||||||||||
| Interest expense: | |||||||||||||||
| Interest-bearing demand | 1,309 | 1,051 | 794 | ||||||||||||
| Savings | 19 | 18 | 14 | ||||||||||||
| Time certificates | 2,897 | 2,661 | 1,929 | ||||||||||||
| FHLB borrowings | 66 | 67 | 46 | ||||||||||||
| Subordinated debit issuance | 1,102 | 186 | - | ||||||||||||
| Total interest expense | 5,394 | 3,982 | 2,783 | ||||||||||||
| Net interest income | 26,495 | 25,741 | 21,597 | ||||||||||||
| Provision for loan losses | 1,400 | 2,300 | 500 | ||||||||||||
| Net interest income after provision for | |||||||||||||||
| loan losses | 25,095 | 23,441 | 21,097 | ||||||||||||
| Noninterest income: | |||||||||||||||
| Fees & service charges on deposit accounts | 322 | 338 | 290 | ||||||||||||
| Trade finance income | 686 | 669 | 380 | ||||||||||||
| BOLI income | 86 | 89 | 85 | ||||||||||||
| Net gain on sale of investment securities | - | - | - | ||||||||||||
| Other income | 257 | 564 | 185 | ||||||||||||
| Total noninterest income | 1,350 | 1,660 | 940 | ||||||||||||
| Noninterest expense: | |||||||||||||||
| Salary and employee benefits | 6,066 | 6,065 | 4,893 | ||||||||||||
| Net occupancy expense | 1,161 | 1,267 | 908 | ||||||||||||
| Business development and promotion expense | 231 | 152 | 133 | ||||||||||||
| Professional services | 1,434 | 1,409 | 1,289 | ||||||||||||
| Office supplies and equipment expense | 345 | 376 | 267 | ||||||||||||
| Other real estate owned related (income)expense and valuation allowance on LHFS | 196 | 243 | (19 | ) | |||||||||||
| Other | 1,054 | 1,279 | 1,269 | ||||||||||||
| Total noninterest expense | 10,486 | 10,791 | 8,740 | ||||||||||||
| Income before provision for income taxes | 15,959 | 14,310 | 13,297 | ||||||||||||
| Income tax expense | 6,080 | 5,724 | 5,396 | ||||||||||||
| Net income | $ | 9,879 | $ | 8,586 | $ | 7,901 | |||||||||
| Dividend and earnings allocated to participating securities | (155 | ) | (137 | ) | (146 | ) | |||||||||
| Net income available to common shareholders | $ | 9,724 | $ | 8,449 | $ | 7,755 | |||||||||
| Income per share available to common shareholders | |||||||||||||||
| Basic | $ | 0.70 | $ | 0.61 | $ | 0.57 | |||||||||
| Diluted | $ | 0.69 | $ | 0.61 | $ | 0.57 | |||||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic | 13,899,986 | 13,851,081 | 13,509,986 | ||||||||||||
| Diluted | 13,997,343 | 13,957,117 | 13,690,228 | ||||||||||||
| Dividends per share | $ | 0.15 | $ | 0.15 | $ | 0.12 | |||||||||
| PREFERRED BANK | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in thousands, except for net income per share and shares) | |||||||||||||||
| For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | Change | |||||||||||||
| 2016 | 2015 | % | |||||||||||||
| Interest income: | |||||||||||||||
| Loans, including fees | $ | 82,900 | $ | 64,443 | 28.6 | % | |||||||||
| Investment securities | 5,722 | 4,719 | 21.3 | % | |||||||||||
| Fed funds sold | 311 | 117 | 166.2 | % | |||||||||||
| Total interest income | 88,933 | 69,279 | 28.4 | % | |||||||||||
| Interest expense: | |||||||||||||||
| Interest-bearing demand | 3,410 | 2,289 | 49.0 | % | |||||||||||
| Savings | 55 | 44 | 26.0 | % | |||||||||||
| Time certificates | 7,872 | 5,305 | 48.4 | % | |||||||||||
| FHLB borrowings | 192 | 112 | 71.0 | % | |||||||||||
| Subordinated debit issuance | 1,288 | - | 100.0 | % | |||||||||||
| Total interest expense | 12,818 | 7,751 | 65.4 | % | |||||||||||
| Net interest income | 76,115 | 61,527 | 23.7 | % | |||||||||||
| Provision for credit losses | 4,500 | 1,500 | 200.0 | % | |||||||||||
| Net interest income after provision for | |||||||||||||||
| loan losses | 71,615 | 60,028 | 19.3 | % | |||||||||||
| Noninterest income: | |||||||||||||||
| Fees & service charges on deposit accounts | 954 | 925 | 3.2 | % | |||||||||||
| Trade finance income | 1,771 | 1,177 | 50.4 | % | |||||||||||
| BOLI income | 259 | 253 | 2.4 | % | |||||||||||
| Net gain on sale of investment securities | 36 | - | 100.0 | % | |||||||||||
| Other income | 1,152 | 584 | 97.2 | % | |||||||||||
| Total noninterest income | 4,173 | 2,939 | 42.0 | % | |||||||||||
| Noninterest expense: | |||||||||||||||
| Salary and employee benefits | 19,153 | 15,712 | 21.9 | % | |||||||||||
| Net occupancy expense | 3,631 | 2,657 | 36.7 | % | |||||||||||
| Business development and promotion expense | 604 | 366 | 65.0 | % | |||||||||||
| Professional services | 3,805 | 3,547 | 7.3 | % | |||||||||||
| Office supplies and equipment expense | 1,072 | 784 | 36.7 | % | |||||||||||
| Other real estate owned related expense(income) and valuation allowance on LHFS | 638 | (481 | ) | -232.6 | % | ||||||||||
| Other | 3,413 | 3,235 | 5.5 | % | |||||||||||
| Total noninterest expense | 32,315 | 25,820 | 25.2 | % | |||||||||||
| Income before provision for income taxes | 43,473 | 37,147 | 17.0 | % | |||||||||||
| Income tax expense | 17,165 | 14,967 | 14.7 | % | |||||||||||
| Net income | $ | 26,308 | $ | 22,180 | 18.6 | % | |||||||||
| Dividend and earnings allocated to participating securities | (413 | ) | (391 | ) | 5.5 | % | |||||||||
| Net income available to common shareholders | $ | 25,895 | $ | 21,789 | 18.8 | % | |||||||||
| Income per share available to common shareholders | |||||||||||||||
| Basic | $ | 1.87 | $ | 1.62 | 15.7 | % | |||||||||
| Diluted | $ | 1.86 | $ | 1.60 | 16.2 | % | |||||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic | 13,849,504 | 13,462,247 | 2.9 | % | |||||||||||
| Diluted | 13,956,298 | 13,648,442 | 2.3 | % | |||||||||||
| Dividends per share | $ | 0.45 | $ | 0.36 | 25.0 | % | |||||||||
| PREFERRED BANK | ||||||||||
| Condensed Consolidated Statements of Financial Condition | ||||||||||
| (unaudited) | ||||||||||
| (in thousands) | ||||||||||
| September 30, | December 31, | |||||||||
| 2016 | 2015 | |||||||||
| (Unaudited) | (Audited) | |||||||||
| Assets | ||||||||||
| Cash and due from banks | $ | 325,522 | $ | 296,175 | ||||||
| Fed funds sold | 80,000 | 13,000 | ||||||||
| Cash and cash equivalents | 405,522 | 309,175 | ||||||||
| Securities held to maturity, at amortized cost | 4,812 | 5,830 | ||||||||
| Securities available-for-sale, at fair value | 203,272 | 169,502 | ||||||||
| Loans and leases | 2,432,667 | 2,059,392 | ||||||||
| Less allowance for loan and lease losses | (24,556 | ) | (22,658 | ) | ||||||
| Less net deferred loan fees | (1,913 | ) | (3,012 | ) | ||||||
| Net loans and leases | 2,406,198 | 2,033,722 | ||||||||
| Other real estate owned | 4,112 | 4,112 | ||||||||
| Customers' liability on acceptances | 1,494 | 897 | ||||||||
| Bank furniture and fixtures, net | 5,424 | 5,601 | ||||||||
| Bank-owned life insurance | 8,767 | 8,763 | ||||||||
| Accrued interest receivable | 8,859 | 8,128 | ||||||||
| Investment in affordable housing | 24,278 | 16,052 | ||||||||
| Federal Home Loan Bank stock | 9,331 | 7,162 | ||||||||
| Deferred tax assets | 22,944 | 23,802 | ||||||||
| Income tax receivable | - | 299 | ||||||||
| Other asset | 5,411 | 5,801 | ||||||||
| Total assets | $ | 3,110,424 | $ | 2,598,846 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Liabilities: | ||||||||||
| Deposits: | ||||||||||
| Demand | $ | 575,388 | $ | 558,906 | ||||||
| Interest-bearing demand | 945,358 | 748,918 | ||||||||
| Savings | 31,344 | 30,703 | ||||||||
| Time certificates of $250,000 or more | 416,807 | 321,537 | ||||||||
| Other time certificates | 691,099 | 626,495 | ||||||||
| Total deposits | $ | 2,659,996 | $ | 2,286,559 | ||||||
| Acceptances outstanding | 1,494 | 897 | ||||||||
| Advances from Federal Home Loan Bank | 26,544 | 26,635 | ||||||||
| Subordinated debt issuance | 98,851 | - | ||||||||
| Commitments to fund investment in affordable housing partnership | 11,015 | 3,958 | ||||||||
| Accrued interest payable | 4,193 | 1,919 | ||||||||
| Other liabilities | 17,064 | 14,733 | ||||||||
| Total liabilities | 2,819,157 | 2,334,701 | ||||||||
| Commitments and contingencies | ||||||||||
| Shareholders' equity: | ||||||||||
| Preferred stock. Authorized 25,000,000 shares; no issued and outstanding | ||||||||||
| shares at September 30, 2016 and December 31, 2015 | — | — | ||||||||
| Common stock, no par value. Authorized 100,000,000 shares; issued | ||||||||||
| and outstanding 14,135,907 and 13,884,942 shares at September 30, 2016 and December 31, 2015 , respectively | 168,331 | 166,560 | ||||||||
| Treasury stock | (19,115 | ) | (19,115 | ) | ||||||
| Additional paid-in-capital | 39,214 | 34,672 | ||||||||
| Accumulated income | 100,813 | 81,046 | ||||||||
| Accumulated other comprehensive income: | ||||||||||
| Unrealized gain on securities, available-for-sale, net of tax of $1,469 and $713 at September 30, 2016 and December 31, 2015, respectively | 2,024 | 982 | ||||||||
| Total shareholders' equity | 291,267 | 264,145 | ||||||||
| Total liabilities and shareholders' equity | $ | 3,110,424 | $ | 2,598,846 | ||||||
| PREFERRED BANK | ||||||||||||||||||||||
| Selected Consolidated Financial Information | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands, except for ratios) | ||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||
| 2016 | 2016 | 2016 | 2015 | 2015 | ||||||||||||||||||
| Unaudited historical quarterly operations data: | ||||||||||||||||||||||
| Interest income | $ | 31,889 | $ | 29,723 | $ | 27,321 | $ | 25,423 | $ | 24,380 | ||||||||||||
| Interest expense | 5,394 | 3,982 | 3,442 | 3,105 | 2,783 | |||||||||||||||||
| Interest income before provision for credit losses | 26,495 | 25,741 | 23,879 | 22,318 | 21,597 | |||||||||||||||||
| Provision for credit losses | 1,400 | 2,300 | 800 | 300 | 500 | |||||||||||||||||
| Noninterest income | 1,350 | 1,660 | 1,163 | 954 | 940 | |||||||||||||||||
| Noninterest expense | 10,486 | 10,791 | 11,038 | 9,890 | 8,740 | |||||||||||||||||
| Income tax expense | 6,080 | 5,724 | 5,361 | 5,518 | 5,396 | |||||||||||||||||
| Net income | 9,879 | 8,586 | 7,843 | 7,563 | 7,901 | |||||||||||||||||
| Earnings per share | ||||||||||||||||||||||
| Basic | $ | 0.70 | $ | 0.61 | $ | 0.56 | $ | 0.55 | $ | 0.57 | ||||||||||||
| Diluted | $ | 0.69 | $ | 0.61 | $ | 0.56 | $ | 0.54 | $ | 0.57 | ||||||||||||
| Ratios for the period: | ||||||||||||||||||||||
| Return on average assets | 1.31 | % | 1.26 | % | 1.21 | % | 1.28 | % | 1.42 | % | ||||||||||||
| Return on beginning equity | 13.92 | % | 12.62 | % | 11.94 | % | 11.67 | % | 12.55 | % | ||||||||||||
| Net interest margin (Fully-taxable equivalent) | 3.59 | % | 3.87 | % | 3.79 | % | 3.88 | % | 4.00 | % | ||||||||||||
| Noninterest expense to average assets | 1.39 | % | 1.58 | % | 1.70 | % | 1.67 | % | 1.58 | % | ||||||||||||
| Efficiency ratio | 37.66 | % | 39.38 | % | 44.08 | % | 42.50 | % | 38.78 | % | ||||||||||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.14 | % | 0.36 | % | -0.04 | % | 0.36 | % | 0.05 | % | ||||||||||||
| Ratios as of period end: | ||||||||||||||||||||||
| Tier 1 leverage capital ratio | 9.47 | % | 10.05 | % | 10.29 | % | 10.46 | % | 11.47 | % | ||||||||||||
| Common equity tier 1 risk-based capital ratio | 10.05 | % | 10.41 | % | 10.74 | % | 11.03 | % | 11.80 | % | ||||||||||||
| Tier 1 risk-based capital ratio | 10.05 | % | 10.41 | % | 10.74 | % | 11.03 | % | 11.80 | % | ||||||||||||
| Total risk-based capital ratio | 14.48 | % | 13.65 | % | 11.70 | % | 12.00 | % | 12.93 | % | ||||||||||||
| Allowances for credit losses to loans and leases at end of period | 1.01 | % | 1.06 | % | 1.10 | % | 1.10 | % | 1.31 | % | ||||||||||||
| Allowance for credit losses to non-performing | ||||||||||||||||||||||
| loans and leases | 1460.49 | % | 722.47 | % | 2346.18 | % | 1140.29 | % | 303.27 | % | ||||||||||||
| Average balances: | ||||||||||||||||||||||
| Total loans and leases | $ | 2,344,102 | $ | 2,248,652 | $ | 2,067,047 | $ | 1,876,544 | $ | 1,741,762 | ||||||||||||
| Earning assets | $ | 2,953,325 | $ | 2,687,435 | $ | 2,550,821 | $ | 2,297,154 | $ | 2,160,075 | ||||||||||||
| Total assets | $ | 3,009,457 | $ | 2,746,031 | $ | 2,605,907 | $ | 2,345,319 | $ | 2,201,060 | ||||||||||||
| Total deposits | $ | 2,590,701 | $ | 2,400,756 | $ | 2,291,764 | $ | 2,039,567 | $ | 1,907,719 | ||||||||||||
| (1) Risk-based capital ratios were calculated under BASEL III rules, which became effective on January 1, 2015. Ratios for the prior periods were calculated under Basel I rules. | ||||||||||||||||||||||
| PREFERRED BANK | ||||||||||
| Selected Consolidated Financial Information | ||||||||||
| (in thousands, except for ratios) | ||||||||||
| For the Nine Months Ended | ||||||||||
| September 30, | September 30, | |||||||||
| 2016 | 2015 | |||||||||
| Interest income | $ | 88,933 | $ | 69,279 | ||||||
| Interest expense | 12,818 | 7,751 | ||||||||
| Interest income before provision for credit losses | 76,115 | 61,527 | ||||||||
| Provision for credit losses | 4,500 | 1,500 | ||||||||
| Noninterest income | 4,173 | 2,939 | ||||||||
| Noninterest expense | 32,315 | 25,820 | ||||||||
| Income tax expense | 17,165 | 14,967 | ||||||||
| Net income | 26,308 | 22,180 | ||||||||
| Earnings per share | ||||||||||
| Basic | $ | 1.87 | $ | 1.62 | ||||||
| Diluted | $ | 1.86 | $ | 1.60 | ||||||
| Ratios for the period: | ||||||||||
| Return on average assets | 1.26 | % | 1.38 | % | ||||||
| Return on beginning equity | 13.30 | % | 12.62 | % | ||||||
| Net interest margin (Fully-taxable equivalent) | 3.74 | % | 3.95 | % | ||||||
| Noninterest expense to average assets | 1.55 | % | 1.61 | % | ||||||
| Efficiency ratio | 40.25 | % | 40.05 | % | ||||||
| Net charge-offs (recoveries) to average loans | 0.16 | % | 0.03 | % | ||||||
| Average balances: | ||||||||||
| Total loans and leases | $ | 2,220,438 | $ | 1,676,320 | ||||||
| Earning assets | $ | 2,731,362 | $ | 2,098,549 | ||||||
| Total assets | $ | 2,787,977 | $ | 2,144,830 | ||||||
| Total deposits | $ | 2,428,402 | $ | 1,858,592 | ||||||
| PREFERRED BANK | ||||||||||||||||||||||
| Selected Consolidated Financial Information | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands, except for ratios) | ||||||||||||||||||||||
| As of | ||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||
| 2016 | 2016 | 2016 | 2015 | 2015 | ||||||||||||||||||
| Unaudited quarterly statement of financial position data: | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 405,522 | $ | 376,485 | $ | 293,547 | $ | 309,175 | $ | 232,707 | ||||||||||||
| Securities held-to-maturity, at amortized cost | 4,812 | 5,143 | 5,550 | 5,830 | 6,307 | |||||||||||||||||
| Securities available-for-sale, at fair value | 203,272 | 201,256 | 162,654 | 169,502 | 164,378 | |||||||||||||||||
| Loans and Leases: | ||||||||||||||||||||||
| Real estate - Single and multi-family residential | $ | 493,489 | $ | 393,076 | $ | 401,708 | $ | 415,003 | $ | 328,124 | ||||||||||||
| Real estate - Land for housing | 14,796 | 14,817 | 14,838 | 14,408 | 14,429 | |||||||||||||||||
| Real estate - Land for income properties | 1,809 | 6,316 | 1,816 | 1,795 | 1,876 | |||||||||||||||||
| Real estate - Commercial | 1,037,687 | 995,213 | 924,913 | 861,317 | 770,494 | |||||||||||||||||
| Real estate - For sale housing construction | 104,973 | 95,519 | 82,153 | 73,858 | 79,406 | |||||||||||||||||
| Real estate - Other construction | 96,147 | 72,963 | 66,636 | 57,546 | 48,438 | |||||||||||||||||
| Commercial and industrial | 659,306 | 659,701 | 626,599 | 596,887 | 555,680 | |||||||||||||||||
| Trade finance and other | 24,460 | 34,625 | 39,323 | 38,578 | 38,602 | |||||||||||||||||
| Gross loans | 2,432,667 | 2,272,230 | 2,157,986 | 2,059,392 | 1,837,049 | |||||||||||||||||
| Allowance for loan and lease losses | (24,556 | ) | (23,983 | ) | (23,681 | ) | (22,658 | ) | (24,055 | ) | ||||||||||||
| Net deferred loan fees | (1,913 | ) | (3,682 | ) | (3,065 | ) | (3,012 | ) | (2,476 | ) | ||||||||||||
| Total loans, net | $ | 2,406,198 | $ | 2,244,565 | $ | 2,131,240 | $ | 2,033,722 | $ | 1,810,518 | ||||||||||||
| Other real estate owned | $ | 4,112 | $ | 4,112 | $ | 4,112 | $ | 4,112 | $ | - | ||||||||||||
| Investment in affordable housing | 24,278 | 24,886 | 25,499 | 16,052 | 16,589 | |||||||||||||||||
| Federal Home Loan Bank stock | 9,331 | 9,332 | 6,965 | 7,162 | 6,677 | |||||||||||||||||
| Other assets | 52,899 | 49,862 | 53,783 | 53,291 | 45,370 | |||||||||||||||||
| Total assets | $ | 3,110,424 | $ | 2,915,641 | $ | 2,683,350 | $ | 2,598,846 | $ | 2,282,546 | ||||||||||||
| Liabilities: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Demand | $ | 575,388 | $ | 540,374 | $ | 528,126 | $ | 558,906 | $ | 477,523 | ||||||||||||
| Interest-bearing demand | 945,358 | 855,661 | 803,374 | 748,918 | 697,402 | |||||||||||||||||
| Savings | 31,344 | 29,031 | 30,002 | 30,703 | 21,159 | |||||||||||||||||
| Time certificates of $250,000 or more | 416,807 | 398,736 | 339,971 | 321,537 | 263,949 | |||||||||||||||||
| Other time certificates | 691,099 | 692,063 | 656,386 | 626,495 | 527,602 | |||||||||||||||||
| Total deposits | $ | 2,659,996 | $ | 2,515,865 | $ | 2,357,859 | $ | 2,286,559 | $ | 1,987,635 | ||||||||||||
| Advances from Federal Home Loan Bank | $ | 26,544 | $ | 26,573 | $ | 26,601 | $ | 26,635 | $ | 20,000 | ||||||||||||
| Subordinated debt issuance | 98,851 | 61,475 | - | - | - | |||||||||||||||||
| Commitments to fund investment in affordable housing partnership | 11,015 | 11,454 | 11,454 | 3,958 | 4,139 | |||||||||||||||||
| Other liabilities | 22,751 | 17,922 | 13,862 | 17,549 | 13,590 | |||||||||||||||||
| Total liabilities | $ | 2,819,157 | $ | 2,633,289 | $ | 2,409,776 | $ | 2,334,701 | $ | 2,025,364 | ||||||||||||
| Equity: | ||||||||||||||||||||||
| Net common stock, no par value | $ | 188,430 | $ | 187,212 | $ | 185,780 | $ | 182,118 | $ | 180,310 | ||||||||||||
| Retained earnings | 100,813 | 93,119 | 86,716 | 81,046 | 75,629 | |||||||||||||||||
| Accumulated other comprehensive income | 2,024 | 2,021 | 1,079 | 982 | 1,243 | |||||||||||||||||
| Total shareholders' equity | $ | 291,267 | $ | 282,352 | $ | 273,574 | $ | 264,145 | $ | 257,182 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 3,110,424 | $ | 2,915,641 | $ | 2,683,350 | $ | 2,598,846 | $ | 2,282,546 | ||||||||||||
| Preferred Bank | |||||||||||
| Loan and Credit Quality Information | |||||||||||
| Allowance For Credit Losses & Loss History | |||||||||||
| Nine Months Ended | Year Ended | ||||||||||
| September 30, 2016 | December 31, 2015 | ||||||||||
| (Dollars in 000's) | |||||||||||
| Allowance For Credit Losses | |||||||||||
| Balance at Beginning of Period | $ | 22,658 | $ | 22,974 | |||||||
| Charge-Offs | |||||||||||
| Commercial & Industrial | 4,322 | 1,475 | |||||||||
| Mini-perm Real Estate | - | 1,793 | |||||||||
| Construction - Residential | - | - | |||||||||
| Construction - Commercial | - | - | |||||||||
| Land - Residential | - | - | |||||||||
| Land - Commercial | - | - | |||||||||
| Others | - | - | |||||||||
| Total Charge-Offs | 4,322 | 3,268 | |||||||||
| Recoveries | |||||||||||
| Commercial & Industrial | 983 | 131 | |||||||||
| Mini-perm Real Estate | - | 144 | |||||||||
| Construction - Residential | - | - | |||||||||
| Construction - Commercial | 26 | 20 | |||||||||
| Land - Residential | - | 100 | |||||||||
| Land - Commercial | 711 | 757 | |||||||||
| Total Recoveries | 1,720 | 1,152 | |||||||||
| Net Loan Charge-Offs | 2,602 | 2,116 | |||||||||
| Provision for Credit Losses | 4,500 | 1,800 | |||||||||
| Balance at End of Period | $ | 24,556 | $ | 22,658 | |||||||
| Average Loans and Leases | $ | 2,220,438 | $ | 1,731,871 | |||||||
| Loans and Leases at end of Period | $ | 2,432,667 | $ | 2,059,392 | |||||||
| Net Charge-Offs to Average Loans and Leases | 0.16 | % | 0.12 | % | |||||||
| Allowances for credit losses to loans and leases at end of period | 1.01 | % | 1.10 | % | |||||||