LOS ANGELES, Oct. 20, 2021 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2021. Preferred Bank (“the Bank”) reported net income of $26.1 million or $1.76 per diluted share for the third quarter of 2021. This is an increase of $4.7 million or 21.7% over the prior quarter and up significantly from the $17.1 million or $1.15 per share posted in the same quarter of last year. The primary reason for the increase compared to the prior year was a $9.0 million provision for credit losses recorded in the third quarter of last year as compared to a reversal of $1.5 million in allowance for credit losses (“ACL”) this quarter, a difference of $10.5 million. In comparison to the second quarter of 2021, net interest income increased $4.4 million, the beneficial change in the provision for credit losses was $1.5 million and noninterest income increased by $1.1 million.
Third quarter 2021 highlights:
- Net income of $26.1 million, or $1.76 per diluted share (company all-time high)
- Linked quarter deposit growth of 8.3%
- Linked quarter loan growth (Ex-PPP) of 1.8%
- Return on average assets (“ROA”) of 1.80%
- Return on beginning equity (“ROBE”) of 18.56%
- Pre-provision, pre-tax (“PPPT”) ROBE of 25.0%
Li Yu, Chairman and CEO, commented, “I am pleased to report third quarter 2021 net income of $26.1 million or $1.76 per share. Excluding a release of allowance for credit losses in the amount of $1.5 million, our net interest income and net income set new quarterly records for our Bank.
“This quarter we experienced significant asset growth. Total assets are approaching $6 billion, principally due to the $398 million or 8.3% linked-quarter deposit growth.
“Loan growth for the quarter was $77 million excluding PPP, or 1.8% on a linked quarter basis. We continue to experience moderate margin compression. Together with the strong deposit growth, our net interest margin for the quarter came in at 3.36%.
“Our loan quality was stable. There are no deferred loans granted under the CARES Act as of September 30, 2021. Total PPP balances have been reduced to $64 million as of that date.
“Non-interest income increased $1.1 million from the prior quarter principally due to increased letter of credit (“LC”) fees. Operating expenses continue to be under control for the quarter, as our efficiency ratio clocked in at 30.4%.
“We are highly encouraged by this quarter’s results considering the current low interest rate environment and the slow progress, nationally of controlling the delta variant. We are optimistic that both of these will improve gradually”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $47.8 million for the third quarter of 2021. This was an increase from the $43.4 million recorded in the second quarter of 2021 and was also ahead of the $44.1 million recorded in the third quarter of 2020. The second quarter of 2021 was negatively impacted by a $2.29 million interest reversal on our troubled debt restructured loan as well as a charge of $614,000 to interest expense related to the unamortized issuance costs of the subordinated notes that were called in the second quarter of 2021. These two items drove the Bank’s taxable equivalent net interest margin down to 3.25%, excluding these items, the Bank’s margin would have been 3.47%. The taxable equivalent margin was 3.36% for the third quarter of 2021, as compared to 3.47% (adjusted, see table below) in the second quarter of 2021 and versus 3.54% for the same period last year.
Noninterest Income. For the third quarter of 2021, noninterest income was $2,784,000 compared with $1,605,000 for the same quarter last year and compared to $1,646,000 for the second quarter of 2021. The increase compared to last year was due to LC fee income which increased by $886,000 and service charges on deposits which increased by $153,000 over last year. When compared to the second quarter of 2021, LC fees increased by $765,000 and in the prior quarter the Bank recorded a loss on sale of loans of $261,000 which did not recur this quarter.
Noninterest Expense. Total noninterest expense was $15.4 million for the third quarter of 2021. This is up compared to the $13.7 million recorded in the same quarter last year and also up from the $15.0 million posted in the second quarter of 2021. Salaries and benefits expense totaled $10.9 million for the third quarter of 2021, an increase of $1.8 million from the third quarter of 2020 and an increase of $635,000 over the $10.3 million posted in the second quarter of 2021. The increase over the prior year was due mainly to staff expansion and an increase in the Bank’s incentive compensation expense and the increase over the second quarter of 2021 was mainly due to higher incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was flat compared to the prior quarter’s $1.4 million and down slightly from the $1.5 million recorded in the third quarter of last year. Professional services expense was $1.1 million for the third quarter of 2021, a slight increase of $79,000 over the prior quarter and an increase of $101,000 over the same period last year. Other expenses were $1.4 million for the third quarter of 2021, down from the $1.7 million recorded last quarter and also up from the $1.6 million recorded in the same quarter last year. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended September 30, 2021, the Bank’s efficiency ratio was 30.4%, down slightly from last quarter’s 33.2% mark and just slightly over the remarkable 29.9% ratio achieved in the same period last year.
Income Taxes. The Bank recorded a provision for income taxes of $10.5 million for the third quarter of 2021. This represents an effective tax rate (“ETR”) of 28.7% and just slightly over the ETR of 28.5% in the prior quarter but up from the ETR of 25.7% in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.
Balance Sheet Summary
Total gross loans at September 30, 2021 were $4.32 billion, an increase of $286 million or 7.1% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.2 billion, an increase of $751 million or 16.9% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $5.98 billion, an increase of $836 million or 16.3% over the total of $5.14 billion as of December 31, 2020.
Asset Quality
As of September 30, 2021, nonaccrual loans totaled $20.9 million, up slightly from the $20.2 million reported as of June 30, 2021. Total net charge-offs for the third quarter of 2021 were $1.0 million compared to $1.2 million in the prior quarter and compared to net charge-offs of $3.5 million in the third quarter of 2020.
At September 30, 2021, the Bank had no loans remaining on COVID-19 deferral status. Also important to note that as of September 30, 2021, the Bank had recouped 78% of all interest deferred during the deferral period.
Allowance for Credit Losses
The provision for (release of) credit losses for the third quarter of 2021 was ($1.5 million) compared to $0 recorded last quarter and compared to $9.0 million posted in the third quarter of 2020. A consistently improving economic outlook led to a lower allowance requirement. The Bank’s allowance coverage ratio now stands at 1.44% of total loans (excluding PPP loans).
Capitalization
As of September 30, 2021, the Bank’s leverage ratio was 9.64%, the common equity tier 1 capital ratio was 11.19% and the total capital ratio stood at 15.47%. As of December 31, 2020, the Bank’s leverage ratio was 10.08%, the common equity tier 1 ratio was 11.21% and the total risk-based capital ratio was 14.64%. In accordance with the Bank’s stock repurchase plan, during the third quarter, the Bank repurchased a total of 282,949 common shares at a total cost of $17.47 million.
| GAAP – Non-GAAP Reconciliation -Second Quarter 2021 NIM | |||
| Net interest margin - GAAP | 3.25 | % | |
| Add: $2.3MM loan interest income | 0.17 | % | |
| Add: $614K unamortized $100M sub-debt issuance cost | 0.05 | % | |
| Net interest margin - non-GAAP | 3.47 | % | |
| GAAP – Non-GAAP Reconciliation -Third Quarter 2021 PPPT ROBE | |||
| Net Income | $ | 26,145 | |
| Add: Reversal of credit losses | (1,500 | ) | |
| Add: Income tax expense | 10,522 | ||
| Pre-provision and pre-tax income | $ | 35,167 | |
| Total equity - 6/30/21 | $ | 558,969 | |
| Pre-provision and pre-tax ROBE | 24.96 | % | |
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2021 financial results will be held tomorrow, October 21, 2021 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com. Web participants are encouraged to go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.
Preferred Bank's Chairman and Chief Executive Officer Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will be present to discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will remain available in the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 4, 2021; the passcode is 10161195.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)) and one branch in Flushing, New York. In addition, the Bank operates a Loan Production Office in the Houston, Texas suburb of Sugar Land. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy
shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2020 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.
Financial Tables to Follow
| PREFERRED BANK | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in thousands, except for net income per share and shares) | |||||||||||||||
| For the Quarter Ended | |||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||
| 2021 | 2021 | 2020 | |||||||||||||
| Interest income: | |||||||||||||||
| Loans, including fees | $ | 50,866 | $ | 47,906 | $ | 50,417 | |||||||||
| Investment securities | 2,725 | 2,548 | 2,335 | ||||||||||||
| Fed funds sold | 20 | 19 | 30 | ||||||||||||
| Total interest income | 53,611 | 50,473 | 52,782 | ||||||||||||
| Interest expense: | |||||||||||||||
| Interest-bearing demand | 1,486 | 1,530 | 1,432 | ||||||||||||
| Savings | 3 | 18 | 20 | ||||||||||||
| Time certificates | 3,045 | 3,419 | 5,681 | ||||||||||||
| Subordinated debt | 1,324 | 2,145 | 1,530 | ||||||||||||
| Total interest expense | 5,857 | 7,112 | 8,663 | ||||||||||||
| Net interest income | 47,754 | 43,361 | 44,119 | ||||||||||||
| (Reversal of) provision for credit losses | (1,500 | ) | - | 9,000 | |||||||||||
| Net interest income after (reversal of) provision for | |||||||||||||||
| credit losses | 49,254 | 43,361 | 35,119 | ||||||||||||
| Noninterest income: | |||||||||||||||
| Fees & service charges on deposit accounts | 581 | 525 | 428 | ||||||||||||
| Letters of credit fee income | 1,576 | 811 | 690 | ||||||||||||
| BOLI income | 98 | 98 | 96 | ||||||||||||
| Net gain on called and sale of investment securities | 41 | - | 15 | ||||||||||||
| Net loss on sale of loans | - | (261 | ) | - | |||||||||||
| Other income | 488 | 473 | 376 | ||||||||||||
| Total noninterest income | 2,784 | 1,646 | 1,605 | ||||||||||||
| Noninterest expense: | |||||||||||||||
| Salary and employee benefits | 10,920 | 10,285 | 9,126 | ||||||||||||
| Net occupancy expense | 1,430 | 1,429 | 1,455 | ||||||||||||
| Business development and promotion expense | 98 | 117 | 95 | ||||||||||||
| Professional services | 1,075 | 996 | 974 | ||||||||||||
| Office supplies and equipment expense | 467 | 476 | 443 | ||||||||||||
| Other | 1,380 | 1,661 | 1,570 | ||||||||||||
| Total noninterest expense | 15,370 | 14,964 | 13,663 | ||||||||||||
| Income before provision for income taxes | 36,668 | 30,043 | 23,061 | ||||||||||||
| Income tax expense | 10,522 | 8,563 | 5,936 | ||||||||||||
| Net income | $ | 26,146 | $ | 21,480 | $ | 17,125 | |||||||||
| Dividend and earnings allocated to participating securities | (3 | ) | (3 | ) | (53 | ) | |||||||||
| Net income available to common shareholders | $ | 26,143 | $ | 21,477 | $ | 17,072 | |||||||||
| Income per share available to common shareholders | |||||||||||||||
| Basic | $ | 1.76 | $ | 1.44 | $ | 1.15 | |||||||||
| Diluted | $ | 1.76 | $ | 1.44 | $ | 1.15 | |||||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic | 14,884,570 | 14,954,688 | 14,893,774 | ||||||||||||
| Diluted | 14,884,570 | 14,954,688 | 14,893,774 | ||||||||||||
| Cash dividends per common share | $ | 0.38 | $ | 0.38 | $ | 0.30 | |||||||||
| PREFERRED BANK | ||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||
| (unaudited) | ||||||||||||||
| (in thousands, except for net income per share and shares) | ||||||||||||||
| For the Nine Months Ended | ||||||||||||||
| September 30, | September 30, | Change | ||||||||||||
| 2021 | 2020 | % | ||||||||||||
| Interest income: | ||||||||||||||
| Loans, including fees | $ | 148,631 | $ | 151,794 | -2.1 | % | ||||||||
| Investment securities | 7,550 | 8,634 | -12.6 | % | ||||||||||
| Fed funds sold | 63 | 185 | -66.2 | % | ||||||||||
| Total interest income | 156,244 | 160,613 | -2.7 | % | ||||||||||
| Interest expense: | ||||||||||||||
| Interest-bearing demand | 4,453 | 6,262 | -28.9 | % | ||||||||||
| Savings | 40 | 51 | -22.3 | % | ||||||||||
| Time certificates | 10,291 | 21,617 | -52.4 | % | ||||||||||
| Subordinated debt | 5,000 | 4,592 | 8.9 | % | ||||||||||
| Total interest expense | 19,783 | 32,522 | -39.2 | % | ||||||||||
| Net interest income | 136,461 | 128,091 | 6.5 | % | ||||||||||
| (Reversal of) provision for credit losses | (100 | ) | 21,800 | -100.5 | % | |||||||||
| Net interest income after (reversal of) provision for | ||||||||||||||
| credit losses | 136,561 | 106,291 | 28.5 | % | ||||||||||
| Noninterest income: | ||||||||||||||
| Fees & service charges on deposit accounts | 1,532 | 1,172 | 30.7 | % | ||||||||||
| Letters of credit fee income | 3,195 | 2,280 | 40.1 | % | ||||||||||
| BOLI income | 292 | 285 | 2.5 | % | ||||||||||
| Net (loss) gain on called and sale of investment securities | 41 | (98 | ) | -141.9 | % | |||||||||
| Net (loss) gain on sale of loans | (640 | ) | 15 | -4363.5 | % | |||||||||
| Other income | 1,357 | 1,053 | 28.9 | % | ||||||||||
| Total noninterest income | 5,777 | 4,707 | 22.7 | % | ||||||||||
| Noninterest expense: | ||||||||||||||
| Salary and employee benefits | 32,328 | 30,123 | 7.3 | % | ||||||||||
| Net occupancy expense | 4,260 | 4,147 | 2.7 | % | ||||||||||
| Business development and promotion expense | 288 | 360 | -20.0 | % | ||||||||||
| Professional services | 3,052 | 2,994 | 1.9 | % | ||||||||||
| Office supplies and equipment expense | 1,381 | 1,391 | -0.7 | % | ||||||||||
| Other | 4,677 | 4,166 | 12.3 | % | ||||||||||
| Total noninterest expense | 45,986 | 43,181 | 6.5 | % | ||||||||||
| Income before provision for income taxes | 96,352 | 67,817 | 42.1 | % | ||||||||||
| Income tax expense | 27,532 | 19,229 | 43.2 | % | ||||||||||
| Net income | $ | 68,820 | $ | 48,588 | 41.6 | % | ||||||||
| Dividend and earnings allocated to participating securities | $ | (8 | ) | $ | (153 | ) | -94.6 | % | ||||||
| Net income available to common shareholders | $ | 68,812 | $ | 48,435 | 42.1 | % | ||||||||
| Income per share available to common shareholders | ||||||||||||||
| Basic | $ | 4.61 | $ | 3.25 | 41.6 | % | ||||||||
| Diluted | $ | 4.61 | $ | 3.25 | 41.6 | % | ||||||||
| Weighted-average common shares outstanding | ||||||||||||||
| Basic | 14,929,519 | 14,881,381 | 0.3 | % | ||||||||||
| Diluted | 14,929,519 | 14,881,381 | 0.3 | % | ||||||||||
| Dividends per share | $ | 1.14 | $ | 0.90 | 26.7 | % | ||||||||
| PREFERRED BANK | |||||||||
| Condensed Consolidated Statements of Financial Condition | |||||||||
| (unaudited) | |||||||||
| (in thousands) | |||||||||
| September 30, | December 31, | ||||||||
| 2021 | 2020 | ||||||||
| (Unaudited) | (Audited) | ||||||||
| Assets | |||||||||
| Cash and due from banks | $ | 1,060,634 | $ | 739,465 | |||||
| Fed funds sold | 22,000 | 20,000 | |||||||
| Cash and cash equivalents | 1,082,634 | 759,465 | |||||||
| Securities held to maturity, at amortized cost | 15,294 | 6,568 | |||||||
| Securities available-for-sale, at fair value | 461,356 | 239,682 | |||||||
| Loans | 4,321,529 | 4,035,394 | |||||||
| Less allowance for credit losses | (61,135 | ) | (63,426 | ) | |||||
| Less amortized deferred loan fees, net | (5,498 | ) | (4,574 | ) | |||||
| Loans, net | 4,254,896 | 3,967,394 | |||||||
| Customers' liability on acceptances | 7,697 | 3,596 | |||||||
| Bank furniture and fixtures, net | 10,955 | 11,825 | |||||||
| Bank-owned life insurance | 10,022 | 9,828 | |||||||
| Accrued interest receivable | 16,551 | 23,692 | |||||||
| Investment in affordable housing partnerships | 53,399 | 62,521 | |||||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | |||||||
| Deferred tax assets | 25,128 | 24,466 | |||||||
| Income tax receivable | 1,192 | - | |||||||
| Operating lease right-of-use assets | 20,598 | 16,106 | |||||||
| Other assets | 5,118 | 3,498 | |||||||
| Total assets | $ | 5,979,840 | $ | 5,143,641 | |||||
| Liabilities and Shareholders' Equity | |||||||||
| Deposits: | |||||||||
| Non-interest bearing demand deposits | $ | 1,349,114 | $ | 938,911 | |||||
| Interest-bearing deposits: | 1,861,334 | 1,700,818 | |||||||
| Savings | 33,417 | 34,702 | |||||||
| Time certificates of $250,000 or more | 959,826 | 912,546 | |||||||
| Other time certificates | 990,228 | 855,503 | |||||||
| Total deposits | 5,193,919 | 4,442,480 | |||||||
| Acceptances outstanding | 7,697 | 3,596 | |||||||
| Subordinated debt issuance, net | 147,699 | 99,334 | |||||||
| Commitments to fund investment in affordable housing partnerships | 17,900 | 30,715 | |||||||
| Operating lease liabilities | 21,933 | 18,682 | |||||||
| Accrued interest payable | 2,081 | 1,245 | |||||||
| Other liabilities | 26,590 | 22,142 | |||||||
| Total liabilities | 5,417,819 | 4,618,194 | |||||||
| Shareholders' equity | 562,021 | 525,447 | |||||||
| Total liabilities and shareholders' equity | $ | 5,979,840 | $ | 5,143,641 | |||||
| Book value per common share | $ | 38.29 | $ | 31.47 | |||||
| Number of common shares outstanding | 14,679,215 | 14,931,861 | |||||||
| PREFERRED BANK | |||||||||||||||||
| Selected Consolidated Financial Information | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| (in thousands, except for ratios) | |||||||||||||||||
| For the Quarter Ended | |||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||||
| Unaudited historical quarterly operations data: | |||||||||||||||||
| Interest income | $ | 53,611 | $ | 50,473 | $ | 52,160 | $ | 53,649 | $ | 52,782 | |||||||
| Interest expense | 5,857 | 7,112 | 6,814 | 7,586 | 8,663 | ||||||||||||
| Interest income before provision for credit losses | 47,754 | 43,361 | 45,346 | 46,063 | 44,119 | ||||||||||||
| (Reversal of) provision for credit losses | (1,500 | ) | - | 1,400 | 4,200 | 9,000 | |||||||||||
| Noninterest income | 2,784 | 1,646 | 1,347 | 1,356 | 1,605 | ||||||||||||
| Noninterest expense | 15,370 | 14,964 | 15,652 | 14,177 | 13,663 | ||||||||||||
| Income tax expense | 10,522 | 8,563 | 8,447 | 8,162 | 5,936 | ||||||||||||
| Net income | $ | 26,146 | $ | 21,480 | $ | 21,194 | $ | 20,880 | $ | 17,125 | |||||||
| Earnings per share | |||||||||||||||||
| Basic | $ | 1.76 | $ | 1.44 | $ | 1.42 | $ | 1.40 | $ | 1.15 | |||||||
| Diluted | $ | 1.76 | $ | 1.44 | $ | 1.42 | $ | 1.40 | $ | 1.15 | |||||||
| Ratios for the period: | |||||||||||||||||
| Return on average assets | 1.80 | % | 1.58 | % | 1.65 | % | 1.63 | % | 1.34 | % | |||||||
| Return on beginning equity | 18.56 | % | 15.98 | % | 16.36 | % | 16.49 | % | 13.94 | % | |||||||
| Net interest margin (Fully-taxable equivalent) | 3.36 | % | 3.25 | % | 3.61 | % | 3.66 | % | 3.54 | % | |||||||
| Noninterest expense to average assets | 1.06 | % | 1.10 | % | 1.22 | % | 1.10 | % | 1.07 | % | |||||||
| Efficiency ratio | 30.41 | % | 33.25 | % | 33.52 | % | 29.90 | % | 29.88 | % | |||||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.10 | % | 0.12 | % | -0.01 | % | 0.20 | % | 0.35 | % | |||||||
| Ratios as of period end: | |||||||||||||||||
| Tier 1 leverage capital ratio | 9.64 | % | 10.07 | % | 10.26 | % | 10.08 | % | 9.75 | % | |||||||
| Common equity tier 1 risk-based capital ratio | 11.19 | % | 11.28 | % | 11.34 | % | 11.21 | % | 11.02 | % | |||||||
| Tier 1 risk-based capital ratio | 11.19 | % | 11.28 | % | 11.34 | % | 11.21 | % | 11.02 | % | |||||||
| Total risk-based capital ratio | 15.47 | % | 15.61 | % | 14.73 | % | 14.64 | % | 14.51 | % | |||||||
| Allowances for credit losses to loans at end of period | 1.41 | % | 1.49 | % | 1.56 | % | 1.57 | % | 1.55 | % | |||||||
| Allowance for credit losses to non-performing loans | 292.84 | % | 290.58 | % | 294.74 | % | 308.96 | % | 243.56 | % | |||||||
| Average balances: | |||||||||||||||||
| Total securities | $ | 401,641 | $ | 269,000 | $ | 242,200 | $ | 251,284 | $ | 237,801 | |||||||
| Total loans | 4,156,289 | 4,130,190 | 4,044,800 | 3,971,537 | 3,956,145 | ||||||||||||
| Total earning assets | 5,659,678 | 5,364,598 | 5,102,291 | 5,018,031 | 4,975,005 | ||||||||||||
| Total assets | 5,760,056 | 5,467,678 | 5,200,079 | 5,110,065 | 5,073,548 | ||||||||||||
| Total time certificate of deposits | 1,959,514 | 1,893,247 | 1,820,461 | 1,764,528 | 1,841,901 | ||||||||||||
| Total interest bearing deposits | 3,783,704 | 3,704,771 | 3,531,358 | 3,508,276 | 3,501,275 | ||||||||||||
| Total deposits | 4,971,607 | 4,724,104 | 4,486,399 | 4,426,326 | 4,408,882 | ||||||||||||
| Total interest bearing liabilities | 3,931,375 | 3,815,964 | 3,630,705 | 3,607,592 | 3,600,560 | ||||||||||||
| Total equity | 569,624 | 553,561 | 538,282 | 518,567 | 503,421 | ||||||||||||
| PREFERRED BANK | |||||||||
| Selected Consolidated Financial Information | |||||||||
| (unaudited) | |||||||||
| (in thousands, except for ratios) | |||||||||
| For the Nine Months Ended | |||||||||
| September 30, | September 30, | ||||||||
| 2021 | 2020 | ||||||||
| Interest income | $ | 156,244 | $ | 160,613 | |||||
| Interest expense | 19,783 | 32,522 | |||||||
| Interest income before provision for credit losses | 136,461 | 128,091 | |||||||
| (Reversal of) provision for credit losses | (100 | ) | 21,800 | ||||||
| Noninterest income | 5,777 | 4,707 | |||||||
| Noninterest expense | 45,986 | 43,181 | |||||||
| Income tax expense | 27,532 | 19,229 | |||||||
| Net income | $ | 68,820 | $ | 48,588 | |||||
| Earnings per share | |||||||||
| Basic | $ | 4.61 | $ | 3.25 | |||||
| Diluted | $ | 4.61 | $ | 3.25 | |||||
| Ratios for the period: | |||||||||
| Return on average assets | 1.68 | % | 1.33 | % | |||||
| Return on beginning equity | 17.51 | % | 13.81 | % | |||||
| Net interest margin (Fully-taxable equivalent) | 3.40 | % | 3.60 | % | |||||
| Noninterest expense to average assets | 1.12 | % | 1.19 | % | |||||
| Efficiency ratio | 32.33 | % | 32.52 | % | |||||
| Net charge-offs to average loans | 0.07 | % | 0.12 | % | |||||
| Average balances: | |||||||||
| Total securities | $ | 304,865 | $ | 245,181 | |||||
| Total loans | 4,110,835 | 3,864,667 | |||||||
| Total earning assets | 5,377,565 | 4,764,789 | |||||||
| Total assets | 5,477,989 | 4,865,382 | |||||||
| Total time certificate of deposits | 1,891,583 | 1,788,612 | |||||||
| Total interest bearing deposits | 3,674,201 | 3,382,405 | |||||||
| Total deposits | 4,729,147 | 4,213,950 | |||||||
| Total interest bearing liabilities | 3,793,782 | 3,481,659 | |||||||
| Total equity | 553,937 | 488,641 | |||||||
| PREFERRED BANK | ||||||||||||||||||||||
| Selected Consolidated Financial Information | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands, except for ratios) | ||||||||||||||||||||||
| As of | ||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||||||||||
| Unaudited quarterly statement of financial position data: | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,082,634 | $ | 896,474 | $ | 943,126 | $ | 759,465 | $ | 807,791 | ||||||||||||
| Securities held-to-maturity, at amortized cost | 15,294 | 15,749 | 6,039 | 6,568 | 6,727 | |||||||||||||||||
| Securities available-for-sale, at fair value | 461,356 | 278,460 | 228,635 | 239,682 | 219,778 | |||||||||||||||||
| Loans: | ||||||||||||||||||||||
| Real estate – Mortgage: | ||||||||||||||||||||||
| Real estate—Residential | $ | 540,725 | $ | 558,147 | $ | 541,313 | $ | 523,789 | $ | 528,371 | ||||||||||||
| Real estate—Commercial | 2,093,692 | 2,019,995 | 1,925,554 | 1,911,485 | 1,808,200 | |||||||||||||||||
| Total Real Estate – Mortgage | 2,634,417 | 2,578,142 | 2,466,867 | 2,435,274 | 2,336,571 | |||||||||||||||||
| Real estate – Construction: | ||||||||||||||||||||||
| R/E Construction — Residential | 122,382 | 120,363 | 123,302 | 148,825 | 170,773 | |||||||||||||||||
| R/E Construction — Commercial | 213,833 | 224,323 | 229,933 | 215,032 | 223,706 | |||||||||||||||||
| Total real estate construction loans | 336,215 | 344,686 | 353,235 | 363,857 | 394,480 | |||||||||||||||||
| Commercial and industrial | 1,286,995 | 1,259,668 | 1,248,550 | 1,165,990 | 1,144,051 | |||||||||||||||||
| PPP | 63,897 | 95,765 | 95,434 | 70,234 | 74,551 | |||||||||||||||||
| Consumer and others | 6 | 143 | 155 | 39 | 68 | |||||||||||||||||
| Gross loans | 4,321,529 | 4,278,403 | 4,164,241 | 4,035,394 | 3,949,721 | |||||||||||||||||
| Allowance for credit losses on loans | (61,135 | ) | (63,635 | ) | (64,883 | ) | (63,426 | ) | (61,262 | ) | ||||||||||||
| Net deferred loan fees | (5,498 | ) | (5,329 | ) | (4,872 | ) | (4,574 | ) | (4,411 | ) | ||||||||||||
| Net loans, excluding loans held for sale | $ | 4,254,896 | $ | 4,209,439 | $ | 4,094,486 | $ | 3,967,394 | $ | 3,884,048 | ||||||||||||
| Loans held for sale | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Net loans | $ | 4,254,896 | $ | 4,209,439 | $ | 4,094,486 | $ | 3,967,394 | $ | 3,884,048 | ||||||||||||
| Investment in affordable housing partnerships | 53,399 | 55,452 | 59,824 | 62,521 | 47,917 | |||||||||||||||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | 15,000 | 15,000 | 15,000 | |||||||||||||||||
| Other assets | 97,261 | 105,334 | 100,894 | 93,011 | 104,313 | |||||||||||||||||
| Total assets | $ | 5,979,840 | $ | 5,575,908 | $ | 5,448,004 | $ | 5,143,641 | $ | 5,085,574 | ||||||||||||
| Liabilities: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Demand | $ | 1,349,114 | $ | 1,063,472 | $ | 1,026,260 | $ | 938,911 | $ | 926,166 | ||||||||||||
| Interest-bearing demand | 1,861,334 | 1,774,668 | 1,751,951 | 1,700,818 | 1,620,495 | |||||||||||||||||
| Savings | 33,417 | 32,560 | 37,551 | 34,702 | 32,830 | |||||||||||||||||
| Time certificates of $250,000 or more | 959,826 | 930,976 | 927,043 | 912,546 | 977,821 | |||||||||||||||||
| Other time certificates | 990,228 | 994,630 | 979,694 | 855,503 | 857,113 | |||||||||||||||||
| Total deposits | $ | 5,193,919 | $ | 4,796,306 | $ | 4,722,499 | $ | 4,442,480 | $ | 4,414,425 | ||||||||||||
| Acceptances outstanding | $ | 7,697 | $ | 7,797 | $ | 9,670 | $ | 3,596 | $ | 7,463 | ||||||||||||
| Subordinated debt issuance, net | 147,699 | 147,787 | 99,365 | 99,334 | 99,304 | |||||||||||||||||
| Commitments to fund investment in affordable housing partnerships | 17,900 | 19,197 | 27,918 | 30,715 | 16,689 | |||||||||||||||||
| Other liabilities | 50,604 | 45,852 | 49,283 | 42,069 | 43,826 | |||||||||||||||||
| Total liabilities | $ | 5,417,819 | $ | 5,016,939 | $ | 4,908,735 | $ | 4,618,194 | $ | 4,581,707 | ||||||||||||
| Equity: | ||||||||||||||||||||||
| Net common stock, no par value | $ | 203,844 | $ | 219,958 | $ | 218,593 | $ | 217,444 | $ | 213,519 | ||||||||||||
| Retained earnings | 352,843 | 332,276 | 316,481 | 300,969 | 284,568 | |||||||||||||||||
| Accumulated other comprehensive income | 5,334 | 6,735 | 4,195 | 7,034 | 5,780 | |||||||||||||||||
| Total shareholders' equity | $ | 562,021 | $ | 558,969 | $ | 539,269 | $ | 525,447 | $ | 503,867 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 5,979,840 | $ | 5,575,908 | $ | 5,448,004 | $ | 5,143,641 | $ | 5,085,574 | ||||||||||||
| PREFERRED BANK | |||||||||||||||||||||||||
| Quarter-to-Date Average Balances, Yield and Rates | |||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||
| Three months ended September 30, | Three months ended June 30, | Three months ended September 30, | |||||||||||||||||||||||
| 2021 | 2021 | 2020 | |||||||||||||||||||||||
| Interest | Average | Interest | Average | Interest | Average | ||||||||||||||||||||
| Average | Income or | Yield/ | Average | Income or | Yield/ | Average | Income or | Yield/ | |||||||||||||||||
| Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||
| ASSETS | (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||
| Loans (1,2) | $ | 4,156,289 | 50,866 | 4.86 | % | $ | 4,132,451 | $ | 47,906 | 4.65 | % | $ | 3,956,145 | $ | 50,417 | 5.07 | % | ||||||||
| Investment securities (3) | 401,641 | 2,163 | 2.14 | % | 269,000 | 2,058 | 3.07 | % | 237,801 | 1,967 | 3.29 | % | |||||||||||||
| Federal funds sold | 21,837 | 20 | 0.36 | % | 20,437 | 19 | 0.36 | % | 23,828 | 30 | 0.50 | % | |||||||||||||
| Other earning assets | 1,079,911 | 679 | 0.25 | % | 942,710 | 597 | 0.25 | % | 757,231 | 474 | 0.25 | % | |||||||||||||
| Total interest-earning assets | 5,659,678 | 53,728 | 3.77 | % | 5,364,598 | 50,580 | 3.78 | % | 4,975,005 | 52,888 | 4.23 | % | |||||||||||||
| Deferred loan fees, net | (5,176 | ) | (4,924 | ) | (4,713 | ) | |||||||||||||||||||
| Allowance for credit losses on loans | (63,608 | ) | (64,842 | ) | (55,822 | ) | |||||||||||||||||||
| Noninterest earning assets: | |||||||||||||||||||||||||
| Cash and due from banks | 14,457 | 10,620 | 7,355 | ||||||||||||||||||||||
| Bank furniture and fixtures | 11,123 | 11,468 | 11,856 | ||||||||||||||||||||||
| Right of use assets | 21,136 | 19,735 | 16,550 | ||||||||||||||||||||||
| Other assets | 122,446 | 131,023 | 123,317 | ||||||||||||||||||||||
| Total assets | $ | 5,760,056 | $ | 5,467,678 | $ | 5,073,548 | |||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||
| Interest-bearing demand and savings | 1,824,190 | $ | 1,489 | 0.32 | % | 1,811,524 | $ | 1,548 | 0.34 | % | $ | 1,659,374 | $ | 1,452 | 0.35 | % | |||||||||
| TCD $250K or more | 964,656 | 1,542 | 0.63 | % | 926,161 | 1,688 | 0.73 | % | 987,631 | 2,993 | 1.21 | % | |||||||||||||
| Other time certificates | 994,858 | 1,503 | 0.60 | % | 967,086 | 1,731 | 0.72 | % | 854,270 | 2,688 | 1.25 | % | |||||||||||||
| Total interest-bearing deposits | 3,783,704 | 4,534 | 0.48 | % | 3,704,771 | 4,967 | 0.54 | % | 3,501,275 | 7,133 | 0.81 | % | |||||||||||||
| Subordinated debt, net | 147,671 | 1,324 | 3.56 | % | 111,193 | 2,145 | 7.74 | % | 99,285 | 1,530 | 6.13 | % | |||||||||||||
| Total interest-bearing liabilities | 3,931,375 | 5,858 | 0.59 | % | 3,815,964 | 7,112 | 0.75 | % | 3,600,560 | 8,663 | 0.96 | % | |||||||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||||||
| Demand deposits | 1,187,903 | 1,019,333 | 907,607 | ||||||||||||||||||||||
| Lease Liability | 22,747 | 21,765 | 19,400 | ||||||||||||||||||||||
| Other liabilities | 48,407 | 57,055 | 42,560 | ||||||||||||||||||||||
| Total liabilities | 5,190,432 | 4,914,117 | 4,570,127 | ||||||||||||||||||||||
| Shareholders’ equity | 569,624 | 553,561 | 503,421 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,760,056 | $ | 5,467,678 | $ | 5,073,548 | |||||||||||||||||||
| Net interest income | $ | 47,870 | $ | 43,468 | $ | 44,225 | |||||||||||||||||||
| Net interest spread | 3.18 | % | 3.03 | % | 3.27 | % | |||||||||||||||||||
| Net interest margin | 3.36 | % | 3.25 | % | 3.54 | % | |||||||||||||||||||
| Cost of Deposits: | |||||||||||||||||||||||||
| Noninterest bearing demand deposits | $ | 1,187,903 | $ | 1,019,333 | $ | 907,607 | |||||||||||||||||||
| Interest bearing deposits | 3,783,704 | 4,534 | 0.48 | % | 3,704,771 | 4,967 | 0.54 | % | 3,501,275 | 7,133 | 0.81 | % | |||||||||||||
| Total Deposits | $ | 4,971,607 | $ | 4,534 | 0.36 | % | $ | 4,724,104 | $ | 4,967 | 0.42 | % | $ | 4,408,882 | $ | 7,133 | 0.64 | % | |||||||
| (1) | Includes non-accrual loans and loans held for sale | ||||||||||||||||||||||||
| (2) | Net loan fee income of $823,000, $669,000 and $683,000 for the quarter ended September 30, 2021, June 30, 2021, September 30, 2020, respectively, are included in the yield computations | ||||||||||||||||||||||||
| (3) | Yields on securities have been adjusted to a tax-equivalent basis | ||||||||||||||||||||||||
| PREFERRED BANK | |||||||||||||||||
| Year-to-Date Average Balances, Yield and Rates | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Nine Months ended September 30, | |||||||||||||||||
| 2021 | 2020 | ||||||||||||||||
| Interest | Average | Interest | Average | ||||||||||||||
| Average | Income or | Yield/ | Average | Income or | Yield/ | ||||||||||||
| Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||
| ASSETS | (Dollars in thousands) | ||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans (1,2) | $ | 4,111,596 | $ | 148,631 | 4.83 | % | $ | 3,865,350 | $ | 151,794 | 5.25 | % | |||||
| Investment securities (3) | 304,865 | 6,104 | 2.68 | % | 245,181 | 6,193 | 3.37 | % | |||||||||
| Federal funds sold | 21,251 | 63 | 0.39 | % | 26,093 | 185 | 0.95 | % | |||||||||
| Other earning assets | 939,853 | 1,769 | 0.25 | % | 628,165 | 2,736 | 0.58 | % | |||||||||
| Total interest-earning assets | 5,377,565 | 156,567 | 3.89 | % | 4,764,789 | 160,908 | 4.51 | % | |||||||||
| Deferred loan fees, net | (4,818 | ) | (3,662 | ) | |||||||||||||
| Allowance for credit losses on loans | (63,967 | ) | (48,981 | ) | |||||||||||||
| Noninterest earning assets: | |||||||||||||||||
| Cash and due from banks | 11,683 | 7,321 | |||||||||||||||
| Bank furniture and fixtures | 11,452 | 12,039 | |||||||||||||||
| Right of use assets | 19,255 | 16,774 | |||||||||||||||
| Other assets | 126,819 | 117,102 | |||||||||||||||
| Total assets | $ | 5,477,989 | $ | 4,865,382 | |||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand/ savings | 1,782,618 | $ | 4,492 | 0.34 | % | 1,593,793 | $ | 6,313 | 0.53 | % | |||||||
| TCD $250K or more | 936,825 | 5,148 | 0.73 | % | 967,413 | 11,469 | 1.58 | % | |||||||||
| Other time certificates | 954,758 | 5,143 | 0.72 | % | 821,199 | 10,148 | 1.65 | % | |||||||||
| Total interest-bearing deposits | 3,674,201 | 14,783 | 0.54 | % | 3,382,405 | 27,930 | 1.10 | % | |||||||||
| Subordinated debt, net | 119,581 | 5,000 | 5.59 | % | 99,254 | 4,592 | 6.18 | % | |||||||||
| Total interest-bearing liabilities | 3,793,782 | 19,783 | 0.70 | % | 3,481,659 | 32,522 | 1.25 | % | |||||||||
| Non-interest bearing liabilities: | |||||||||||||||||
| Demand deposits | 1,054,946 | 831,545 | |||||||||||||||
| Lease Liability | 21,280 | 19,850 | |||||||||||||||
| Other liabilities | 54,044 | 43,687 | |||||||||||||||
| Total liabilities | 4,924,052 | 4,376,741 | |||||||||||||||
| Shareholders’ equity | 553,937 | 488,641 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,477,989 | $ | 4,865,382 | |||||||||||||
| Net interest income | $ | 136,784 | $ | 128,386 | |||||||||||||
| Net interest spread | 3.20 | % | 3.26 | % | |||||||||||||
| Net interest margin | 3.40 | % | 3.60 | % | |||||||||||||
| Cost of Deposits: | |||||||||||||||||
| Noninterest bearing demand deposits | $ | 1,054,946 | $ | 831,545 | |||||||||||||
| Interest bearing deposits | 3,674,201 | 14,783 | 0.54 | % | 3,382,405 | 27,930 | 1.10 | % | |||||||||
| Total Deposits | $ | 4,729,147 | $ | 14,783 | 0.42 | % | $ | 4,213,950 | $ | 27,930 | 0.89 | % | |||||
| (1) | Includes non-accrual loans and loans held for sale | ||||||||||||||||
| (2) | Net loan fee income of $2.0 million and $1.9 million for the nine months ended September 30, 2021 and 2020, respectively, are included in the yield computations | ||||||||||||||||
| (3) | Yields on securities have been adjusted to a tax-equivalent basis | ||||||||||||||||
| Preferred Bank | ||||||||||
| Loan and Credit Quality Information | ||||||||||
| Allowance For Credit Losses History | ||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||
| September 30, 2021 | September 30, 2020 | |||||||||
| (Dollars in 000's) | ||||||||||
| Allowance For Credit Losses | ||||||||||
| Balance at Beginning of Period | $ | 63,426 | $ | 34,830 | ||||||
| Charge-Offs | ||||||||||
| Commercial & Industrial | 1,431 | 1,661 | ||||||||
| Mini-perm Real Estate | 817 | 1,900 | ||||||||
| Total Charge-Offs | 2,248 | 3,561 | ||||||||
| Recoveries | ||||||||||
| Commercial & Industrial | 57 | - | ||||||||
| Construction - Commercial | - | 193 | ||||||||
| Total Recoveries | 57 | 193 | ||||||||
| Net Charge-Offs | 2,191 | 3,368 | ||||||||
| (Reversal of) Provision for Credit Losses: | ||||||||||
| CECL Cumulative Effect Adjustment | - | 8,000 | ||||||||
| Current (Reversal) Provision | (100 | ) | 21,800 | |||||||
| Balance at End of Period | $ | 61,135 | $ | 61,262 | ||||||
| Average Loans Held for Investment | $ | 4,110,835 | $ | 3,864,667 | ||||||
| Loans Held for Investment at End of Period | $ | 4,321,529 | $ | 3,949,721 | ||||||
| Net Charge-Offs (Recoveries) to Average Loans | 0.07 | % | 0.12 | % | ||||||
| Allowances for Credit Losses to Loans at End of Period | 1.41 | % | 1.55 | % | ||||||
| AT THE COMPANY: Edward J. Czajka Executive Vice President Chief Financial Officer (213) 891-1188 | AT FINANCIAL PROFILES: Jeffrey Haas General Information (310) 622-8240 PFBC@finprofiles.com |
