Preferred Bank Reports Quarterly Results


LOS ANGELES, July 25, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.6 million or $2.48 per diluted share for the second quarter of 2024. This represents a slight increase in net income of $126,000 over the prior quarter but down by $4.3 million from the same quarter last year. The decrease in net income from the prior year was due to lower net interest income because of rising deposit costs. Despite the decrease in net income, Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.

Highlights for the Quarter:

  • Return on average assets was 1.97%
  • Return on beginning equity of 19.44%
  • Net interest margin (NIM) was 3.96%
  • Total loans increased by $103 million or 1.9% for the quarter
  • Total deposits increased $77 million or 1.3% for the quarter
  • Efficiency ratio was 28.3%

Li Yu, Chairman and CEO, commented, “I am pleased to report Preferred Bank’s second quarter net income of $33.6 million or $2.48 per fully diluted share. For the quarter, total loans grew $103 million or 1.95% on a linked quarter basis. Deposits also grew $77 million or 1.33% linked quarter.

“This quarter, total non-performing loans (NPL’s) increased $22.2 million to $40.6 million as several previously criticized loans have changed from performing status to non-accrual status. This migration is typical in the process of problem loan resolution. We are confident that these NPL’s are either fully-reserved or well-protected by collateral and cash flow. It is not likely that the resolution of these loans will present any significant impact to the Bank’s future earnings. Criticized loans at June 30, 2024, decreased $13.0 million from the previous quarter-end and in-migration into this category seems to have slowed down. There was only one loan newly classified/criticized in the quarter. The loan was supported by adequate collateral value and cash flow with no loss exposure identified.

“During the quarter, we have charged-off $9.0 million of loans that were fully reserved for at the end of the previous quarter. Provision expense for the quarter was $2.5 million. The allowance for credit losses now stands at 1.34% of total loans at June 30, 2024.

“We continue to work on our balance sheet in order to reduce the asset sensitivity in the balance sheet. We are confident that with this work, when interest rates ease the impact on our earnings will be quite modest. Meanwhile, lower interest rates will typically give way to better organic growth which will positively impact earnings.

“The regulatory approval for our $150 million stock buyback plan from 2023 has expired with $72.5 million worth of stock repurchased thus far. We are seeking regulatory approval to extend or renew the plan. We are also pleased to report that with the $72.5 million buyback, the Bank 's tangible common equity (TCE) ratio actually improved from 10.02% as of June 30, 2023 to 10.55% as of June 30, 2024. We attribute this to the Bank’s top echelon earnings capability.

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $66.1 million for the second quarter of 2024. This was a decrease from the $73.3 million recorded in the same quarter last year and down slightly from the $68.5 million posted in the first quarter of 2024. A rising cost of deposits was partially to blame for the decrease in net interest income but so was the addition of new nonaccrual loans whose accrued interest totaled $1.4 million which had to be reversed out of loan interest income. This helped to drive the Bank’s net interest margin down to 3.96% for the quarter. This compares to a margin of 4.19% in the prior quarter and down from 4.58% one year ago. The interest reversals on the nonaccrual loans had the effect of reducing the Bank’s NIM by 8 basis points for the quarter.

Noninterest Income. For the second quarter of 2024, noninterest income was $3.4 million compared with $3.1 million for the same quarter last year and compared to $3.1 million for the first quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $246,000 and gains on sales of SBA loans which increased by $250,000 partially offset by a decrease in other income of $131,000. In comparing to the same quarter last year; LC fee income was up by $173,000 and gains on SBA loan sales were up by $167,000.

Noninterest Expense. Total noninterest expense was $19.7 million for the second quarter of 2024 compared to $20.0 million for the first quarter of 2024 and compared to the $20.9 million recorded in the same period last year. The primary reason for the decrease from the prior year is the $2.8 million valuation allowance recorded in the second quarter of last year on the Bank’s other real estate owned (OREO) property. Partially offsetting that is an increase in professional services; mainly legal fees for loan resolutions. In comparing this quarter to the first quarter of 2024; personnel expenses decreased by $956,000 and other professional services increased by $375,000, again due mainly to legal fees. For the quarter ended June 30, 2024, the Bank’s efficiency ratio was 28.3%, a tick higher than the 28.0% recorded last quarter and up off the 27.3% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.7 million for the second quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.

Balance Sheet Summary

Total gross loans at June 30, 2024 were $5.43 billion, an increase of $155.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits increased to $5.88 billion, up $169.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.85 billion, an increase of $187.3 million over the total of $6.66 billion as of December 31, 2023.

Asset Quality

As of June 30, 2024, nonaccrual loans increased to $40.6 million, up from the $18.3 million reported as of March 31, 2024 and also up from the $28.7 million as of December 31, 2023. The increase was primarily due to the addition of an $18 million loan secured by a hotel and the addition of two C&I loans totaling $13.5 million as well as a $6.1 million loan also secured by a hotel. These additions were partially offset by the sale of a non-performing note during the quarter which totaled $12.3 million. OREO and repossessed assets totaled $16.7 million as of June 30, 2024, no change from the prior quarter or from December 31, 2023. Criticized loans decreased from $86.6 million as of March 31, 2024 to $73.7 million as of June 30, 2024. Total net charge-offs (recoveries) were $9.0 million for the second quarter of 2024 as compared to $3.4 million last quarter and compared to $0 for the second quarter last year. Below is more detail of our loan quality:

Loan Quality

 June 30, 2024March 31, 2024
Criticized loans still accruing$33,101$68,304
Loans on nonaccrual status 40,551 18,314
Total Criticized Loans$73,652$86,618


Non-performing loans (non-accrual status) includes the following:

  1. A hotel loan of $18.0 million, in a very populated area of Los Angeles, with cash flow sufficient to service the debt and loan-to-value ratio (LTV) of 51%.
  2. Two commercial and industrial (C&I) loans totaling $13.5 million. The estimated net exposure is fully reserved.
  3. A $6.1 million loan in San Francisco collateralized by a motel with LTV of 71%. This note was sold in July at par, so that credit is already resolved.
  4. Two real estate loans totaling $1.8 million, which are now paying as agreed. These loans will be reinstated to performing status in the third quarter of 2024.

Allowance for Credit Losses

The provision for credit losses for the second quarter of 2024 was $2.5 million compared to $4.4 million last quarter and compared to $2.5 million in the same quarter last year. The aforementioned charge-offs recorded during the quarter as well as loan growth were the primary drivers of the provision for the quarter. The Bank’s allowance coverage ratio is 1.34% of total loans as compared to 1.49% last quarter.

Capitalization

As of June 30, 2024, the Bank’s leverage ratio was 10.89%, the common equity tier 1 capital ratio was 11.52% and the total capital ratio stood at 14.93%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2024 financial results will be held tomorrow, July 26, 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 August 9, 2024; the passcode is 7823115.

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. In addition, the Bank also operates a loan production office in Sunnyvale, California. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. 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 2023 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

Financial Tables to Follow

 
PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
       
  For the Quarter Ended
  June 30, March 31, June 30,
   2024   2024   2023 
Interest income:      
Loans, including fees $109,451  $109,980  $102,220 
Investment securities  17,552   16,257   15,919 
Fed funds sold  291   283   272 
Total interest income  127,294   126,520   118,411 
       
Interest expense:      
Interest-bearing demand  24,205   22,290   16,406 
Savings  79   75   47 
Time certificates  35,578   34,330   25,436 
FHLB borrowings  -   -   1,888 
Subordinated debt  1,325   1,325   1,325 
Total interest expense  61,187   58,020   45,102 
Net interest income  66,107   68,500   73,309 
Provision for credit losses  2,500   4,400   2,500 
Net interest income after provision for      
credit losses  63,607   64,100   70,809 
       
Noninterest income:      
Fees & service charges on deposit accounts  819   845   844 
Letters of credit fee income  1,749   1,503   1,576 
BOLI income  105   105   103 
Net loss on called and sale of investment securities  -   -   - 
Net gain on sale of loans  353   103   186 
Other income  378   509   392 
Total noninterest income  3,404   3,065   3,101 
       
Noninterest expense:      
Salary and employee benefits  12,944   13,900   12,520 
Net occupancy expense  1,716   1,711   1,476 
Business development and promotion expense  403   266   200 
Professional services  1,832   1,457   1,343 
Office supplies and equipment expense  477   473   398 
Loss on sale of OREO, valuation allowance and related expense  29   135   2,838 
Other  2,296   2,086   2,077 
Total noninterest expense  19,697   20,028   20,852 
Income before provision for income taxes  47,314   47,137   53,058 
Income tax expense  13,722   13,671   15,122 
Net income $33,592  $33,466  $37,936 
       
Income per share available to common shareholders      
Basic $2.51  $2.48  $2.63 
Diluted $2.48  $2.44  $2.61 
       
Weighted-average common shares outstanding      
Basic  13,362,522   13,508,878   14,419,959 
Diluted  13,548,400   13,736,986   14,560,693 
       
Cash dividends per common share $0.70  $0.70  $0.55 
       


PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
       
  For the Six Months Ended  
  June 30, June 30, Change
   2024   2023  %
Interest income:      
Loans, including fees $219,431  $198,101  10.8%
Investment securities  33,809   28,898  17.0%
Fed funds sold  574   496  15.8%
Total interest income  253,814   227,495  11.6%
       
Interest expense:      
Interest-bearing demand  46,495   33,444  39.0%
Savings  154   86  78.8%
Time certificates  69,908   42,029  66.3%
FHLB borrowings  -   2,262  -100.0%
Subordinated debt  2,650   2,650  0.0%
Total interest expense  119,207   80,471  48.1%
Net interest income  134,607   147,024  -8.4%
Provision for credit losses  6,900   3,000  130.0%
Net interest income after provision for credit losses  127,707   144,024  -11.3%
       
Noninterest income:      
Fees & service charges on deposit accounts  1,664   1,538  8.2%
Letters of credit fee income  3,252   2,900  12.1%
BOLI income  210   204  3.0%
Net loss on called and sale of investment securities  -   (4,117) -100.0%
Net gain on sale of loans  456   526  -13.3%
Other income  887   984  -9.9%
Total noninterest income  6,469   2,035  217.8%
       
Noninterest expense:      
Salary and employee benefits  26,844   26,248  2.3%
Net occupancy expense  3,427   2,950  16.2%
Business development and promotion expense  669   305  119.3%
Professional services  3,289   2,492  32.0%
Office supplies and equipment expense  950   802  18.5%
Loss on sale of OREO, valuation allowance and related expense  164   2,910  -94.4%
Other  4,382   4,045  8.3%
Total noninterest expense  39,725   39,752  -0.1%
Income before provision for income taxes  94,451   106,307  -11.2%
Income tax expense  27,393   30,298  -9.6%
Net income $67,058  $76,009  -11.8%
       
Income per share available to common shareholders      
Basic $4.99  $5.27  -5.3%
Diluted $4.93  $5.21  -5.5%
       
Weighted-average common shares outstanding      
Basic  13,435,700   14,425,253  -6.9%
Diluted  13,608,783   14,581,458  -6.7%
       
Dividends per share $1.40  $1.10  27.3%


PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
     
     
  June 30, December 31,
   2024   2023 
  (Unaudited) (Audited)
Assets    
Cash and due from banks $895,677  $890,852 
Fed funds sold  22,000   20,000 
Cash and cash equivalents  917,677   910,852 
     
Securities held-to-maturity, at amortized cost  20,605   21,171 
Securities available-for-sale, at fair value  331,909   313,842 
     
Loans held for sale, at lower of cost or fair value  955   360 
     
Loans  5,428,600   5,273,498 
Less allowance for credit losses  (72,848)  (78,355)
Less amortized deferred loan fees, net  (10,502)  (11,079)
Loans, net  5,345,250   5,184,064 
     
Other real estate owned and repossessed assets  16,716   16,716 
Customers' liability on acceptances  -   315 
Bank furniture and fixtures, net  9,506   9,694 
Bank-owned life insurance  10,772   10,632 
Accrued interest receivable  36,618   33,892 
Investment in affordable housing partnerships  60,432   65,276 
Federal Home Loan Bank stock, at cost  15,000   15,000 
Deferred tax assets  48,719   48,991 
Income tax receivable  6,421   2,391 
Operating lease right-of-use assets  22,564   22,050 
Other assets  3,436   4,030 
Total assets $6,846,580  $6,659,276 
     
Liabilities and Shareholders' Equity    
Deposits:    
Noninterest bearing demand deposits $675,767  $786,995 
Interest bearing deposits:  2,326,214   2,075,156 
Savings  28,251   29,167 
Time certificates of $250,000 or more  1,406,149   1,317,862 
Other time certificates  1,442,381   1,500,162 
Total deposits  5,878,762   5,709,342 
     
Acceptances outstanding  -   315 
Subordinated debt issuance, net  148,351   148,232 
Commitments to fund investment in affordable housing partnerships  27,946   30,824 
Operating lease liabilities  19,149   19,766 
Accrued interest payable  15,086   16,124 
Other liabilities  34,158   39,568 
Total liabilities  6,123,452   5,964,171 
     
Shareholders' equity  723,128   695,105 
Total liabilities and shareholders' equity $6,846,580  $6,659,276 
     
Book value per common share $54.23  $50.54 
Number of common shares outstanding  13,334,752   13,753,246 


PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
       
  For the Quarter Ended
       
  June 30,March 31,December 31,September 30,June 30,
   2024  2024  2023  2023  2023 
Unaudited historical quarterly operations data:      
Interest income $127,294 $126,520 $124,964 $125,529 $118,411 
Interest expense  61,187  58,020  55,568  52,575  45,102 
Interest income before provision for credit losses  66,107  68,500  69,396  72,954  73,309 
Provision for credit losses  2,500  4,400  3,500  3,500  2,500 
Noninterest income  3,404  3,065  2,106  2,972  3,101 
Noninterest expense  19,697  20,028  17,873  19,009  20,852 
Income tax expense  13,722  13,671  14,290  15,225  15,122 
Net income $33,592 $33,466 $35,839 $38,192 $37,936 
       
Earnings per share      
Basic $2.51 $2.48 $2.63 $2.74 $2.63 
Diluted $2.48 $2.44 $2.60 $2.71 $2.61 
       
Ratios for the period:      
Return on average assets  1.97% 2.00% 2.15% 2.25% 2.32%
Return on beginning equity  19.44% 19.36% 21.21% 22.66% 23.18%
Net interest margin (Fully-taxable equivalent)  3.96% 4.19% 4.24% 4.39% 4.58%
Noninterest expense to average assets  1.15% 1.20% 1.07% 1.12% 1.28%
Efficiency ratio  28.34% 27.99% 25.00% 25.04% 27.29%
Net charge-offs (recoveries) to average loans (annualized)  0.68% 0.26% -0.00% 0.01% -0.00%
       
Ratios as of period end:      
Tangible common equity ratio  10.55% 10.35% 10.43% 10.10% 10.02%
Tier 1 leverage capital ratio  10.89% 10.80% 10.85% 10.46% 10.61%
Common equity tier 1 risk-based capital ratio  11.52% 11.50% 11.57% 11.63% 11.51%
Tier 1 risk-based capital ratio  11.52% 11.50% 11.57% 11.63% 11.51%
Total risk-based capital ratio  14.93% 15.08% 15.18% 15.32% 15.14%
Allowances for credit losses to loans at end of period  1.34% 1.49% 1.49% 1.46% 1.40%
Allowance for credit losses to non-performing loans 1.79x4.33x2.73x3.86x13.86x
       
Average balances:      
Total securities $353,357 $348,961 $349,863 $368,968 $397,905 
Total loans  5,320,360  5,263,562  5,126,918  5,086,241  5,044,004 
Total earning assets  6,728,498  6,585,853  6,499,469  6,597,557  6,432,950 
Total assets  6,863,829  6,718,018  6,627,349  6,719,859  6,558,651 
Total time certificate of deposits  2,884,259  2,852,860  2,767,385  2,680,854  2,617,872 
Total interest bearing deposits  5,203,034  5,004,834  4,906,947  4,800,227  4,549,519 
Total deposits  5,901,976  5,761,488  5,689,713  5,654,350  5,481,457 
Total interest bearing liabilities  5,351,347  5,153,089  5,055,143  5,069,014  4,847,596 
Total equity  715,190  704,996  683,141  678,020  677,306 


PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
    
 For the Six Months Ended
 June 30,
 June 30,
  2024   2023 
    
Interest income$253,814  $227,495 
Interest expense 119,207   80,471 
Interest income before provision for credit losses 134,607   147,024 
Provision for credit losses 6,900   3,000 
Noninterest income 6,469   2,035 
Noninterest expense 39,725   39,752 
Income tax expense 27,393   30,298 
Net income$67,058  $76,009 
    
Earnings per share   
Basic$4.99  $5.27 
Diluted$4.93  $5.21 
    
Ratios for the period:   
Return on average assets 1.99%  2.37%
Return on beginning equity 19.40%  24.31%
Net interest margin (Fully-taxable equivalent) 4.07%  4.67%
Noninterest expense to average assets 1.18%  1.24%
Efficiency ratio 28.16%  26.67%
Net charge-off (recoveries) to average loans 0.47%  0.00%
    
Average balances:   
Total securities$351,159  $420,254 
Total loans 5,291,961   5,028,520 
Total earning assets 6,657,176   6,355,222 
Total assets 6,790,924   6,480,186 
Total time certificate of deposits 2,868,560   2,414,750 
Total interest bearing deposits 5,103,935   4,501,301 
Total deposits 5,831,732   5,480,705 
Total interest bearing liabilities 5,252,219   4,740,508 
Total equity 710,093   664,207 


PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
             
    As of
             
    June 30, March 31, December 31, September 30,June 30,
     2024   2024   2023   2023   2023 
Unaudited quarterly statement of financial position data:         
Assets:         
 Cash and cash equivalents$917,677  $936,600  $910,852  $1,021,108  $1,049,745 
 Securities held-to-maturity, at amortized cost 20,605   20,904   21,171   21,474   21,818 
 Securities available-for-sale, at fair value 331,909   333,411   313,842   335,608   352,548 
 Loans:         
  Real estate – Mortgage:         
   Real estate—Residential$732,251  $724,101  $688,058  $663,021  $631,795 
   Real estate—Commercial 2,833,430   2,777,608   2,760,761   2,688,148   2,744,074 
   Total Real Estate – Mortgage 3,565,681   3,501,709   3,448,819   3,351,169   3,375,869 
  Real estate – Construction:         
   R/E Construction — Residential 238,062   236,596   246,201   226,482   186,239 
   R/E Construction — Commercial 247,582   213,727   179,775   164,666   153,418 
   Total real estate construction loans 485,644   450,323   425,976   391,148   339,657 
  Commercial and industrial 1,371,694   1,369,529   1,394,871   1,383,216   1,398,213 
  SBA 5,463   3,914   3,469   2,424   4,427 
  Consumer and others 118   379   363   285   345 
   Gross loans 5,428,600   5,325,854   5,273,498   5,128,242   5,118,511 
 Allowance for credit losses on loans (72,848)  (79,311)  (78,355)  (74,849)  (71,429)
 Net deferred loan fees (10,502)  (10,460)  (11,079)  (10,240)  (10,464)
  Net loans, excluding loans held for sale$5,345,250  $5,236,083  $5,184,064  $5,043,153  $5,036,618 
 Loans held for sale$955  $605  $360  $-  $176 
  Net loans$5,346,205  $5,236,688  $5,184,424  $5,043,153  $5,036,794 
             
 Other real estate owned and repossessed assets$16,716  $16,716  $16,716  $16,716  $16,728 
 Investment in affordable housing partnerships 60,432   62,854   65,276   54,679   56,844 
 Federal Home Loan Bank stock, at cost 15,000   15,000   15,000   15,000   15,000 
 Other assets 138,036   134,040   131,995   124,793   118,465 
  Total assets$6,846,580  $6,756,213  $6,659,276  $6,632,530  $6,667,942 
             
Liabilities:         
 Deposits:         
  Demand$675,767  $709,767  $786,995  $838,300  $870,282 
  Interest bearing demand 2,326,214   2,159,948   2,075,156   2,091,384   2,005,298 
  Savings 28,251   29,261   29,167   30,427   32,089 
  Time certificates of $250,000 or more 1,406,149   1,349,927   1,317,862   1,283,461   1,244,128 
  Other time certificates 1,442,381   1,552,805   1,500,162   1,439,699   1,437,194 
  Total deposits$5,878,762  $5,801,708  $5,709,342  $5,683,271  $5,588,991 
             
 Acceptances outstanding$-  $-  $315  $103  $448 
 Advance from Federal Home Loan Bank -   -   -   -   150,000 
 Subordinated debt issuance, net 148,351   148,292   148,232   148,173   148,114 
 Commitments to fund investment in affordable housing partnerships 27,946   29,647   30,824   20,824   20,930 
 Other liabilities 68,393   77,008   75,458   109,651   90,692 
  Total liabilities$6,123,452  $6,056,655  $5,964,171  $5,962,022  $5,999,175 
             
Equity:          
 Net common stock, no par value$113,510  $115,915  $134,534  $143,584  $167,404 
 Retained earnings 640,675   616,417   592,325   566,027   535,373 
 Accumulated other comprehensive income (31,057)  (32,774)  (31,754)  (39,103)  (34,010)
  Total shareholders' equity$723,128  $699,558  $695,105  $670,508  $668,767 
  Total liabilities and shareholders' equity$6,846,580  $6,756,213  $6,659,276  $6,632,530  $6,667,942 


PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)
            
   Three months ended June 30, Three months ended March 31, Three months ended June 30,
    2024   2024   2023 
    InterestAverage  InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:           
 Loans (1,2)$5,324,410 $109,4518.27% $5,265,940 $109,9808.40% $5,044,517 $102,2208.13%
 Investment securities (3) 353,357  3,6524.16%  348,961  3,4303.95%  397,905  3,7093.74%
 Federal funds sold 20,866  2915.61%  20,390  2835.58%  20,000  2725.45%
 Other earning assets 1,029,865  13,9995.47%  950,562  12,9285.47%  970,528  12,3115.09%
  Total interest earning assets 6,728,498  127,3937.61%  6,585,853  126,6217.73%  6,432,950  118,5127.39%
 Deferred loan fees, net (10,459)    (10,694)    (10,417)  
 Allowance for credit losses on loans (79,119)    (78,349)    (68,956)  
Noninterest earning assets:           
 Cash and due from banks 10,626     11,244     12,712   
 Bank furniture and fixtures 9,787     10,084     9,005   
 Right of use assets 22,886     22,003     21,988   
 Other assets 181,610     177,877     161,369   
  Total assets$6,863,829    $6,718,018    $6,558,651   
              
LIABILITIES AND SHAREHOLDERS' EQUITY           
Interest bearing liabilities:           
 Deposits:           
  Interest bearing demand and savings$2,318,775 $24,2844.21% $2,151,974 $22,3654.18% $1,931,647 $16,4533.42%
  TCD $250K or more 1,379,116  17,2955.04%  1,341,298  16,5014.95%  1,259,305  12,7724.07%
  Other time certificates 1,505,143  18,2834.89%  1,511,562  17,8294.74%  1,358,567  12,6643.74%
  Total interest bearing deposits 5,203,034  59,8624.63%  5,004,834  56,6954.56%  4,549,519  41,8893.69%
Advance from Federal Home Loan Bank -  -0.00%  -  -0.00%  150,000  1,8885.05%
Subordinated debt, net 148,313  1,3253.59%  148,255  1,3253.59%  148,077  1,3253.59%
  Total interest bearing liabilities 5,351,347  61,1874.60%  5,153,089  58,0204.53%  4,847,596  45,1023.73%
Noninterest bearing liabilities:           
 Demand deposits 698,942     756,654     931,938   
 Lease liability 19,828     19,500     20,708   
 Other liabilities 78,522     83,779     81,103   
  Total liabilities 6,148,639     6,013,022     5,881,345   
Shareholders’ equity 715,190     704,996     677,306   
  Total liabilities and shareholders’ equity$6,863,829    $6,718,018    $6,558,651   
Net interest income $66,206   $68,601   $73,410 
Net interest spread  3.02%   3.20%   3.66%
Net interest margin  3.96%   4.19%   4.58%
              
Cost of Deposits:           
 Noninterest bearing demand deposits$698,942    $756,654    $931,938   
 Interest bearing deposits 5,203,034  59,8624.63%  5,004,834  56,6954.56%  4,549,519  41,8893.69%
  Total Deposits$5,901,976 $59,8624.08% $5,761,488 $56,6953.96% $5,481,457 $41,8893.07%
              
(1)Includes non-accrual loans and loans held for sale
(2)Net loan fee income of $1.3 million, $1.1 million and $902,000 for the quarter ended June 30, 2024, March 31, 20243 and June 30, 2023, 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)
          
   Six Months ended June 30,
    2024
   2023 
    InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:       
 Loans (1,2)$5,295,175 $219,4318.33% $5,029,214 $198,1017.94%
 Investment securities (3) 351,159  7,0824.06%  420,254  7,7033.70%
 Federal funds sold 20,628  5745.60%  20,110  4964.97%
 Other earning assets 990,214  26,9275.47%  885,644  21,3984.87%
  Total interest earning assets 6,657,176  254,0147.67%  6,355,222  227,6987.23%
 Deferred loan fees, net (10,576)    (10,178)  
 Allowance for credit losses on loans (78,734)    (68,713)  
Noninterest earning assets:       
 Cash and due from banks 10,729     11,920   
 Bank furniture and fixtures 9,936     8,991   
 Right of use assets 22,444     21,928   
 Other assets 179,949     161,016   
  Total assets$6,790,924    $6,480,186   
          
LIABILITIES AND SHAREHOLDERS' EQUITY       
Interest bearing liabilities:       
 Deposits:       
  Interest bearing demand/ savings$2,235,375 $46,6494.20% $2,086,551 $33,5303.24%
  TCD $250K or more 1,360,207  33,7965.00%  1,262,670  23,5153.76%
  Other time certificates 1,508,353  36,1124.81%  1,152,080  18,5143.24%
  Total interest \bearing deposits 5,103,935  116,5574.59%  4,501,301  75,5593.39%
Short-term borrowings -  -0.00%  -  -0.00%
Advance from Federal Home Loan Bank -  -0.00%  91,160  2,2625.00%
Subordinated debt, net 148,284  2,6503.59%  148,047  2,6503.61%
  Total interest bearing liabilities 5,252,219  119,2074.56%  4,740,508  80,4713.42%
Noninterest bearing liabilities:       
 Demand deposits 727,797     979,404   
 Lease liability 19,664     20,850   
 Other liabilities 81,151     75,217   
  Total liabilities 6,080,831     5,815,979   
Shareholders’ equity 710,093     664,207   
  Total liabilities and shareholders’ equity$6,790,924    $6,480,186   
Net interest income $134,807   $147,227 
Net interest spread  3.11%   3.80%
Net interest margin  4.07%   4.67%
          
Cost of Deposits:       
 Noninterest bearing demand deposits$727,797    $979,404   
 Interest bearing deposits 5,103,935  116,5574.59%  4,501,301  75,5593.39%
  Total Deposits$5,831,732 $116,5574.02% $5,480,705 $75,5592.78%
          
(1)Includes non-accrual loans and loans held for sale
(2)Net loan fee income of $2.4 million and $2.1 million for the year ended June 30, 2024 and 2023, 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
     Six Months Ended Year ended
     June 30, 2024 December 31, 2023
     (Dollars in 000's)
Allowance For Credit Losses    
Balance at Beginning of Period $78,355  $68,472 
 Charge-Offs    
  Commercial & Industrial  12,409   124 
  Mini-perm Real Estate  -   - 
  Total Charge-Offs  12,409   124 
        
 Recoveries    
  Commercial & Industrial  2   7 
  Mini-perm Real Estate  -   - 
  Total Recoveries  2   7 
        
 Net Charge-Offs  12,407   117 
 Provision for Credit Losses:  6,900   10,000 
Balance at End of Period $72,848  $78,355 
        
Average Loans Held for Investment $5,295,175  $5,067,870 
Loans Held for Investment at End of Period $5,428,600  $5,273,498 
Net Charge-Offs to Average Loans  0.47%  0.00%
Allowances for Credit Losses to Loans at End of Period  1.34%  1.49%
        


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