Bulletin
Investor Alert

press release

Oct. 19, 2020, 5:18 p.m. EDT

Preferred Bank Reports Quarterly Earnings

LOS ANGELES, Oct 19, 2020 (GLOBE NEWSWIRE via COMTEX) -- LOS ANGELES, Oct. 19, 2020 (GLOBE NEWSWIRE) -- Preferred Bank /zigman2/quotes/210374414/composite PFBC +1.18% , an independent commercial bank, today reported results for the quarter ended September 30, 2020. Preferred Bank ("the Bank") reported net income of $17.1 million or $1.15 per diluted share for the third quarter of 2020. This is down from net income of $20.0 million or $1.32 per diluted share for the third quarter of 2019 but easily surpasses net income of $15.3 million or $1.03 per diluted share for the second quarter of 2020. The primary reason for the decrease compared to the prior year is the provision for credit losses, which totaled $9.0 million for the third quarter of 2020, as compared to $900,000 in the third quarter of 2019. Compared to the second quarter of 2020, however, the provision for credit losses increased $1.5 million over the $7.5 million recorded in that period, yet net income increased $1.9 million or $0.12 per diluted share. This was due to an increase in net interest income, an increase in noninterest income coupled with a decrease in noninterest expense.

Li Yu, Chairman and CEO, commented, "We are pleased to report third quarter net income of $17.1 million or $1.15 per share. Our earnings compare favorably with the previous two quarters. In fact, on a pre-tax, pre-provision (PTPP) basis, our third quarter and YTD earnings reached a record high. The primary reasons for the performance was significantly reduced interest cost and effective overhead control. The Bank's third quarter efficiency ratio clocked in at 29.88%. Our net interest margin, however, compressed slightly from the previous quarter due to a larger balance sheet and much higher level of cash. Under the current interest rate environment, excess cash reduces our profitability.

Deposits continued to grow in the third quarter as we saw a $64.2 million or 1.5% increase from June 30, 2020. However, our loan balances came in $14 million below the previous quarter. The prolonged shut down of our trade area has reduced the opportunities for new loans. The uncertainties further make many new opportunities proportionately less attractive.

Our main focus at present is credit management. We elected to charge-off portions of the two loans which were placed on nonaccrual status last quarter in addition to fully reserving for any amounts which may not be collectible. In addition, due to the ongoing economic disruption caused by the pandemic, our provision for credit losses is again elevated this quarter. The allowance for credit loss to total loans now stands at 1.58% (excluding PPP loans).

A great deal of the credit management effort was also spent on loans modified under the CARES Act. These loans totaled $199.5 million at September 30, 2020 which represented a $267.6 million or 57% reduction from the $467.1 million reported on June 30, 2020. We have also been in contact with substantially all of these borrowers inquiring about their plan of resumption of scheduled payments. We are encouraged to learn that loans under modification at December 31, 2020 could be a very modest amount.

The pandemic has resulted in unprecedented uncertainties for our citizens, our economy and the banking industry. Preferred Bank's outstanding operating metrics and earnings power will provide an additional resource in meeting the challenges ahead."

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $44.1 million for the third quarter of 2020. This is an increase over the $41.5 million recorded in the third quarter of 2019 as well as the $42.2 million recorded in the second quarter of 2020. The increase over both periods is due to growth in average total loans as well as declining deposit costs. The Bank's taxable equivalent net interest margin was 3.54% for the third quarter of 2020, a 30 basis point decrease from the 3.84% achieved in the third quarter of 2019 and a 3 basis point decrease from the 3.57% posted in the second quarter of 2020. During the third quarter, compared to the second quarter, average interest-earning assets increased by $207 million, of which $184 million was centered in cash, most of which earns interest at 0.10% per annum. This brought average asset yields down to 4.23% in the quarter from 4.41% the previous quarter. Fortunately, the Bank continues to benefit from lower deposit costs as the Bank's total cost of deposits went from 0.81% in the second quarter down to 0.64% in the third quarter. Total deposit interest expense is down by more than half, or 52% from the same period last year.

Noninterest Income. For the third quarter of 2020, noninterest income was $1,605,000 compared with $1,737,000 for the same quarter last year and compared to $1,430,000 for the second quarter of 2020. The decrease from the third quarter of 2019 was due mainly to letter of credit fee income which decreased by $183,000. In addition, the Bank incurred a loss on sale of investment securities of $113,000 in the second quarter of 2020 compared to a gain of $15,000 in the third quarter of 2020.

Noninterest Expense. Total noninterest expense was $13.7 million for the third quarter of 2020. This is down from the $13.9 million recorded in the same quarter last year and is also down from the $14.3 million posted in the second quarter of 2020. Salaries and benefits expense totaled $9.1 million for the third quarter of 2020, a decrease of $675,000 from the third quarter of 2019 and a decrease of $1.0 million from the second quarter of 2020. The decrease from the prior quarter is mostly to an increase in capitalized loan origination costs related to higher overall loan production in the third quarter versus the second quarter. The decrease from the prior year is due mainly to reduced bonus expense as the Bank's profitability is lower than in the prior year, which is the main driver of total incentive compensation. Occupancy expense totaled $1.5 million for the quarter and this represented an increase over the $1.3 million recorded in the third quarter of 2019 and the second quarter of 2020. Professional services expense was $1.0 million for the third quarter of 2020 and was down slightly from the $1.1 million recorded in the same quarter of 2019 and flat compared to the $1.0 million posted in the second quarter of 2020. Other expenses were $1.6 million for the third quarter of 2020, an increase of $414,000 over the same period last year and up by $207,000 over the second quarter of 2020. The increase over both periods was mainly due to FDIC insurance premiums of which there were none in the third quarter of 2019 and which were also lower in the second quarter of 2020 compared to the third quarter. For the quarter ended September 30, 2020, the Bank's efficiency ratio was 29.9%.

Income Taxes. The Bank recorded a provision for income taxes of $5.9 million for the third quarter of 2020. This represents an effective tax rate ("ETR") of 27.5% and a slight decrease from the ETR of 29.5% for the same quarter last year and also down from the 29.7% recorded in the second quarter of 2020. 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, 2020 were $3.95 billion, an increase of $224.8 million or 6.0% over the total of $3.72 billion as of December 31, 2019. Total deposits increased to $4.41 billion, an increase of $421.1 million or 10.8% over the $3.98 billion as of December 31, 2019. Total assets ended the quarter at $5.09 billion, an increase of $457.1 million or 9.9% over the total of $4.63 billion as of December 31, 2019.

Below is a breakdown of the Bank's loan portfolio by segment as of September 30, 2020:

Category Loan Count Total Balance
(000's)
% of Loan Balance Average LTV Average DCR
Cash Secured 79 34,241 0.87% N/A N/A
Commercial 1,741 1,094,872 27.72% N/A N/A
International 62 15,006 0.38% N/A N/A
Construction - 1-4 Residential 54 170,773 4.32% 48.8% N/A
Construction - Commercial 41 223,706 5.66% 53.8% N/A
Real Estate - 1-4 Residential 165 248,371 6.29% 55.5% 1.32
Real Estate - Industrial 99 243,130 6.16% 53.9% 1.71
Real Estate - Multifamily 68 282,188 7.14% 58.1% 1.24
Real Estate - Office 70 327,786 8.30% 55.5% 1.66
Real Estate - Retail 116 411,508 10.42% 59.0% 1.55
Real Estate - Special Purpose 75 542,561 13.74% 51.5% 1.51
Real Estate - Vacant Land 4 7,787 0.20% 49.4% N/A
SBA 227 74,551 1.89% N/A N/A
HELOC 6 1,545 0.04% 42.4% N/A
Residential Mortgage 422 271,695 6.88% 59.7% % (DTI)
Total 3,229 3,949,721 100.00%

Asset Quality

As of September 30, 2020, nonaccrual loans totaled $25.2 million, down slightly from the $26.4 million reported as of June 30, 2020 and but an increase over the $2.1 million reported at December 31, 2019. Total net charge-offs for the third quarter of 2020 were $3.5 million compared to net recoveries of $133,000 in the second quarter of 2020 and compared to net charge-offs of $430,000 for the third quarter of 2019.

COVID - 19 Relief Modifications

Below is a breakdown of loans at September 30, 2020 that are in some form of payment deferment by segment as compared to June 30, 2020:

Loan Type Prior Qtr
Total in Deferral
30-Jun-20
Curr Qtr
Total in Deferral
30-Sept-20
% of Total Portfolio Weighted Average LTV Quarterly Decrease
$ %
Commercial and Industrial $ 39,518 $ 5,865 0.6% N/A $ 33,653 85.2%
Office 28,696 16,200 4.9% 55.5% 12,496 43.5%
Industrial 29,495 13,064 5.4% 53.9% 16,431 55.7%
Retail 88,319 64,169 15.6% 59.0% 24,150 27.3%
Multi-Family 17,593 17,200 6.1% 58.1% 393 2.2%
1-4 Family (Inv) 6,624 3,915 1.6% 55.6% 2,709 40.9%
Restaurant 6,149 4,212 19.2% 47.2% 1,937 31.5%
Special Purpose / Hotel 172,531 47,305 13.8% 54.9% 125,226 72.6%
Special Purpose / Other 51,232 12,720 6.4% 45.7% 38,512 75.2%
Construction / AD - - 0.0% - 0.0%
Residential Mortgage 26,935 14,887 5.5% - 12,048 44.7%
Grand Total $ 467,092 $ 199,537 5.1% $ 267,555 57.3%


At September 30, 2020, total dollar amount of loans in deferral were equal to 5.1% of the Bank's loan portfolio. Of the total modifications at present, 37% are for the deferral of interest only and 57% are for principal and interest deferral. As previously mentioned, based on communications with nearly all of those in deferral, the outlook for deferrals at year end appears modest.

Allowance for Credit Losses

Due primarily to the ongoing partial economic shutdown and uncertainty regarding future economic activity, the provision for credit losses continues to be elevated at $9.0 million for this quarter. This compares to the $7.5 million provision recorded in the second quarter of 2020 and is well ahead of the $900,000 recorded in the same quarter last year. In the first quarter of 2020, the Bank implemented the CECL methodology under Accounting Standards Codification ("ASC") 326, in which the allowance for credit losses now reflects expected credit losses over the life of loans and held-to-maturity debt securities, and incorporates macroeconomic forecasts as well as historical loss rates. Between the adoption of CECL in the first quarter, and the heightened provisions for credit losses to-date this year, the Bank's allowance coverage ratio has increased from 0.94% of total loans as of December 31, 2019 to a coverage ratio now totaling 1.58% of total non-PPP loans.

Capitalization

As of September 30, 2020, the Bank's leverage ratio was 9.75%, the common equity tier 1 capital ratio was 10.98% and the total capital ratio was 14.47%. As of December 31, 2019, the Bank's leverage ratio was 10.32%, the common equity tier 1 ratio was 10.57% and the total risk based capital ratio was 13.70%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank's third quarter 2020 financial results will be held tomorrow, October 20, 2020 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, 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 3, 2020; the passcode is 10148872.

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. 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 2019 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 .

AT THE COMPANY: AT FINANCIAL PROFILES:
Edward J. Czajka Jeffrey Haas
Executive Vice President General Information
Chief Financial Officer (310) 622-8240
(213) 891-1188 PFBC@finprofiles.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,
2020 2020 2019
Interest income:
Loans, including fees $ 50,417 $ 49,813 $ 52,862
Investment securities 2,335 2,320 4,875
Fed funds sold 30 31 222
Total interest income 52,782 52,164 57,959
Interest expense:
Interest-bearing demand 1,432 1,462 4,904
Savings 20 17 13
Time certificates 5,681 6,973 10,034
Subordinated debit 1,530 1,531 1,531
Total interest expense 8,663 9,983 16,482
Net interest income 44,119 42,181 41,477
Provision for credit losses 9,000 7,500 900
Net interest income after provision for
credit losses 35,119 34,681 40,577
Noninterest income:
Fees & service charges on deposit accounts 428 339 401
Letters of credit fee income 690 742 874
BOLI income 96 95 94
Net gain (loss) on called and sale of investment securities 15 (113 ) -
Other income 376 367 368
Total noninterest income 1,605 1,430 1,737
Noninterest expense:
Salary and employee benefits 9,126 10,095 9,801
Net occupancy expense 1,455 1,296 1,329
Business development and promotion expense 95 114 109
Professional services 974 1,006 1,149
Office supplies and equipment expense 443 459 483
Net loss (gain) on sale of other real estate owned and expense 3 2 (129)
Other 1,567 1,362 1,156
Total noninterest expense 13,663 14,334 13,898
Income before provision for income taxes 23,061 21,777 28,416
Income tax expense 5,936 6,468 8,383
Net income $ 17,125 $ 15,309 $ 20,033
Dividend and earnings allocated to participating securities (53 ) (49 ) (168 )
Net income available to common shareholders $ 17,072 $ 15,260 $ 19,865
Income per share available to common shareholders
Basic $ 1.15 $ 1.03 $ 1.32
Diluted $ 1.15 $ 1.03 $ 1.32
Weighted-average common shares outstanding
Basic 14,893,774 14,879,383 15,091,270
Diluted 14,893,774 14,879,383 15,091,270
Cash dividends per common share $ 0.30 $ 0.30 $ 0.30



PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
September 30, December 31, September 30,
2020 2019 2019
(Unaudited) (Audited) (Unaudited)
Assets
Cash and due from banks $ 780,291 $ 498,645 $ 409,189
Fed funds sold 27,500 37,000 56,000
Cash and cash equivalents 807,791 535,645 465,189
Securities held to maturity, at amortized cost 6,727 7,310 7,545
Securities available-for-sale, at fair value 219,778 240,640 242,655
Loans 3,949,721 3,724,922 3,671,450
Less allowance for credit losses (61,262 ) (34,830 ) (34,281 )
Amortized deferred loan fees, net (4,411 ) (3,028 ) (2,518 )
Loans, net 3,884,048 3,687,064 3,634,651
Loans held for sale, at lower of cost or fair value - - 2,999
Customers' liability on acceptances 7,463 7,379 7,333
Bank furniture and fixtures, net 11,797 12,236 12,438
Bank-owned life insurance 9,764 9,571 9,507
Accrued interest receivable 24,353 14,961 14,505
Investment in affordable housing 47,917 53,142 39,780
Federal Home Loan Bank stock 15,000 13,101 13,101
Deferred tax assets 21,219 19,560 17,338
Income tax receivable 9,090 3,368 3,849
Operating lease right-of-use assets 16,384 17,103 17,362
Other assets 4,243 7,401 7,232
Total assets $ 5,085,574 $ 4,628,481 $ 4,495,484
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits $ 926,166 $ 835,790 $ 774,869
Interest-bearing deposits: 1,620,495 1,328,863 1,435,144
Savings 32,830 23,784 21,985
Time certificates of $250,000 or more 977,821 976,727 849,574
Other time certificates 857,113 818,130 787,392
Total deposits 4,414,425 3,983,294 3,868,964
Acceptances outstanding 7,463 7,379 7,333
Subordinated debt issuance 99,304 99,211 99,180
Commitments to fund investment in affordable housing partnership 16,689 24,149 12,904
Operating lease liabilities 19,106 20,497 20,958
Accrued interest payable 2,940 3,324 6,117
Other liabilities 21,780 20,612 20,948
Total liabilities 4,581,707 4,158,466 4,036,404
Shareholders' equity 503,867 470,015 459,080
Total liabilities and shareholders' equity $ 5,085,574 $ 4,628,481 $ 4,495,484
Book value per common share $ 33.74 $ 31.47 $ 30.42
Number of common shares outstanding 14,933,307 14,933,768 15,091,657



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
For the Quarter Ended
September 30, June 30, Mars 31, December 31, September 30,
2020 2020 2020 2019 2019
Unaudited historical quarterly operations data:
Interest income $ 52,782 $ 52,164 $ 55,667 $ 55,483 $ 57,959
Interest expense 8,663 9,983 13,876 15,074 16,482
Interest income before provision for credit losses 44,119 42,181 41,791 40,409 41,477
Provision for credit losses 9,000 7,500 5,300 450 900
Noninterest income 1,605 1,430 1,672 1,883 1,737
Noninterest expense 13,663 14,334 15,184 13,770 13,898
Income tax expense 5,936 6,468 6,825 8,456 8,383
Net income $ 17,125 $ 15,309 $ 16,154 $ 19,616 $ 20,033
Earnings per share
Basic $ 1.15 $ 1.03 $ 1.08 $ 1.31 $ 1.32
Diluted $ 1.15 $ 1.03 $ 1.08 $ 1.31 $ 1.32
Ratios for the period:
Return on average assets 1.34% 1.26% 1.40% 1.74% 1.81%
Return on beginning equity 13.94% 13.00% 13.82% 16.95% 17.61%
Net interest margin (Fully-taxable equivalent) 3.54% 3.57% 3.70% 3.67% 3.84%
Noninterest expense to average assets 1.07% 1.18% 1.31% 1.22% 1.25%
Efficiency ratio 29.88% 32.87% 34.93% 32.56% 32.16%
Net charge-offs (recoveries) to average loans (annualized) 0.35% -0.01% 0.00% -0.01% 0.05%
Ratios as of period end:
Tier 1 leverage capital ratio 9.75% 9.87% 10.05% 10.32% 10.27%
Common equity tier 1 risk-based capital ratio 10.98% 10.39% 10.80% 10.57% 10.40%
Tier 1 risk-based capital ratio 10.98% 10.39% 10.80% 10.57% 10.40%
Total risk-based capital ratio 14.47% 13.80% 14.26% 13.70% 13.53%
Allowances for credit losses to loans and leases at end of period 1.55% 1.41% 1.24% 0.94% 0.93%
Allowance for credit losses to non-performing loans and leases 243.56% 211.08% 2263.66% 1631.42% 895.30%
Average balances:
Total securities $ 237,801 $ 250,134 $ 247,689 $ 248,904 $ 249,060
Total loans $ 3,956,145 $ 3,919,674 $ 3,717,175 $ 3,613,400 3,534,194
Total earning assets $ 4,975,005 $ 4,768,537 $ 4,548,512 $ 4,381,206 $ 4,298,523
Total assets $ 5,073,650 $ 4,868,356 $ 4,651,956 $ 4,482,210 $ 4,395,357
Total time certificate of deposits $ 1,841,901 $ 1,757,531 $ 1,765,816 $ 1,756,480 $ 1,650,965
Total interest bearing deposits $ 3,501,275 $ 3,399,924 $ 3,244,711 $ 3,050,318 $ 3,051,007
Total deposits $ 4,408,882 $ 4,220,197 $ 4,010,629 $ 3,849,825 $ 3,772,097
Total interest bearing liabilities $ 3,600,560 $ 3,499,178 $ 3,343,933 $ 3,149,511 $ 3,150,167
Total equity $ 503,515 $ 486,931 $ 475,409 $ 463,849 $ 460,451



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
As of
September 30, June 30, Mars 31, December 31, September 30,
2020 2020 2020 2019 2019
Unaudited quarterly statement of financial position data:
Assets:
Cash and cash equivalents $ 807,791 $ 656,183 $ 484,869 $ 535,645 $ 465,189
Securities held-to-maturity, at amortized cost 6,727 6,922 7,077 7,310 7,545
Securities available-for-sale, at fair value 219,778 270,667 235,097 240,640 242,655
Loans:
Real estate - Mortgage:
Real estate--Residential $ 528,371 $ 511,354 $ 493,226 $ 468,321 $ 432,605
Real estate--Commercial 1,808,200 1,781,660 1,730,017 1,731,017 1,751,735
Total Real Estate - Mortgage 2,336,571 2,293,014 2,223,243 2,199,338 2,184,340
Real estate - Construction:
R/E Construction -- Residential 170,773 187,083 177,364 173,951 179,651
R/E Construction -- Commercial 223,706 217,729 223,385 218,562 216,812
Total real estate construction loans 394,480 404,812 400,749 392,513 396,463
Commercial and industrial 1,144,051 1,192,056 1,269,242 1,132,629 1,090,230
PPP 74,551 73,524 - - -
Consumer and others 68 241 91 442 417
Gross loans 3,949,721 3,963,647 3,893,325 3,724,922 3,671,450
Allowance for credit losses on loans (61,262 ) (55,762 ) (48,130 ) (34,830 ) (34,281 )
Net deferred loan fees (4,411 ) (5,097 ) (3,084 ) (3,028 ) (2,518 )
Net loans, excluding loans held for sale $ 3,884,048 $ 3,902,788 $ 3,842,111 $ 3,687,064 $ 3,634,651
Loans held for sale $ - $ - $ - $ - $ 2,999
Net loans $ 3,884,048 $ 3,902,788 $ 3,842,111 $ 3,687,064 $ 3,637,650
Investment in affordable housing 47,917 49,658 51,400 53,142 39,780
Federal Home Loan Bank stock 15,000 15,000 13,101 13,101 13,101
Other assets 104,313 103,239 93,979 91,579 89,564
Total assets $ 5,085,574 $ 5,004,457 $ 4,727,634 $ 4,628,481 $ 4,495,484
Liabilities:
Deposits:
Demand $ 926,166 $ 934,764 $ 753,750 $ 835,790 $ 774,869
Interest-bearing demand 1,620,495 1,594,682 1,503,618 1,328,863 1,435,144
Savings 32,830 27,737 23,035 23,784 21,985
Time certificates of $250,000 or more 977,821 970,649 1,030,282 976,727 849,574
Other time certificates 857,113 822,404 775,792 818,130 787,392
Total deposits $ 4,414,425 $ 4,350,236 $ 4,086,477 $ 3,983,294 $ 3,868,964
Acceptances outstanding $ 7,463 $ 6,112 $ 6,507 $ 7,379 $ 7,333
Subordinated debt issuance 99,304 99,273 99,242 99,211 99,180
Commitments to fund investment in affordable housing partnership 16,689 17,536 21,195 24,149 12,904
Other liabilities 43,826 42,571 40,428 44,433 48,023
Total liabilities $ 4,581,707 $ 4,515,728 $ 4,253,849 $ 4,158,466 $ 4,036,404
Equity:
Net common stock, no par value $ 213,519 $ 212,187 $ 210,091 $ 210,998 $ 215,123
Retained earnings 284,568 271,923 261,095 255,050 239,914
Accumulated other comprehensive income 5,780 4,619 2,599 3,967 4,043
Total shareholders' equity $ 503,867 $ 488,729 $ 473,785 $ 470,015 $ 459,080
Total liabilities and shareholders' equity $ 5,085,574 $ 5,004,457 $ 4,727,634 $ 4,628,481 $ 4,495,484



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,
2020 2020 2019
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)] $ 3,956,145 $ 50,417 5.07% $ 3,921,694 $ 49,813 5.11% $ 3,534,283 $ 52,862 5.93%
Investment securities [(3)] 237,801 1,967 3.29% 250,134 2,098 3.37% 249,060 2,253 3.59%
Federal funds sold 23,828 30 0.50% 24,324 31 0.52% 35,079 222 2.52%
Other earning assets 757,231 474 0.25% 572,385 318 0.22% 480,101 2,737 2.26%
Total interest-earning assets 4,975,005 52,888 4.23% 4,768,537 52,260 4.41% 4,298,523 58,074 5.36%
Deferred loan fees, net (4,713) (3,182) (1,742)
Allowance for credit losses on loans (55,724) (48,247) (33,717)
Noninterest earning assets:
Cash and due from banks 7,355 8,274 4,935
Bank furniture and fixtures 11,856 11,993 12,656
Right of use assets 16,550 16,768 17,525
Other assets 123,321 114,213 97,177
Total assets $ 5,073,650 $ 4,868,356 $ 4,395,357
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and savings 1,659,374 $ 1,452 0.35% 1,642,393 $ 1,479 0.36% $ 1,400,042 $ 4,917 1.39%
TCD $250K or more 987,631 2,993 1.21% 945,043 3,624 1.54% 845,262 5,120 2.40%
Other time certificates 854,270 2,688 1.25% 812,488 3,349 1.66% 805,703 4,914 2.42%
Total interest-bearing deposits 3,501,275 7,133 0.81% 3,399,924 8,452 1.00% 3,051,007 14,951 1.94%
Subordinated debt 99,285 1,530 6.13% 99,254 1,531 6.20% 99,160 1,531 6.13%
Total interest-bearing liabilities 3,600,560 8,663 0.96% 3,499,178 9,983 1.15% 3,150,167 16,482 2.08%
Non-interest bearing liabilities:
Demand deposits 907,607 820,273 721,090
Lease Liability 19,400 19,841 21,252
Other liabilities 42,568 42,133 42,397
Total liabilities 4,570,135 4,381,425 3,934,906
Shareholders' equity 503,515 486,931 460,451
Total liabilities and shareholders' equity $ 5,073,650 $ 4,868,356 $ 4,395,357
Net interest income $ 44,225 $ 42,277 $ 41,592
Net interest spread 3.27% 3.26% 3.28%
Net interest margin 3.54% 3.57% 3.84%
Cost of Deposits:
Noninterest bearing demand deposits $ 907,607 $ 820,273 $ 721,090
Interest bearing deposits 3,501,275 7,133 0.81% 3,399,924 8,452 1.00% 3,051,007 14,951 1.94%
Total Deposits $ 4,408,882 $ 7,133 0.64% $ 4,220,197 $ 8,452 0.81% $ 3,772,097 $ 14,951 1.57%
[(1)] Includes non-accrual loans and loans held for sale
[(2)] Net loan fee income of $683,000 and $640,000 for the quarter ended September 30, 2020 and 2019, 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,
2020 2019
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)] $ 3,865,350 $ 151,794 5.25% $ 3,389,136 $ 156,166 6.16%
Investment securities [(3)] 245,181 6,193 3.37% 215,818 6,442 3.99%
Federal funds sold 26,093 185 0.95% 42,720 799 2.50%
Other earning assets 628,165 2,736 0.58% 436,906 8,143 7.41%
Total interest-earning assets 4,764,789 160,908 4.51% 4,084,580 171,550 5.62%
Deferred loan fees, net (3,662) (1,721)
Allowance for credit losses on loans (48,949) (31,776)
Noninterest earning assets:
Cash and due from banks 7,321 5,923
Bank furniture and fixtures 12,039 10,201
Right of use assets 16,774 11,852
Other assets 117,105 110,456
Total assets $ 4,865,417 $ 4,189,515
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand/ savings 1,593,793 $ 6,313 0.53% 1,324,550 $ 14,504 1.46%
TCD $250K or more 967,413 11,469 1.58% 787,522 13,992 2.38%
Other time certificates 821,199 10,148 1.65% 787,354 13,902 2.36%
Total interest-bearing deposits 3,382,405 27,930 1.10% 2,899,426 42,398 1.96%
Subordinated debt 99,254 4,592 6.18% 99,108 4,593 6.20%
Long-term debt - - 0.00% 1,052 19 2.46%
Total interest-bearing liabilities 3,481,659 32,522 1.25% 2,999,586 47,010 2.10%
Non-interest bearing liabilities:
Demand deposits 831,545 691,266
Lease Liability 19,850 14,546
Other liabilities 43,690 47,452
Total liabilities 4,376,744 3,752,850
Shareholders' equity 488,673 436,665
Total liabilities and shareholders' equity $ 4,865,417 $ 4,189,515
Net interest income $ 128,386 $ 124,540
Net interest spread 3.26% 3.52%
Net interest margin 3.60% 4.08%
Cost of Deposits:
Noninterest bearing demand deposits $ 831,545 $ 691,266
Interest bearing deposits 3,382,405 27,930 1.10% 2,899,426 42,398 1.96%
Total Deposits $ 4,213,950 $ 27,930 0.89% $ 3,590,692 $ 42,398 1.58%
[(1)] Includes non-accrual loans and loans held for sale
[(2)] Net loan fee income of $1.9 million and $1.6 million for the nine months ended September 30, 2020 and 2019, 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 Year ended
September 30, 2020 December 31, 2019
(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period $ 34,830 $ 31,065
Charge-Offs
Commercial & Industrial 1,661 526
Mini-perm Real Estate 1,900 101
Total Charge-Offs 3,561 627
Recoveries
Commercial & Industrial - 527
Mini-perm Real Estate - 415
Construction - Commercial 193 -
Total Recoveries 193 942
Net Charge-Offs (Recoveries) 3,368 (315 )
Provision for Credit Losses:
CECL Cumulative Effect Adjustment 8,000 -
Current Provision 21,800 3,450
Balance at End of Period $ 61,262 $ 34,830
Average Loans Held for Investment $ 3,864,667 $ 3,482,218
Loans Held for Investment at End of Period $ 3,949,721 $ 3,724,922
Net Charge-Offs (Recoveries) to Average Loans 0.12 % -0.01%
Allowances for Credit Losses to Loans at End of Period 1.55 % 0.94 %

COMTEX_373043100/2471/2020-10-19T17:18:04

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/zigman2/quotes/210374414/composite
US : U.S.: Nasdaq
$ 59.40
+0.69 +1.18%
Volume: 41,481
July 23, 2021 4:00p
P/E Ratio
11.00
Dividend Yield
2.56%
Market Cap
$885.18 million
Rev. per Employee
$828,267
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