Preferred Bank Reports Quarterly and Annual Earnings
LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter and year ended December 31, 2021. Preferred Bank (“the Bank”) reported net income of $26.4 million or $1.80 per diluted share for the fourth quarter of 2021. This is an increase of $5.5 million or 26.5% over the same quarter last year and up from the $26.1 million or $1.76 per share posted in the third quarter of 2021. The primary reasons for the increase compared to the prior year was a $4.2 million provision for credit losses recorded in the fourth quarter of last year as compared to a reversal of $900,000 in allowance for credit losses (“ACL”) this quarter, a difference of $5.1 million. In comparison to the third quarter of 2021, net interest income increased $1.7 million, noninterest income was down $818,000 and noninterest expense decreased $564,000. Fourth Quarter 2021 highlights: Net income of $26.4 million, or $1.80 per diluted share (company all-time high)Linked quarter loan growth (Ex-PPP) of 2.9%Return on average assets (“ROA”) of 1.72%Return on beginning equity (“ROBE”) of 18.65%Pre-provision, pre-tax (“PPPT”) ROBE of 25.82% 1Efficiency ratio of 28.82% 1 This is a non-GAAP measure and linking to the reconciliation on page 5. Full Year 2021 highlights: Net income of $95.2 million, or $6.41 per diluted share (company all-time high)Loan growth (Ex-PPP) of 10.5%Deposit growth of 17.6%Return on average assets (“ROA”) of 1.74%Return on beginning equity (“ROBE”) of 18.13%Efficiency ratio of 31.40% Li Yu, Chairman and CEO, commented, “I am very pleased to report fourth quarter 2021 earnings of $26.4 million or $1.80 per diluted share and record full year earnings of $95.2 million or $6.41 per diluted share. Pre-provision, pre-tax revenue (“PPPT”) also was a record this year for Preferred Bank. “In the midst of this COVID-19 pandemic, the Bank recorded strong growth in loans, deposits and total assets. Loan growth for the quarter, excluding PPP, was 2.9% and for the year was 10.5%. Deposit growth was only 0.6% for the quarter but was a robust 17.6% for the year. Of the $783 million in deposit growth in 2021, almost 90% was in DDA and money market accounts. “The net interest margin for the fourth quarter was 3.28%, down from last quarter’s 3.36% but this was due to loan growth in the fourth quarter mostly taking place in the latter part of the quarter. The larger asset base and our highly asset sensitive balance sheet bode well for NIM expansion for 2022 and 2023. “During the quarter, we successfully resolved a $9.2 million nonperforming loan which did not require the use of the set aside allowance for credit loss that was anticipated. Also, in early January of 2022, a $23 million loan which was deemed a troubled debt restructuring (“TDR”) paid off in full. With these two loans resolved, the Bank’s credit quality is close to pristine levels. “Looking to 2022, we see potential concerns. Inflation is running at levels not seen in decades and thus will result in higher operating costs. The Omicron variant is another major concern although ultimately the data regarding the severity of this variant appears to be encouraging. We must remain confident that our Country will deal with these issues effectively. Meanwhile, we will apply our best efforts to meet these new challenges.” Results of Operations - Quarter Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $49.4 million for the fourth quarter of 2021. This was an increase from the $47.8 million recorded in the third quarter of 2021 and was well ahead of the $46.1 million recorded in the fourth quarter of 2020. Loan growth was the primary driver of the increase in net interest income as was an increase in investment securities along with a decline in interest expense. The taxable equivalent margin was 3.28% for the fourth quarter of 2021, as compared to 3.36% in the third quarter of 2021 and versus 3.66% for the same period last year. Noninterest Income. For the fourth quarter of 2021, noninterest income was $1,966,000 compared with $1,356,000 for the same quarter last year and compared to $2,784,000 for the third quarter of 2021. The increase compared to last year was due to a $663,000 loss on sale of securities recorded in the fourth quarter of last year. The decrease from the third quarter of 2021 was mainly due to letter of credit (“LC”) fees which were down by $858,000 from the third quarter of 2021. Noninterest Expense. Total noninterest expense was $14.8 million for the fourth quarter of 2021. This is up compared to the $14.2 million recorded in the same quarter last year but a decline on a linked-quarter basis of $564,000 from the third quarter of 2021. Salaries and benefits expense totaled $10.3 million for the fourth quarter of 2021, an increase of $838,000 from the fourth quarter of 2020 and a decrease of $642,000 from the $10.9 million recorded in the third quarter of 2021. The increase over the prior year was due mainly to staff expansion and a corresponding increase in the Bank’s payroll tax expense and the decrease from the third quarter of 2021 was primarily due lower incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was relatively flat compared to both the prior quarter and when compared to the same quarter last year. Professional services expense was $1.1 million for the fourth quarter of 2021, essentially flat when comparted to both prior periods. Other expenses were $1.3 million for the fourth quarter of 2021, down from the $1.4 million recorded last quarter and also a decline from the $1.6 million posted in the fourth quarter of 2020. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended December 31, 2021, the Bank’s efficiency ratio was a record 28.8%, down from last quarter’s 30.4% mark and slightly below the 29.9% ratio achieved in the same period last year. Income Taxes. The Bank recorded a provision for income taxes of $11.1 million for the fourth quarter of 2021. This represents an effective tax rate (“ETR”) of 29.5% and slightly above the ETR of 28.7% in the prior quarter and also up from the ETR of 28.1% 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. Results of Operations - Year Net income for 2021 was $95.2 million, or $6.41 per diluted share. This compares to $69.5 million or $4.65 per diluted share for the year 2020. This represents an increase in net income of $25.8 million or 37.1% and an increase in diluted EPS of $1.75 per share or 37.7%. The primary drivers for the large increase year over year is a reversal of provision for credit losses of $1.0 million in 2021 versus a provision for credit losses in 2020 of $26.0 million. In addition, net interest income increased by $11.7 million or 6.7% over 2020 levels. Also, noninterest income increased by $1.7 million or 27.7% over 2020 and offsetting these was an increase in noninterest expense of $3.4 million or 6.0%. The Bank’s net interest margin was 3.46% for 2021 compared to 3.62% in 2020. Balance Sheet Summary Total gross loans at December 31, 2021 were $4.42 billion, an increase of $390 million or 9.7% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.23 billion, an increase of $783 million or 17.6% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $6.04 billion, an increase of $901 million or 17.5% over the total of $5.14 billion as of December 31, 2020. Asset Quality As of December 31, 2021, nonaccrual loans totaled $14.8 million, well off of the $20.9 million reported as of September 30, 2021 and down from the $20.5 million as of December 31, 2020. Total net charge-offs for the fourth quarter of 2021 were $267,000 as compared to $1.0 million in the prior quarter and compared to net charge-offs of $2.0 million in the fourth quarter of 2020. Allowance for Credit Losses The (reversal of) provision for credit losses for the fourth quarter of 2021 was ($900,000) as compared to a reversal of ($1.5 million) in the prior quarter and compared to the $4.2 million provision for credit losses posted in the fourth quarter of 2020. A consistently improving economic outlook, among other factors such as credit quality led to a lower allowance requirement. The Bank’s allowance coverage ratio now stands at 1.37% of total loans (excluding PPP loans). Capitalization As of December 31, 2021, the Bank’s leverage ratio was 9.49%, the common equity tier 1 capital ratio was 11.21% and the total capital ratio stood at 15.32%. 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%. GAAP – Non-GAAP Reconciliation -Fourth Quarter 2021 PPPT ROBE Net Income$26,421 Add: Reversal of provision for credit losses (900)Add: Income tax expense 11,056 Pre-provision and pre-tax income$36,577 Total equity - 9/30/21$562,021 Pre-provision and pre-tax ROBE 25.82% Conference Call and Webcast A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2021 financial results will be held tomorrow, January 20, 2022 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 February 3, 2022; the passcode is 4300401. 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 BANKCondensed Consolidated Statements of Operations(unaudited)(in thousands, except for net income per share and shares) For the Quarter Ended December 31, September 30, December 31, 2021 2021 2020 Interest income: Loans, including fees $51,906 $50,866 $51,299 Investment securities 2,867 2,725 2,320 Fed funds sold 18 20 30 Total interest income 54,791 53,611 53,649 Interest expense: Interest-bearing demand 1,511 1,486 1,499 Savings 17 3 21 Time certificates 2,521 3,045 4,534 Subordinated debt 1,325 1,324 1,532 Total interest expense 5,374 5,858 7,586 Net interest income 49,417 47,753 46,063 (Reversal of) provision for credit losses (900) (1,500) 4,200 Net interest income after (reversal of) provision for credit losses 50,317 49,253 41,863 Noninterest income: Fees & service charges on deposit accounts 581 581 456 Letters of credit fee income 719 1,576 1,004 BOLI income 99 98 96 Net gain on called and sale of investment securities - 41 (663)Other income 567 488 463 Total noninterest income 1,966 2,784 1,356 Noninterest expense: Salary and employee benefits 10,278 10,920 9,440 Net occupancy expense 1,396 1,430 1,378 Business development and promotion expense 280 98 204 Professional services 1,075 1,075 1,084 Office supplies and equipment expense 498 467 454 Other 1,279 1,380 1,617 Total noninterest expense 14,806 15,370 14,177 Income before provision for income taxes 37,477 36,667 29,042 Income tax expense 11,056 10,522 8,162 Net income $26,421 $26,145 $20,880 Dividend and earnings allocated to participating securities (3) (3) (42)Net income available to common shareholders $26,418 $26,142 $20,838 Income per share available to common shareholders Basic $1.80 $1.76 $1.40 Diluted $1.80 $1.76 $1.40 Weighted-average common shares outstanding Basic 14,677,515 14,884,570 14,895,925 Diluted 14,677,515 14,884,570 14,895,925 Cash dividends per common share $0.43 $0.38 $0.30 PREFERRED BANKCondensed Consolidated Statements of Operations(unaudited)(in thousands, except for net income per share and shares) For the Year Ended December 31, December 31, Change 2021 2020 %Interest income: Loans, including fees $200,537 $203,093 -1.3%Investment securities 10,417 10,954 -4.9%Fed funds sold 81 215 -62.4%Total interest income 211,035 214,262 -1.5% Interest expense: Interest-bearing demand 5,964 7,761 -23.2%Savings 57 72 -20.1%Time certificates 12,812 26,151 -51.0%Subordinated debt 6,325 6,124 3.3%Total interest expense 25,158 40,108 -37.3%Net interest income 185,877 174,154 6.7%(Reversal of) provision for credit losses (1,000) 26,000 -103.8%Net interest income after (reversal of) provision for credit losses 186,877 148,154 26.1% Noninterest income: Fees & service charges on deposit accounts 2,113 1,627 29.9%Letters of credit fee income 3,914 3,284 19.2%BOLI income 391 381 2.5%Net (loss) gain on called and sale of investment securities 41 (761) -105.4%Net (loss) gain on sale of loans (640) 15 -4363.5%Other income 1,924 1,517 26.8%Total noninterest income 7,743 6,063 27.7% Noninterest expense: Salary and employee benefits 42,606 39,563 7.7%Net occupancy expense 5,656 5,525 2.4%Business development and promotion expense 568 564 0.7%Professional services 4,127 4,078 1.2%Office supplies and equipment expense 1,879 1,845 1.8%Other 5,956 5,783 3.0%Total noninterest expense 60,792 57,358 6.0%Income before provision for income taxes 133,828 96,859 38.2%Income tax expense 38,588 27,391 40.9%Net income $95,240 $69,468 37.1% Dividend and earnings allocated to participating securities $(11) $(194) -94.1%Net income available to common shareholders $95,229 $69,274 37.5% Income per share available to common shareholders Basic $6.41 $4.65 37.6%Diluted $6.41 $4.65 37.6% Weighted-average common shares outstanding Basic 14,866,000 14,885,230 -0.1%Diluted 14,866,000 14,885,230 -0.1% Dividends per share $1.57 $1.20 30.8% PREFERRED BANKCondensed Consolidated Statements of Financial Condition(unaudited)(in thousands) December 31, December 31, 2021 2020 (Unaudited) (Audited)Assets Cash and due from banks$1,030,610 $739,465 Fed funds sold 20,000 20,000 Cash and cash equivalents 1,050,610 759,465 Securities held to maturity, at amortized cost 13,962 6,568 Securities available-for-sale, at fair value 451,911 239,682 Loans 4,424,992 4,035,394 Less allowance for credit losses (59,969) (63,426)Less amortized deferred loan fees, net (6,316) (4,574)Loans, net 4,358,707 3,967,394 Customers' liability on acceptances 10,188 3,596 Bank furniture and fixtures, net 10,533 11,825 Bank-owned life insurance 10,088 9,828 Accrued interest receivable 14,646 23,692 Investment in affordable housing partnerships 59,018 62,521 Federal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 25,288 24,466 Operating lease right-of-use assets 21,969 16,106 Other assets 2,997 3,498 Total assets$6,044,917 $5,143,641 Liabilities and Shareholders' Equity Deposits: Non-interest bearing demand deposits$1,305,691 $938,911 Interest-bearing deposits: 2,032,820 1,700,818 Savings 37,839 34,702 Time certificates of $250,000 or more 934,444 912,546 Other time certificates 914,717 855,503 Total deposits 5,225,511 4,442,480 Acceptances outstanding 10,188 3,596 Subordinated debt issuance, net 147,758 99,334 Commitments to fund investment in affordable housing partnerships 22,606 30,715 Operating lease liabilities 22,861 18,682 Accrued interest payable 715 1,245 Other liabilities 31,545 22,142 Total liabilities 5,461,184 4,618,194 Shareholders' equity 583,733 525,447 Total liabilities and shareholders' equity$6,044,917 $5,143,641 Book value per common share$39.76 $35.19 Number of common shares outstanding 14,679,769 14,931,861 PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) For the Quarter Ended December 31,September 30,June 30,March 31,December 31, 2021 2021 2021 2021 2020 Unaudited historical quarterly operations data: Interest income$54,791 $53,611 $50,473 $52,160 $53,649 Interest expense 5,374 5,858 7,112 6,814 7,586 Interest income before provision for credit losses 49,417 47,753 43,361 45,346 46,063 (Reversal of) provision for credit losses (900) (1,500) - 1,400 4,200 Noninterest income 1,966 2,784 1,646 1,347 1,356 Noninterest expense 14,806 15,370 14,964 15,652 14,177 Income tax expense 11,056 10,522 8,563 8,447 8,162 Net income$26,421 $26,145 $21,480 $21,194 $20,880 Earnings per share Basic$1.80 $1.76 $1.44 $1.42 $1.40 Diluted$1.80 $1.76 $1.44 $1.42 $1.40 Ratios for the period: Return on average assets 1.72% 1.80% 1.58% 1.65% 1.63%Return on beginning equity 18.65% 18.56% 15.98% 16.36% 16.49%Net interest margin (Fully-taxable equivalent) 3.28% 3.36% 3.25% 3.61% 3.66%Noninterest expense to average assets 0.97% 1.06% 1.10% 1.22% 1.10%Efficiency ratio 28.82% 30.41% 33.25% 33.52% 29.90%Net charge-offs (recoveries) to average loans (annualized) 0.03% 0.10% 0.12% -0.01% 0.20% Ratios as of period end: Tier 1 leverage capital ratio 9.49% 9.64% 10.07% 10.26% 10.08%Common equity tier 1 risk-based capital ratio 11.21% 11.19% 11.28% 11.34% 11.21%Tier 1 risk-based capital ratio 11.21% 11.19% 11.28% 11.34% 11.21%Total risk-based capital ratio 15.32% 15.47% 15.61% 14.73% 14.64%Allowances for credit losses to loans at end of period 1.36% 1.41% 1.49% 1.56% 1.57%Allowance for credit losses to non-performing loans 404.55% 292.84% 290.58% 294.74% 308.96% Average balances: Total securities$470,811 $401,641 $269,000 $242,200 $251,284 Total loans 4,218,699 4,156,289 4,130,190 4,044,800 3,971,537 Total earning assets 5,984,055 5,659,678 5,364,598 5,102,291 5,018,031 Total assets 6,079,919 5,760,056 5,467,678 5,200,079 5,110,065 Total time certificate of deposits 1,915,117 1,959,514 1,893,247 1,820,461 1,764,528 Total interest bearing deposits 3,945,276 3,783,704 3,704,771 3,531,358 3,508,276 Total deposits 5,277,508 4,971,607 4,724,104 4,486,399 4,426,326 Total interest bearing liabilities 4,093,003 3,931,375 3,815,964 3,630,705 3,607,595 Total equity 576,462 569,624 553,561 538,282 518,567 PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) For the Year Ended December 31, December 31, 2021 2020 Interest income$211,035 $214,262 Interest expense 25,158 40,108 Interest income before provision for credit losses 185,877 174,154 (Reversal of) provision for credit losses (1,000) 26,000 Noninterest income 7,743 6,063 Noninterest expense 60,792 57,358 Income tax expense 38,588 27,391 Net income$95,240 $69,468 Earnings per share Basic$6.41 $4.65 Diluted$6.41 $4.65 Ratios for the period: Return on average assets 1.74% 1.41%Return on beginning equity 18.13% 14.78%Net interest margin (Fully-taxable equivalent) 3.46% 3.62%Noninterest expense to average assets 1.11% 1.16%Efficiency ratio 31.40% 31.83%Net charge-offs to average loans 0.06% 0.14% Average balances: Total securities$304,865 $246,715 Total loans 4,110,835 3,891,530 Total earning assets 5,377,565 4,828,445 Total assets 5,477,989 4,926,887 Total time certificate of deposits 1,891,583 1,782,558 Total interest bearing deposits 3,674,201 3,414,045 Total deposits 4,729,147 4,267,334 Total interest bearing liabilities 3,793,782 3,513,315 Total equity 553,937 496,164 PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) As of December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Unaudited quarterly statement of financial position data: Assets: Cash and cash equivalents$1,050,610 $1,082,634 $896,474 $943,126 $759,465 Securities held-to-maturity, at amortized cost 13,962 15,294 15,749 6,039 6,568 Securities available-for-sale, at fair value 451,911 461,356 278,460 228,635 239,682 Loans: Real estate – Mortgage: Real estate—Residential $536,286 $540,725 $558,147 $541,313 $523,789 Real estate—Commercial 2,267,063 2,093,692 2,019,995 1,925,554 1,911,485 Total Real Estate – Mortgage 2,803,349 2,634,417 2,578,142 2,466,867 2,435,274 Real estate – Construction: R/E Construction — Residential 130,842 122,382 120,363 123,302 148,825 R/E Construction — Commercial 202,482 213,833 224,323 229,933 215,032 Total real estate construction loans 333,324 336,215 344,686 353,235 363,857 Commercial and industrial 1,245,734 1,286,995 1,259,668 1,248,550 1,165,990 PPP 42,467 63,897 95,765 95,434 70,234 Consumer and others 118 6 143 155 39 Gross loans 4,424,992 4,321,529 4,278,403 4,164,241 4,035,394 Allowance for credit losses on loans (59,969) (61,135) (63,635) (64,883) (63,426)Net deferred loan fees (6,316) (5,498) (5,329) (4,872) (4,574)Net loans $4,358,707 $4,254,896 $4,209,439 $4,094,486 $3,967,394 Investment in affordable housing partnerships 59,018 53,399 55,452 59,824 62,521 Federal Home Loan Bank stock, at cost 15,000 15,000 15,000 15,000 15,000 Other assets 95,709 97,261 105,334 100,894 93,011 Total assets $6,044,917 $5,979,840 $5,575,908 $5,448,004 $5,143,641 Liabilities: Deposits: Demand $1,305,691 $1,349,114 $1,063,472 $1,026,260 $938,911 Interest-bearing demand 2,032,820 1,861,334 1,774,668 1,751,951 1,700,818 Savings 37,839 33,417 32,560 37,551 34,702 Time certificates of $250,000 or more 934,444 959,826 930,976 927,043 912,546 Other time certificates 914,717 990,228 994,630 979,694 855,503 Total deposits $5,225,511 $5,193,919 $4,796,306 $4,722,499 $4,442,480 Acceptances outstanding$10,188 $7,697 $7,797 $9,670 $3,596 Subordinated debt issuance, net 147,758 147,699 147,787 99,365 99,334 Commitments to fund investment in affordable housing partnerships 22,606 17,900 19,197 27,918 30,715 Other liabilities 55,121 50,604 45,852 49,283 42,069 Total liabilities $5,461,184 $5,417,819 $5,016,939 $4,908,735 $4,618,194 Equity: Net common stock, no par value$205,855 $203,844 $219,958 $218,593 $217,444 Retained earnings 372,952 352,843 332,276 316,481 300,969 Accumulated other comprehensive income 4,926 5,334 6,735 4,195 7,034 Total shareholders' equity $583,733 $562,021 $558,969 $539,269 $525,447 Total liabilities and shareholders' equity $6,044,917 $5,979,840 $5,575,908 $5,448,004 $5,143,641 PREFERRED BANK Quarter-To-Date Average Balances, Yield And Rates (Unaudited) Three months ended December 31, Three months ended September 30, Three months ended December 31, 2021 2021 2020 InterestAverage InterestAverage InterestAverage AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/ BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate ASSETS(Dollars in thousands) Interest-earning assets: Loans (1,2)$4,218,699 51,9064.88% $4,156,289 $50,8664.86% 3,974,599 $51,2995.13% Investment securities (3) 470,811 2,2281.88% 401,641 2,1632.14% 251,284 1,9363.07% Federal funds sold 20,380 180.36% 21,837 200.36% 22,939 300.51% Other earning assets 1,274,165 7520.23% 1,079,911 6790.25% 769,209 4870.25% Total interest-earning assets 5,984,055 54,9043.64% 5,659,678 53,7283.77% 5,018,031 53,7524.26% Deferred loan fees, net (5,530) (5,176) (4,162) Allowance for credit losses on loans (61,123) (63,608) (60,875) Noninterest earning assets: Cash and due from banks 11,933 14,457 8,214 Bank furniture and fixtures 10,810 11,123 11,892 Right of use assets 21,150 21,136 16,272 Other assets 118,624 122,446 120,693 Total assets$6,079,919 $5,760,056 $5,110,065 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest-bearing demand and savings 2,030,159 $1,5280.30% 1,824,190 $1,4890.32% $1,743,748 $1,5200.35% TCD $250K or more 942,201 1,1510.48% 964,656 1,5420.63% 923,079 2,2980.99% Other time certificates 972,916 1,3700.56% 994,858 1,5030.60% 841,449 2,2361.06% Total interest-bearing deposits 3,945,276 4,0490.41% 3,783,704 4,5340.48% 3,508,276 6,0540.69% Short-term borrowings 3 00.22% - -0.00% 3 00.20% Subordinated debt, net 147,724 1,3253.56% 147,671 1,3243.56% 99,316 1,5326.14% Total interest-bearing liabilities 4,093,003 5,3740.52% 3,931,375 5,8580.59% 3,607,595 7,5860.84% Non-interest bearing liabilities: Demand deposits 1,332,232 1,187,903 918,050 Lease Liability 22,298 22,747 18,936 Other liabilities 55,924 48,407 46,917 Total liabilities 5,503,457 5,190,432 4,591,498 Shareholders’ equity 576,462 569,624 518,567 Total liabilities and shareholders’ equity$6,079,919 $5,760,056 $5,110,065 Net interest income $49,530 $47,870 $46,166 Net interest spread 3.12% 3.18% 3.42% Net interest margin 3.28% 3.36% 3.66% Cost of Deposits: Noninterest bearing demand deposits$1,332,232 $1,187,903 $918,050 Interest bearing deposits 3,945,276 4,0490.41% 3,783,704 4,5340.48% 3,508,276 6,0540.69% Total Deposits$5,277,508 $4,0490.30% $4,971,607 $4,5340.36% $4,426,326 $6,0540.54% (1)Includes non-accrual loans and loans held for sale (2)Net loan fee income of $1.1 million, $823,000 and $1.1 million for the quarter ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, are included in the yield computations (3)Yields on securities have been adjusted to a tax-equivalent basis PREFERRED BANKYear-To-Date Average Balances, Yield And Rates(Unaudited) Year ended December 31, 2021 2020 InterestAverage InterestAverage AverageIncome orYield/ AverageIncome orYield/ BalanceExpenseRate BalanceExpenseRateASSETS(Dollars in thousands)Interest-earning assets: Loans (1,2)$4,111,596 $200,5374.88% $3,892,811 $203,0935.22% Investment securities (3) 304,865 8,3332.73% 246,715 8,1303.30% Federal funds sold 21,251 810.38% 25,301 2150.85% Other earning assets 939,853 2,5200.27% 663,618 3,2230.49% Total interest-earning assets 5,377,565 211,4713.93% 4,828,445 214,6614.45% Deferred loan fees, net (4,818) (3,788) Allowance for credit losses on loans (63,967) (51,971) Noninterest earning assets: Cash and due from banks 11,683 7,545 Bank furniture and fixtures 11,452 12,002 Right of use assets 19,255 16,648 Other assets 126,819 118,006 Total assets$5,477,989 $4,926,887 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest-bearing demand/ savings 1,782,618 $6,0210.34% 1,631,487 $7,8330.48% TCD $250K or more 936,825 6,2990.67% 956,269 13,7671.44% Other time certificates 954,758 6,5130.68% 826,289 12,3841.50% Total interest-bearing deposits 3,674,201 18,8330.51% 3,414,045 33,9841.00%Subordinated debt, net 119,581 6,3255.29% 99,269 6,1246.17% Total interest-bearing liabilities 3,793,782 25,1580.66% 3,513,315 40,1081.14%Non-interest bearing liabilities: Demand deposits 1,054,946 853,289 Lease Liability 21,280 19,620 Other liabilities 54,044 44,499 Total liabilities 4,924,052 4,430,723 Shareholders’ equity 553,937 496,164 Total liabilities and shareholders’ equity$5,477,989 $4,926,887 Net interest income $186,313 $174,553 Net interest spread 3.27% 3.31%Net interest margin 3.46% 3.62% Cost of Deposits: Noninterest bearing demand deposits$1,054,946 $853,289 Interest bearing deposits 3,674,201 18,8330.51% 3,414,045 33,9841.00% Total Deposits$4,729,147 $18,8330.40% $4,267,334 $33,9840.80% (1)Includes non-accrual loans and loans held for sale (2)Net loan fee income of $3.1 million and $3.0 million for the year ended December 31, 2021 and 2020, respectively, are included in the yield computations(3)Yields on securities have been adjusted to a tax-equivalent basis Preferred BankLoan and Credit Quality Information Allowance For Credit Losses History Year Ended Year Ended December 31, 2021 December 31, 2020 (Dollars in 000's)Allowance For Credit Losses Balance at Beginning of Period $63,426 $34,830 Charge-Offs Commercial & Industrial 1,697 1,661 Mini-perm Real Estate 817 1,900 Others - - Total Charge-Offs 2,514 3,561 Recoveries Commercial & Industrial 57 - Construction - Commercial - 193 Total Recoveries 57 193 Net Charge-Offs 2,457 3,368 (Reversal of) Provision for Credit Losses: CECL Cumulative Effect Adjustment - 8,000 Current (Reversal) Provision (1,000) 21,800 Balance at End of Period $59,969 $61,262 Average Loans Held for Investment $4,110,835 $3,864,667 Loans Held for Investment at End of Period $4,424,992 $3,949,721 Net Charge-Offs (Recoveries) to Average Loans 0.06% 0.12%Allowances for Credit Losses to Loans at End of Period 1.36% 1.55% AT THE COMPANY:AT FINANCIAL PROFILES:Edward J. CzajkaJeffrey HaasExecutive Vice PresidentGeneral InformationChief Financial Officer(310) 622-8240(213) [email protected]
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