Preferred Bank (NASDAQ:PFBC), an independent
commercial bank, today reported results for the quarter ended June
30, 2017. Preferred Bank (“the Bank”) reported net income of $11.7
million or $0.80 per diluted share for the second quarter of 2017.
This compares to net income of $8.6 million or $0.61 per diluted
share for the second quarter of 2016 and compares to net income of
$10.3 million or $0.71 per diluted share for the first quarter of
2017. The increase over the same period last year was primarily due
to an increase in net interest income of $5.5 million and the
increase over the first quarter was due to an increase in net
interest income as well as a decrease in non-interest expense.
Highlights from the second quarter of 2017:
• Linked quarter
deposit growth |
|
$171
million or 5.8% |
• Linked quarter
loan growth |
|
$102
million or 3.8% |
• Return on
average assets |
|
1.36% |
• Return on
beginning equity |
|
15.96% |
• Efficiency
ratio |
|
38.1% |
• Net interest
margin |
|
3.75% |
|
|
|
Li Yu, Chairman and CEO commented, “I am pleased to report
second quarter 2017 net income of $11.7 million or $0.80 per
diluted share which is 37% and 33% higher than the same quarter
last year, respectively.
“Loans and deposits continued to grow this quarter. On a
linked-quarter basis, loans increased $102 million or 3.8% and
deposits increased $171 million or 5.8%. Compared to the
balances at the end of 2016, loans have increased by
$246 million or 9.7% and deposits have grown by $358 million or
12.9%. We are delighted with the strong deposit growth which
enhances our liquidity and long term franchise value, although in
the short term, it can have the effect of reducing capital ratios,
return on average assets and net interest margin (“NIM”).
“Net interest margin for the second quarter was 3.75%, an 8
basis point increase from the first quarter 2017. Given the
rate increases in March and June of 2017, the margin increase was
less than expected largely due to the significant deposit growth
which reduced the Bank’s leverage during the quarter. Asset
pricing competition also had the effect of dampening NIM
growth. The deposit growth, however, has little impact on the
net income and earnings per share of the Bank.
“Since mid-2016, we have been continuously reviewing the loan
portfolio, paying particular attention to those borrowers who may
be affected by e-commerce disruption or by an increasing minimum
wage in California and New York. We have also been closely
monitoring our non-owner occupied commercial real estate (“CRE”)
concentration ratio which currently stands at 331% of total capital
as of June 30, 2017, unchanged from the ratio as of March 31,
2017. Included in this reported non-owner occupied CRE was
approximately $93 million (22% of total capital) of revolving
commercial lines of credit secured by real estate. In some
cases, the real estate collateral was discretionary and taken as
additional collateral.
“With the strong deposit growth in the latest twelve months, our
tangible common capital ratio dropped below 9% for the first time
since 2009. In our capital planning process, we must assume
our asset growth will continue and therefore we must be
proactive. In this regard, we have obtained a negotiating
permit from the State of California which allows us to offer to
sell our common stock. We plan to increase our capital by $50
million in this transaction and plan to use an At The Market
(“ATM”) transaction to raise the capital in installments, which
will more accurately match with the Bank’s growth.
“In June, our Board declared a dividend of $0.20 per share which
is an increase of 11% from the $0.18 per share previously
declared. The increase reflects our strong earnings
performance and our confidence in the future.”
Net Interest Income and Net Interest Margin. Net interest income
before provision for loan and lease losses was $31.3 million for
the second quarter of 2017. This compares favorably to the $25.7
million recorded in the second quarter of 2016 and to the $28.4
million recorded in the first quarter of 2017. The increase over
both comparable periods is due primarily to loan growth as well as
increases in the fed funds and Prime rates. The Bank’s taxable
equivalent net interest margin was 3.75% for the second quarter of
2017, an 8 basis point increase over the 3.67% achieved in the
first quarter of 2017 but a 20 basis point decrease from the 3.87%
achieved in the second quarter of 2016. The increase over the first
quarter of 2017 would have been higher; however the Bank’s average
loan to deposit ratio dropped to 89.7% for the second quarter as
compared to the 92.3% average loan to deposit ratio posted in the
first quarter of 2017. This ‘de-leveraging’ of the balance sheet
during the second quarter had the effect of muting the increase in
average asset yields.
Noninterest Income. For the second quarter of 2017, noninterest
income was $1,275,000 compared with $1,660,000 for the same quarter
last year and compared to $2,090,000 for the first quarter of 2017.
Service charges on deposits decreased by $34,000 this quarter when
compared to the same quarter last year and by $49,000 when compared
to the first quarter of 2017. Letter of Credit fee income was
$581,000 for the second quarter of 2017, a decrease of $254,000
compared to the same period last year and a decrease of $214,000
compared to the first quarter of 2017 as LC activity declined.
Other income was $303,000, a decrease from the $398,000 recorded in
the same period last year and from the $856,000 recorded in the
first quarter of 2017. In the first quarter of 2017, Other income
was bolstered by $345,000 of OREO income.
Noninterest Expense. Total noninterest expense was $12.4 million
for the second quarter of 2017, an increase of $1.6 million over
the same period last year and a decrease of $764,000 from the first
quarter of 2017. Salaries and benefits expense totaled $7.7 million
for the second quarter of 2017 compared to $6.1 million recorded
for the same period last year and compared to the $7.5 million
recorded in the first quarter of 2017. The increase over the same
period last year and the prior quarter was due primarily to
staffing/merit increases, a larger bonus accrual and a reduction in
capitalized loan origination costs. Occupancy expense totaled $1.2
million for the second quarter of 2017 and was down slightly from
the $1.3 million recorded in the same period last year but was flat
when compared to the first quarter of 2017. Professional services
expense was $1.0 million for the second quarter of 2017 compared to
$1.4 million for the same quarter of 2016 and also down from the
$1.2 million recorded in the first quarter of 2017. The decrease
compared to both was due to a reduction in legal fees. The Bank
incurred $118,000 in costs related to its one OREO property and
this compares to OREO expense of $243,000 in the second quarter of
2016 and $108,000 in the first quarter of 2017. Other expenses were
$1.8 million for the second quarter of 2017, an increase of
$594,000 over the second quarter of 2016 but a decrease of $751,000
from the $2.6 million recorded in the first quarter of 2017. The
decrease from the first quarter was mainly due to the legal
settlement reserve of $1.6 million recorded in the first quarter of
2017. The Bank’s efficiency ratio came in at 38.1% for the
quarter.
Income Taxes
The Bank recorded a provision for income taxes of $7.2 million
for the second quarter of 2017. This represents an effective tax
rate (“ETR”) of 38.1% for the quarter. This is down from the ETR of
40.0% for the second quarter of 2016 and up from the 35.2% ETR
recorded in the first quarter of 2017. The relatively low ETR in
the first quarter of 2017 was due to the adoption of Accounting
Standards Update (ASU) 2016-09 which resulted in an excess tax
benefit from share-based compensation and a $768,000 net tax
benefit on the income statement. The ETR recorded this quarter was
lower than the Bank’s statutory rate due mainly to a $154,000
reversal of ASC 740-10 expense recognized in earlier years for
uncertain tax positions related to its California Net Interest
Deduction for Lenders as well as an excess tax benefit recognized
from share-based compensation of $398,000.
Balance Sheet Summary
Total gross loans and leases at June 30, 2017 were $2.79
billion, an increase of $246.5 million or 9.7% over the total of
$2.54 billion as of December 31, 2016. Total deposits as of June
30, 2017 were $3.12 billion, an increase of $357.6 million or 12.9%
over the $2.76 billion at December 31, 2016. Total assets as of
June 30, 2017 were $3.58 billion, an increase of $357.8
million or 11.1% over the $3.22 billion as of December 31,
2016.
Asset QualityAs of June 30, 2017 nonaccrual
loans totaled $6.5 million, down slightly from the $7.8 million as
of March 31, 2017 and also down from the $7.6 million total as of
December 31, 2016. Total net charge-offs for the second quarter of
2017 were $1.2 million as compared to $121,000 in the first quarter
of 2017 and compared to $2.0 million in the second quarter of 2016.
The Bank recorded a provision for loan losses of $1.2 million for
the second quarter of 2017, down from the $2.3 million provision
recorded in the same quarter and down from the $1.5 million
provision recorded in the first quarter of 2017. The allowance for
loan loss at June 30, 2017 was $27.9 million or 1.00% of total
loans compared to $26.5 million or 1.04% of total loans at December
31, 2016.
OREO
As of June 30, 2017 and December 31, 2016, the Bank held one
OREO property, a $4.1 million multi-family property located outside
of California.
CapitalizationAs of June 30, 2017, the Bank’s
leverage ratio was 8.69%, the common equity tier 1 capital ratio
was 9.13% and the total capital ratio was 13.04%. As of December
31, 2016, the Bank’s leverage ratio was 9.43%, the common equity
tier 1 ratio was 9.83% and the total risk based capital ratio was
14.09%.
Conference Call and WebcastA
conference call with simultaneous webcast to discuss Preferred
Bank’s second quarter 2017 financial results will be held tomorrow,
July 19th 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 CEO Li Yu, President and COO
Wellington Chen, Chief Financial Officer Edward J. Czajka, and
Chief Credit Officer Nick Pi will be present to discuss Preferred
Bank's financial results, business highlights and outlook. After
the live webcast, a replay will remain available in the Investor
Relations section of Preferred Bank's website. A replay of the call
will also be available at 877-344-7529 (domestic) or 412-317-0088
(international) through August 2, 2017; the passcode is
10110443.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks
in California. The bank is chartered by the State of California,
and its deposits are insured by the Federal Deposit Insurance
Corporation, or FDIC, to the maximum extent permitted by law. The
Company conducts its banking business from its main office in Los
Angeles, California, and through ten full-service branch banking
offices in the California cities of Alhambra, Century City,
City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico
Rivera, Tarzana and San Francisco, and one office in Flushing New
York. Preferred Bank offers a broad range of deposit and loan
products and services to both commercial and consumer customers.
The bank provides personalized deposit services as well as real
estate finance, commercial loans and trade finance to small and
mid-sized businesses, entrepreneurs, real estate developers,
professionals and high net worth individuals. Although originally
founded as a Chinese-American Bank, Preferred Bank now derives most
of its customers from the diversified mainstream market but does
continue to benefit from the significant migration to California of
ethnic Chinese from China and other areas of East Asia.
Forward-Looking StatementsThis 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 2016 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, |
|
|
|
|
|
2017 |
|
2017 |
|
2016 |
Interest
income: |
|
|
|
|
|
|
|
Loans,
including fees |
|
$ |
34,941 |
|
|
$ |
31,919 |
|
|
$ |
27,892 |
|
|
Investment
securities |
|
|
2,940 |
|
|
|
2,482 |
|
|
|
1,722 |
|
|
Fed funds
sold |
|
|
232 |
|
|
|
231 |
|
|
|
109 |
|
|
|
Total
interest income |
|
|
38,113 |
|
|
|
34,632 |
|
|
|
29,723 |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
1,944 |
|
|
|
1,465 |
|
|
|
1,051 |
|
|
Savings |
|
|
17 |
|
|
|
21 |
|
|
|
18 |
|
|
Time certificates |
|
|
3,283 |
|
|
|
1,160 |
|
|
|
2,661 |
|
|
FHLB
borrowings |
|
|
60 |
|
|
|
65 |
|
|
|
67 |
|
|
Subordinated debit |
|
|
1,531 |
|
|
|
1,531 |
|
|
|
186 |
|
|
|
Total
interest expense |
|
|
6,835 |
|
|
|
6,190 |
|
|
|
3,982 |
|
|
|
Net
interest income |
|
|
31,278 |
|
|
|
28,442 |
|
|
|
25,741 |
|
Provision
for loan losses |
|
|
1,200 |
|
|
|
1,500 |
|
|
|
2,300 |
|
|
|
Net
interest income after provision for loan losses |
|
|
30,078 |
|
|
|
26,942 |
|
|
|
23,441 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income: |
|
|
|
|
|
|
|
Fees &
service charges on deposit accounts |
|
|
304 |
|
|
|
353 |
|
|
|
338 |
|
|
Letters of
credit fee income |
|
|
581 |
|
|
|
795 |
|
|
|
835 |
|
|
BOLI
income |
|
|
87 |
|
|
|
86 |
|
|
|
89 |
|
|
Net gain on
sale of investment securities |
|
|
0 |
|
|
|
- |
|
|
|
- |
|
|
Other
income |
|
|
303 |
|
|
|
856 |
|
|
|
398 |
|
|
|
Total
noninterest income |
|
|
1,275 |
|
|
|
2,090 |
|
|
|
1,660 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
|
|
Salary and
employee benefits |
|
|
7,673 |
|
|
|
7,509 |
|
|
|
6,065 |
|
|
Net
occupancy expense |
|
|
1,214 |
|
|
|
1,182 |
|
|
|
1,267 |
|
|
Business development and promotion expense |
|
|
188 |
|
|
|
240 |
|
|
|
152 |
|
|
Professional services |
|
|
1,038 |
|
|
|
1,162 |
|
|
|
1,409 |
|
|
Office
supplies and equipment expense |
|
|
310 |
|
|
|
353 |
|
|
|
376 |
|
|
Other real estate owned related expense and valuation allowance
on LHFS |
|
|
118 |
|
|
|
108 |
|
|
|
243 |
|
|
Other |
|
|
|
1,873 |
|
|
|
2,624 |
|
|
|
1,279 |
|
|
|
Total
noninterest expense |
|
|
12,414 |
|
|
|
13,178 |
|
|
|
10,791 |
|
|
|
Income
before provision for income taxes |
|
|
18,939 |
|
|
|
15,854 |
|
|
|
14,310 |
|
Income tax
expense |
|
|
7,222 |
|
|
|
5,573 |
|
|
|
5,724 |
|
|
|
Net
income |
|
$ |
11,717 |
|
|
$ |
10,281 |
|
|
$ |
8,586 |
|
|
|
|
|
|
|
|
|
|
|
Dividend
and earnings allocated to participating securities |
|
|
(135 |
) |
|
|
(110 |
) |
|
|
(137 |
) |
Net income
available to common shareholders |
|
$ |
11,582 |
|
|
$ |
10,171 |
|
|
$ |
8,449 |
|
|
|
|
|
|
|
|
|
|
|
Income per
share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.81 |
|
|
$ |
0.71 |
|
|
$ |
0.61 |
|
|
|
Diluted |
|
$ |
0.80 |
|
|
$ |
0.71 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,348,310 |
|
|
|
14,314,624 |
|
|
|
13,851,081 |
|
|
|
Diluted |
|
|
14,407,317 |
|
|
|
14,386,402 |
|
|
|
13,957,117 |
|
|
|
|
|
|
|
|
|
|
|
Dividends
per share |
|
$ |
0.20 |
|
|
$ |
0.18 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
2017 |
|
2016 |
|
% |
Interest
income: |
|
|
|
|
|
|
|
Loans,
including fees |
|
$ |
66,860 |
|
|
$ |
53,352 |
|
|
25.3 |
% |
|
Investment
securities |
|
|
5,422 |
|
|
|
3,506 |
|
|
54.7 |
% |
|
Fed funds
sold |
|
|
463 |
|
|
|
186 |
|
|
148.9 |
% |
|
|
Total
interest income |
|
|
72,745 |
|
|
|
57,044 |
|
|
27.5 |
% |
|
|
|
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
3,409 |
|
|
|
2,101 |
|
|
62.3 |
% |
|
Savings |
|
|
38 |
|
|
|
36 |
|
|
4.5 |
% |
|
Time certificates |
|
|
6,391 |
|
|
|
4,975 |
|
|
28.5 |
% |
|
FHLB
borrowings |
|
|
125 |
|
|
|
126 |
|
|
-0.5 |
% |
|
Subordinated debit issuance |
|
|
3,062 |
|
|
|
186 |
|
|
100.0 |
% |
|
|
Total
interest expense |
|
|
13,025 |
|
|
|
7,424 |
|
|
75.4 |
% |
|
|
Net
interest income |
|
|
59,720 |
|
|
|
49,620 |
|
|
20.4 |
% |
Provision
for credit losses |
|
|
2,700 |
|
|
|
3,100 |
|
|
-12.9 |
% |
|
|
Net
interest income after provision for loan losses |
|
|
57,020 |
|
|
|
46,520 |
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest
income: |
|
|
|
|
|
|
|
Fees &
service charges on deposit accounts |
|
|
657 |
|
|
|
632 |
|
|
3.9 |
% |
|
Letters of
credit fee income |
|
|
1,375 |
|
|
|
1,252 |
|
|
9.9 |
% |
|
BOLI
income |
|
|
174 |
|
|
|
174 |
|
|
-0.2 |
% |
|
Net gain on
sale of investment securities |
|
|
0 |
|
|
|
36 |
|
|
100.0 |
% |
|
Other
income |
|
|
1,159 |
|
|
|
729 |
|
|
59.0 |
% |
|
|
Total
noninterest income |
|
|
3,365 |
|
|
|
2,823 |
|
|
19.2 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
|
|
Salary and
employee benefits |
|
|
15,182 |
|
|
|
13,086 |
|
|
16.0 |
% |
|
Net
occupancy expense |
|
|
2,396 |
|
|
|
2,470 |
|
|
-3.0 |
% |
|
Business development and promotion expense |
|
|
428 |
|
|
|
374 |
|
|
14.6 |
% |
|
Professional services |
|
|
2,200 |
|
|
|
2,371 |
|
|
-7.2 |
% |
|
Office
supplies and equipment expense |
|
|
663 |
|
|
|
727 |
|
|
-8.9 |
% |
|
Other real estate owned related expense and valuation allowance
on LHFS |
|
|
226 |
|
|
|
442 |
|
|
-48.8 |
% |
|
Other |
|
|
|
4,497 |
|
|
|
2,359 |
|
|
90.6 |
% |
|
|
Total
noninterest expense |
|
|
25,592 |
|
|
|
21,829 |
|
|
17.2 |
% |
|
|
Income
before provision for income taxes |
|
|
34,793 |
|
|
|
27,514 |
|
|
26.5 |
% |
Income tax
expense |
|
|
12,795 |
|
|
|
11,085 |
|
|
15.4 |
% |
|
|
Net
income |
|
$ |
21,998 |
|
|
$ |
16,429 |
|
|
33.9 |
% |
|
|
|
|
|
|
|
|
|
|
Dividend
and earnings allocated to participating securities |
|
|
(248 |
) |
|
|
(258 |
) |
|
-4.1 |
% |
Net income
available to common shareholders |
|
$ |
21,750 |
|
|
$ |
16,171 |
|
|
34.5 |
% |
|
|
|
|
|
|
|
|
|
|
Income per
share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.52 |
|
|
$ |
1.17 |
|
|
29.7 |
% |
|
|
Diluted |
|
$ |
1.51 |
|
|
$ |
1.16 |
|
|
30.2 |
% |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,331,560 |
|
|
|
13,823,986 |
|
|
3.7 |
% |
|
|
Diluted |
|
|
14,396,988 |
|
|
|
13,933,721 |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
Dividends
per share |
|
$ |
0.38 |
|
|
$ |
0.30 |
|
|
26.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed Consolidated
Statements of Financial
Condition |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
due from banks |
$ |
395,034 |
|
|
$ |
306,330 |
|
|
Fed funds
sold |
|
107,500 |
|
|
|
97,500 |
|
|
|
Cash and
cash equivalents |
|
502,534 |
|
|
|
403,830 |
|
|
|
|
|
|
|
|
|
|
Securities
held to maturity, at amortized cost |
|
9,610 |
|
|
|
10,337 |
|
|
Securities
available-for-sale, at fair value |
|
192,475 |
|
|
|
199,833 |
|
|
Loans and
leases |
|
2,790,014 |
|
|
|
2,543,549 |
|
|
Less
allowance for loan and lease losses |
|
(27,863 |
) |
|
|
(26,478 |
) |
|
Less net
deferred loan fees |
|
(3,245 |
) |
|
|
(1,682 |
) |
|
|
Net loans
and leases |
|
2,758,906 |
|
|
|
2,515,389 |
|
|
|
|
|
|
|
|
|
|
Other real
estate owned |
|
4,112 |
|
|
|
4,112 |
|
|
Customers'
liability on acceptances |
|
7,018 |
|
|
|
772 |
|
|
Bank
furniture and fixtures, net |
|
5,232 |
|
|
|
5,313 |
|
|
Bank-owned
life insurance |
|
8,941 |
|
|
|
8,825 |
|
|
Accrued
interest receivable |
|
10,684 |
|
|
|
9,550 |
|
|
Investment
in affordable housing |
|
37,029 |
|
|
|
23,670 |
|
|
Federal
Home Loan Bank stock |
|
11,078 |
|
|
|
9,331 |
|
|
Deferred
tax assets |
|
25,701 |
|
|
|
26,605 |
|
|
Other
asset |
|
6,075 |
|
|
|
4,031 |
|
|
|
Total
assets |
$ |
3,579,395 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Deposits: |
|
|
|
|
|
|
Demand |
$ |
641,153 |
|
|
$ |
586,272 |
|
|
|
Interest-bearing demand |
|
1,231,595 |
|
|
|
1,019,058 |
|
|
|
Savings |
|
27,870 |
|
|
|
34,067 |
|
|
|
Time
certificates of $250,000 or more |
|
535,211 |
|
|
|
427,172 |
|
|
|
Other time
certificates |
|
685,445 |
|
|
|
697,155 |
|
|
|
|
Total deposits |
|
$ |
3,121,274 |
|
|
$ |
2,763,724 |
|
|
|
Acceptances
outstanding |
|
7,018 |
|
|
|
772 |
|
|
|
Advances
from Federal Home Loan Bank |
|
6,459 |
|
|
|
26,516 |
|
|
|
Subordinated debt issuance |
|
98,901 |
|
|
|
98,839 |
|
|
|
Commitments
to fund investment in affordable housing partnership |
|
20,966 |
|
|
|
10,632 |
|
|
|
Accrued
interest payable |
|
3,182 |
|
|
|
3,199 |
|
|
|
Other
liabilities |
|
16,370 |
|
|
|
19,851 |
|
|
|
|
Total
liabilities |
|
3,274,170 |
|
|
|
2,923,533 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
Preferred stock. Authorized 25,000,000 shares; issued and no
outstanding shares at June 30, 2017 and December 31, 2016 |
|
— |
|
|
|
— |
|
|
|
Common stock, no par value. Authorized 20,000,000 shares;
issued and outstanding 14,540,588 at June 30, 2017 and 14,232,907
at December 31, 2016, respectively. |
|
173,863 |
|
|
|
169,861 |
|
|
|
Treasury
stock |
|
(33,233 |
) |
|
|
(19,115 |
) |
|
|
Additional
paid-in-capital |
|
39,480 |
|
|
|
39,929 |
|
|
|
Accumulated
income |
|
124,740 |
|
|
|
108,261 |
|
|
|
Accumulated
other comprehensive income (loss): |
|
|
|
|
|
|
Unrealized gain (loss) on securities, available-for-sale, net
of tax of $272 and $(632) at June 30, 2017 and December 31, 2016,
respectively |
|
375 |
|
|
|
(871 |
) |
|
|
|
Total
shareholders' equity |
|
305,225 |
|
|
|
298,065 |
|
|
|
Total
liabilities and shareholders' equity |
$ |
3,579,395 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
2017 |
2017 |
2016 |
2016 |
2016 |
Unaudited historical quarterly operations
data: |
|
|
|
|
|
|
|
Interest
income |
|
$ |
38,113 |
|
$ |
34,632 |
|
$ |
33,980 |
|
$ |
31,889 |
|
$ |
29,723 |
|
|
Interest
expense |
|
|
6,835 |
|
|
6,190 |
|
|
5,916 |
|
|
5,394 |
|
|
3,982 |
|
|
|
Interest income before
provision for credit losses |
|
|
31,278 |
|
|
28,442 |
|
|
28,064 |
|
|
26,495 |
|
|
25,741 |
|
|
Provision
for credit losses |
|
|
1,200 |
|
|
1,500 |
|
|
1,900 |
|
|
1,400 |
|
|
2,300 |
|
|
Noninterest
income |
|
|
1,275 |
|
|
2,090 |
|
|
1,286 |
|
|
1,350 |
|
|
1,660 |
|
|
Noninterest
expense |
|
|
12,414 |
|
|
13,178 |
|
|
11,223 |
|
|
10,486 |
|
|
10,791 |
|
|
Income tax
expense |
|
|
7,222 |
|
|
5,573 |
|
|
6,166 |
|
|
6,080 |
|
|
5,724 |
|
|
|
Net income |
|
|
11,717 |
|
|
10,281 |
|
|
10,061 |
|
|
9,879 |
|
|
8,586 |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.81 |
|
$ |
0.71 |
|
$ |
0.71 |
|
$ |
0.70 |
|
$ |
0.61 |
|
|
|
Diluted |
|
$ |
0.80 |
|
$ |
0.71 |
|
$ |
0.71 |
|
$ |
0.69 |
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
Ratios for the period: |
|
|
|
|
|
|
|
Return on
average assets |
|
|
1.36 |
% |
|
1.29 |
% |
|
1.28 |
% |
|
1.31 |
% |
|
1.26 |
% |
|
Return on
beginning equity |
|
|
15.96 |
% |
|
13.99 |
% |
|
13.74 |
% |
|
13.92 |
% |
|
12.62 |
% |
|
Net interest margin (Fully-taxable equivalent) |
|
|
3.75 |
% |
|
3.67 |
% |
|
3.67 |
% |
|
3.59 |
% |
|
3.87 |
% |
|
Noninterest
expense to average assets |
|
|
1.44 |
% |
|
1.66 |
% |
|
1.43 |
% |
|
1.39 |
% |
|
1.58 |
% |
|
Efficiency
ratio |
|
|
38.13 |
% |
|
43.16 |
% |
|
38.24 |
% |
|
37.66 |
% |
|
39.38 |
% |
|
Net
charge-offs (recoveries) to average loans (annualized) |
|
|
0.18 |
% |
|
0.02 |
% |
|
0.00 |
% |
|
0.14 |
% |
|
0.36 |
% |
|
|
|
|
|
|
|
|
|
Ratios as of period
end: |
|
|
|
|
|
|
|
Tier 1
leverage capital ratio |
|
|
8.69 |
% |
|
9.01 |
% |
|
9.43 |
% |
|
9.47 |
% |
|
10.05 |
% |
|
Common
equity tier 1 risk-based capital ratio |
|
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
9.96 |
% |
|
10.40 |
% |
|
Tier 1
risk-based capital ratio |
|
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
9.96 |
% |
|
10.40 |
% |
|
Total
risk-based capital ratio |
|
|
13.04 |
% |
|
13.21 |
% |
|
14.09 |
% |
|
14.36 |
% |
|
13.68 |
% |
|
Allowances
for credit losses to loans and leases at end of period |
|
|
1.00 |
% |
|
1.04 |
% |
|
1.04 |
% |
|
1.01 |
% |
|
1.06 |
% |
|
Allowance
for credit losses to non-performing loans and leases |
|
|
426.43 |
% |
|
357.09 |
% |
|
346.22 |
% |
|
1460.49 |
% |
|
722.47 |
% |
|
|
|
|
|
|
|
|
|
Average balances: |
|
|
|
|
|
|
|
Total loans
and leases |
|
$ |
2,695,208 |
|
$ |
2,563,473 |
|
$ |
2,465,492 |
|
$ |
2,344,102 |
|
$ |
2,248,652 |
|
|
Earning
assets |
|
$ |
3,401,193 |
|
$ |
3,167,031 |
|
$ |
3,066,189 |
|
$ |
2,953,325 |
|
$ |
2,687,435 |
|
|
Total
assets |
|
$ |
3,466,094 |
|
$ |
3,228,142 |
|
$ |
3,124,984 |
|
$ |
3,009,457 |
|
$ |
2,746,031 |
|
|
Total
deposits |
|
$ |
3,002,583 |
|
$ |
2,775,830 |
|
$ |
2,666,878 |
|
$ |
2,590,702 |
|
$ |
2,400,756 |
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
|
Selected Consolidated
Financial Information |
|
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2017 |
|
2016 |
|
|
Interest
income |
$ |
72,745 |
|
|
$ |
57,044 |
|
|
|
Interest
expense |
|
13,025 |
|
|
|
7,424 |
|
|
|
|
Interest
income before provision for credit losses |
|
59,720 |
|
|
|
49,620 |
|
|
|
Provision
for credit losses |
|
2,700 |
|
|
|
3,100 |
|
|
|
Noninterest
income |
|
3,365 |
|
|
|
2,823 |
|
|
|
Noninterest
expense |
|
25,592 |
|
|
|
21,829 |
|
|
|
Income tax
expense |
|
12,795 |
|
|
|
11,085 |
|
|
|
|
Net
income |
|
21,998 |
|
|
|
16,429 |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
|
|
|
|
|
|
Basic |
$ |
1.52 |
|
|
$ |
1.17 |
|
|
|
|
Diluted |
$ |
1.51 |
|
|
$ |
1.16 |
|
|
|
|
|
|
|
|
|
|
Ratios for the period: |
|
|
|
|
|
Return on
average assets |
|
1.32 |
% |
|
|
1.23 |
% |
|
|
Return on
beginning equity |
|
14.88 |
% |
|
|
12.51 |
% |
|
|
Net
interest margin (Fully-taxable equivalent) |
|
3.69 |
% |
|
|
3.83 |
% |
|
|
Noninterest
expense to average assets |
|
1.54 |
% |
|
|
1.59 |
% |
|
|
Efficiency
ratio |
|
40.57 |
% |
|
|
41.63 |
% |
|
|
Net
charge-offs (recoveries) to average loans |
|
0.10 |
% |
|
|
0.16 |
% |
|
|
|
|
|
|
|
|
|
Average balances: |
|
|
|
|
|
Total loans
and leases |
$ |
2,629,947 |
|
|
$ |
2,158,158 |
|
|
|
Earning
assets |
$ |
3,285,422 |
|
|
$ |
2,619,290 |
|
|
|
Total
assets |
$ |
3,348,450 |
|
|
$ |
2,676,157 |
|
|
|
Total
deposits |
$ |
2,890,418 |
|
|
$ |
2,346,462 |
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Selected Consolidated
Financial Information |
(unaudited) |
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
|
|
|
2017 |
|
2017 |
|
2016 |
|
2016 |
|
2016 |
Unaudited quarterly statement of financial position
data: |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
502,534 |
|
|
$ |
450,355 |
|
|
$ |
403,830 |
|
|
$ |
405,522 |
|
|
$ |
376,485 |
|
|
Securities
held-to-maturity, at amortized cost |
|
9,610 |
|
|
|
9,912 |
|
|
|
10,337 |
|
|
|
4,812 |
|
|
|
5,143 |
|
|
Securities
available-for-sale, at fair value |
|
192,475 |
|
|
|
197,455 |
|
|
|
199,833 |
|
|
|
203,272 |
|
|
|
201,256 |
|
|
Loans and
Leases: |
|
|
|
|
|
|
|
|
|
|
|
Real estate
- Single and multi-family residential |
$ |
494,725 |
|
|
$ |
479,279 |
|
|
$ |
490,683 |
|
|
$ |
493,489 |
|
|
$ |
393,076 |
|
|
|
Real estate
- Land for housing |
|
14,728 |
|
|
|
14,754 |
|
|
|
14,774 |
|
|
|
14,796 |
|
|
|
14,817 |
|
|
|
Real estate
- Land for income properties |
|
1,784 |
|
|
|
1,792 |
|
|
|
1,801 |
|
|
|
1,809 |
|
|
|
6,316 |
|
|
|
Real estate
- Commercial |
|
1,217,254 |
|
|
|
1,160,077 |
|
|
|
1,047,321 |
|
|
|
1,037,687 |
|
|
|
995,213 |
|
|
|
Real estate
- For sale housing construction |
|
95,462 |
|
|
|
109,703 |
|
|
|
104,960 |
|
|
|
104,973 |
|
|
|
95,519 |
|
|
|
Real estate
- Other construction |
|
148,580 |
|
|
|
150,322 |
|
|
|
128,434 |
|
|
|
96,147 |
|
|
|
72,963 |
|
|
|
Commercial
and industrial |
|
791,362 |
|
|
|
741,339 |
|
|
|
733,709 |
|
|
|
659,306 |
|
|
|
659,701 |
|
|
|
Trade
finance and other |
|
26,119 |
|
|
|
30,337 |
|
|
|
21,867 |
|
|
|
24,460 |
|
|
|
34,625 |
|
|
|
|
Gross loans |
|
2,790,014 |
|
|
|
2,687,603 |
|
|
|
2,543,549 |
|
|
|
2,432,667 |
|
|
|
2,272,230 |
|
|
Allowance
for loan and lease losses |
|
(27,863 |
) |
|
|
(27,857 |
) |
|
|
(26,478 |
) |
|
|
(24,556 |
) |
|
|
(23,983 |
) |
|
Net
deferred loan fees |
|
(3,245 |
) |
|
|
(2,572 |
) |
|
|
(1,682 |
) |
|
|
(1,913 |
) |
|
|
(3,682 |
) |
|
|
Total
loans, net |
$ |
2,758,906 |
|
|
$ |
2,657,174 |
|
|
$ |
2,515,389 |
|
|
$ |
2,406,198 |
|
|
$ |
2,244,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real
estate owned |
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
Investment
in affordable housing |
|
37,029 |
|
|
|
22,904 |
|
|
|
23,670 |
|
|
|
24,278 |
|
|
|
24,886 |
|
|
Federal
Home Loan Bank stock |
|
11,078 |
|
|
|
9,330 |
|
|
|
9,331 |
|
|
|
9,331 |
|
|
|
9,332 |
|
|
Other
assets |
|
63,651 |
|
|
|
61,687 |
|
|
|
55,096 |
|
|
|
52,899 |
|
|
|
49,862 |
|
|
|
Total
assets |
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
$ |
3,110,424 |
|
|
$ |
2,915,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
Demand |
$ |
641,153 |
|
|
$ |
576,060 |
|
|
$ |
586,272 |
|
|
$ |
575,388 |
|
|
$ |
540,374 |
|
|
|
Interest-bearing demand |
|
1,231,595 |
|
|
|
1,137,145 |
|
|
|
1,019,058 |
|
|
|
945,358 |
|
|
|
855,661 |
|
|
|
Savings |
|
27,870 |
|
|
|
34,434 |
|
|
|
34,067 |
|
|
|
31,344 |
|
|
|
29,031 |
|
|
|
Time
certificates of $250,000 or more |
|
535,211 |
|
|
|
495,177 |
|
|
|
427,172 |
|
|
|
416,807 |
|
|
|
398,736 |
|
|
|
Other time
certificates |
|
685,445 |
|
|
|
707,830 |
|
|
|
697,155 |
|
|
|
691,099 |
|
|
|
692,063 |
|
|
|
|
Total deposits |
$ |
3,121,274 |
|
|
$ |
2,950,646 |
|
|
$ |
2,763,724 |
|
|
$ |
2,659,996 |
|
|
$ |
2,515,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances
from Federal Home Loan Bank |
$ |
6,459 |
|
|
$ |
26,487 |
|
|
$ |
26,516 |
|
|
$ |
26,544 |
|
|
$ |
26,573 |
|
|
Subordinated debt issuance |
|
98,901 |
|
|
|
98,870 |
|
|
|
98,839 |
|
|
|
98,851 |
|
|
|
61,475 |
|
|
Commitments
to fund investment in affordable housing partnership |
|
20,966 |
|
|
|
10,354 |
|
|
|
10,632 |
|
|
|
11,015 |
|
|
|
11,454 |
|
|
Other
liabilities |
|
26,570 |
|
|
|
32,189 |
|
|
|
23,822 |
|
|
|
22,760 |
|
|
|
17,922 |
|
|
|
Total
liabilities |
$ |
3,274,170 |
|
|
$ |
3,118,546 |
|
|
$ |
2,923,533 |
|
|
$ |
2,819,166 |
|
|
$ |
2,633,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
Net common
stock, no par value |
$ |
180,110 |
|
|
$ |
178,884 |
|
|
$ |
190,675 |
|
|
$ |
188,430 |
|
|
$ |
187,212 |
|
|
Retained
earnings |
|
124,740 |
|
|
|
115,931 |
|
|
|
108,261 |
|
|
|
100,804 |
|
|
|
93,119 |
|
|
Accumulated
other comprehensive income |
|
375 |
|
|
|
(432 |
) |
|
|
(871 |
) |
|
|
2,024 |
|
|
|
2,021 |
|
|
|
Total
shareholders' equity |
$ |
305,225 |
|
|
$ |
294,383 |
|
|
$ |
298,065 |
|
|
$ |
291,258 |
|
|
$ |
282,352 |
|
|
|
Total
liabilities and shareholders' equity |
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
$ |
3,110,424 |
|
|
$ |
2,915,641 |
|
|
|
|
Preferred Bank |
|
Loan and Credit Quality
Information |
|
|
|
|
|
|
|
|
|
|
Allowance For Credit Losses & Loss
History |
|
|
|
|
|
|
Six Months Ended |
|
Year Ended |
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
|
|
|
|
|
(Dollars in 000's) |
|
Allowance
For Credit Losses |
|
|
|
|
|
Balance at
Beginning of Period |
|
$ |
26,478 |
|
|
$ |
22,658 |
|
|
|
Charge-Offs |
|
|
|
|
|
|
|
Commercial
& Industrial |
|
|
1,451 |
|
|
|
4,323 |
|
|
|
|
Mini-perm
Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
Construction - Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
Land -
Residential |
|
|
- |
|
|
|
- |
|
|
|
|
Land -
Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
Others |
|
|
- |
|
|
|
- |
|
|
|
|
|
Total Charge-Offs |
|
|
1,451 |
|
|
|
4,323 |
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
Commercial
& Industrial |
|
|
53 |
|
|
|
985 |
|
|
|
|
Mini-perm
Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
Construction - Commercial |
|
|
17 |
|
|
|
26 |
|
|
|
|
Land -
Residential |
|
|
- |
|
|
|
- |
|
|
|
|
Land -
Commercial |
|
|
61 |
|
|
|
732 |
|
|
|
|
|
Total Recoveries |
|
|
131 |
|
|
|
1,743 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loan
Charge-Offs |
|
|
1,320 |
|
|
|
2,580 |
|
|
|
Provision
for Credit Losses |
|
|
2,700 |
|
|
|
6,400 |
|
|
Balance at
End of Period |
|
$ |
27,858 |
|
|
$ |
26,478 |
|
|
Average
Loans and Leases |
|
$ |
2,629,947 |
|
|
$ |
2,282,074 |
|
|
Loans and
Leases at end of Period |
|
$ |
2,790,014 |
|
|
$ |
2,687,603 |
|
|
Net
Charge-Offs to Average Loans and Leases |
|
|
0.10 |
% |
|
|
0.11 |
% |
|
Allowances
for credit losses to loans and leases at end of period |
|
|
1.00 |
% |
|
|
1.04 |
% |
|
|
|
|
|
|
|
|
|
|
AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188
AT FINANCIAL PROFILES:
Kristen Papke
General Information
(310) 663-8007
kpapke@finprofiles.com
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