Preferred Bank (NASDAQ:PFBC), an independent
commercial bank, today reported results for the quarter ended
September 30, 2017. Preferred Bank (“the Bank”) reported net income
of $13.7 million or $0.94 per diluted share for the third quarter
of 2017. This compares to net income of $9.9 million or $0.69 per
diluted share for the third quarter of 2016 and compares to net
income of $11.7 million or $0.80 per diluted share for the second
quarter of 2017. The increase over the same period last year was
primarily due to an increase in net interest income of $8.9 million
and the increase over the prior quarter was due to an increase in
net interest income as well as a decrease in noninterest expense.
Interest income this quarter was aided by net interest recoveries
of $1.4 million primarily from a recession-era loan charge-off. On
a pre-tax basis, operating income rose by 22.4% over the prior
quarter and rose by 45.3% over the same quarter last year.
Highlights from the third quarter of 2017:
|
|
1.48 |
% |
- Return on beginning equity
|
|
17.77 |
% |
|
|
33.2 |
% |
|
|
3.95 |
% |
- Linked quarter deposit growth
|
|
$73.2 million or 2.3% |
- Linked quarter loan growth
|
|
$88.6 million or 3.2% |
Li Yu, Chairman and CEO commented, “We achieved another record
high for quarterly earnings for the third quarter of 2017.
Net income was $13.7 million or $0.94 per diluted share
compared to $9.9 million or $0.69 per diluted share for the same
quarter last year. This represents an increase of $3.8 million or
38.4%.
“During the third quarter we had a recoveries of interest income
of $1.4 million as we collected in full on a loan written off
several years ago. Without this recovery diluted EPS would
have been approximately $.058 lower, the net interest margin would
have been approximately 16 basis points lower and the efficiency
ratio would have been approximately 1.6 percentage points higher
than what was reported.
“Our growth rate has moderated this quarter. Loans
increased $89 million or 3.2% on a linked quarter basis as we have
seen a higher level of pay-offs. Deposits increased $73
million or 2.3% on a linked quarter basis which is slightly below
our more recent growth rate and this is partially because we chose
not to renew some brokered deposits which matured during the
quarter. The Bank’s loan pipeline, however, remains consistent with
prior quarters.
“On October 4, we began the process of issuing common stock
through an “At the Market” issuance mechanism. As of
October 20, a total of 168,686 shares had been issued. We
expect our goal of $50 million in new capital will be completed
either in the fourth quarter of 2017 or the first quarter of
2018.”
Net Interest Income and Net Interest Margin. Net interest income
before provision for loan and lease losses was $35.4 million for
the third quarter of 2017. This compares favorably to the $26.5
million recorded in the third quarter of 2016 and to the $31.3
million recorded in the second quarter of 2017. The increase over
both comparable periods is due to loan growth, increases in both
the fed funds and Prime interest rates as well as an interest
recovery of $1.4 million recorded this quarter related to a
recession-era charge-off. The Bank’s taxable equivalent net
interest margin was 3.95% for the third quarter of 2017, a 20 basis
point increase over the 3.75% achieved in the second quarter of
2017 and a 36 basis point increase from the 3.59% achieved in the
third quarter of 2016. The increase in the net interest margin was
impacted by the $1.4 million interest recovery, and the margin for
the quarter, excluding this item, would have been 16 basis points
less.
Noninterest Income. For the third quarter of 2017, noninterest
income was $1,243,000 compared with $1,350,000 for the same quarter
last year and compared to $1,275,000 for the second quarter of
2017. Service charges on deposits were $299,000, basically flat
compared to the $304,000 recorded in the second quarter of 2017 and
down slightly from the $322,000 posted in the third quarter of
2016. Letter of Credit fee income was $632,000 for the third
quarter of 2017, a decrease of $54,000 compared to the same period
last year and an increase of $51,000 compared to the second quarter
of 2017 as Letters of Credit activity stabilized. Other income was
$224,000, a decrease from the $257,000 recorded in the same period
last year and from the $303,000 recorded in the second quarter of
2017.
Noninterest Expense. Total noninterest expense was $12.2 million
for the third quarter of 2017, an increase of $1.7 million over the
same period last year and a decrease of $234,000 from the second
quarter of 2017. Salaries and benefits expense totaled $7.9 million
for the third quarter of 2017 compared to $6.1 million recorded for
the same period last year and compared to the $7.7 million recorded
in the second quarter of 2017. The increase over the same period
last year was due primarily to staffing/merit increases, a larger
bonus accrual and a reduction in capitalized loan origination costs
while the increase over the prior quarter was due mainly to an
increase in the bonus accrual. Occupancy expense totaled $1.3
million for the third quarter of 2017 and was up slightly over the
$1.2 million recorded in both the same period last year and the
second quarter of 2017. Professional services expense was $963,000
for the third quarter of 2017 compared to $1.4 million in the third
quarter of 2016 and also down from the $1.0 million recorded in the
second quarter of 2017. The decrease compared to the same period
last year was due to a reduction in legal expenses. The Bank
incurred $168,000 in costs related to its one OREO property and
this compares to OREO expense of $196,000 in the third quarter of
2016 and $118,000 in the second quarter of 2017. Other expenses
were $1.3 million for the third quarter of 2017, up from the $1.1
million posted in the third quarter of 2016 but a decrease of
$544,000 from the $1.9 million recorded in the second quarter of
2017. The Bank’s efficiency ratio came in at 33.2% for the
quarter.
Income Taxes
The Bank recorded a provision for income taxes of $9.5 million
for the third quarter of 2017. This represents an effective tax
rate (“ETR”) of 41.04% for the quarter. This is up from the ETR of
38.1% recorded for both the third quarter of 2016 and the second
quarter of 2017. The relatively low ETR in the first quarter of
2017 was due 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 increased this quarter due mainly to last
quarter’s $154,000 reversal of ASC 740-10 expense recognized in
earlier years for 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 September 30, 2017 were $2.88
billion, an increase of $335.1 million or 13.2% over the total of
$2.54 billion as of December 31, 2016. Total deposits as of
September 30, 2017 were $3.19 billion, an increase of $430.8
million or 15.6% over the $2.76 billion at December 31, 2016. Total
assets as of September 30, 2017 were $3.67 billion, an
increase of $443.9 million or 13.8% over the $3.22 billion as of
December 31, 2016.
Asset Quality
LoansAs of September 30, 2017 nonaccrual loans totaled $6.9
million, up slightly from the $6.5 million reported as of June 30,
2017 but down from the $7.6 million total as of December 31, 2016.
Total net charge-offs for the third quarter of 2017 were $408,000
as compared to $1.2 million in the second quarter of 2017 and
compared to $827,000 in the third quarter of 2016. The Bank
recorded a provision for loan losses of $1.3 million for the third
quarter of 2017, down slightly from the $1.4 million provision
recorded in the same quarter last year but up from the $1.2 million
provision recorded in the second quarter of 2017. The allowance for
loan loss at September 30, 2017 was $28.8 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 September 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 September 30, 2017, the
Bank’s leverage ratio was 8.54%, the common equity tier 1 capital
ratio was 9.24% and the total capital ratio was 13.08%. 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 third quarter 2017 financial results will be held tomorrow,
October 25th 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 November 8, 2017; the passcode is
10113085.
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.
AT THE
COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188
AT FINANCIAL PROFILES:Kristen PapkeGeneral
Information(310) 663-8007kpapke@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, |
|
|
|
|
|
|
2017 |
|
|
|
2017 |
|
|
|
2016 |
|
Interest income: |
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
39,362 |
|
|
$ |
34,941 |
|
|
$ |
29,548 |
|
|
Investment securities |
|
|
3,172 |
|
|
|
2,940 |
|
|
|
2,216 |
|
|
Fed funds sold |
|
|
320 |
|
|
|
232 |
|
|
|
125 |
|
|
|
Total interest income |
|
|
42,854 |
|
|
|
38,113 |
|
|
|
31,889 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
2,263 |
|
|
|
1,944 |
|
|
|
1,309 |
|
|
Savings |
|
|
17 |
|
|
|
17 |
|
|
|
19 |
|
|
Time certificates |
|
|
3,601 |
|
|
|
3,283 |
|
|
|
2,898 |
|
|
FHLB borrowings |
|
|
21 |
|
|
|
60 |
|
|
|
66 |
|
|
Subordinated debit |
|
|
1,530 |
|
|
|
1,531 |
|
|
|
1,102 |
|
|
|
Total interest expense |
|
|
7,432 |
|
|
|
6,835 |
|
|
|
5,394 |
|
|
|
Net interest income |
|
|
35,422 |
|
|
|
31,278 |
|
|
|
26,495 |
|
Provision for loan losses |
|
|
1,300 |
|
|
|
1,200 |
|
|
|
1,400 |
|
|
|
Net interest income after provision
for |
|
|
|
|
|
|
|
|
|
loan
losses |
|
|
34,122 |
|
|
|
30,078 |
|
|
|
25,095 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
Fees & service charges on deposit accounts |
|
|
299 |
|
|
|
304 |
|
|
|
322 |
|
|
Letters of credit fee income |
|
|
632 |
|
|
|
581 |
|
|
|
686 |
|
|
BOLI income |
|
|
88 |
|
|
|
87 |
|
|
|
85 |
|
|
Net gain on sale of investment securities |
|
|
- |
|
|
|
0 |
|
|
|
- |
|
|
Other income |
|
|
224 |
|
|
|
303 |
|
|
|
257 |
|
|
|
Total noninterest income |
|
|
1,243 |
|
|
|
1,275 |
|
|
|
1,350 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
Salary and employee benefits |
|
|
7,878 |
|
|
|
7,673 |
|
|
|
6,067 |
|
|
Net occupancy expense |
|
|
1,257 |
|
|
|
1,214 |
|
|
|
1,161 |
|
|
Business development and promotion
expense |
|
|
251 |
|
|
|
188 |
|
|
|
230 |
|
|
Professional services |
|
|
963 |
|
|
|
1,038 |
|
|
|
1,434 |
|
|
Office supplies and equipment expense |
|
|
334 |
|
|
|
310 |
|
|
|
345 |
|
|
Other real estate owned related
expense |
|
|
168 |
|
|
|
118 |
|
|
|
196 |
|
|
Other |
|
|
|
1,328 |
|
|
|
1,873 |
|
|
|
1,053 |
|
|
|
Total noninterest expense |
|
|
12,179 |
|
|
|
12,414 |
|
|
|
10,486 |
|
|
|
Income before provision for income taxes |
|
|
23,186 |
|
|
|
18,939 |
|
|
|
15,959 |
|
Income tax expense |
|
|
9,516 |
|
|
|
7,222 |
|
|
|
6,080 |
|
|
|
Net income |
|
$ |
13,670 |
|
|
$ |
11,717 |
|
|
$ |
9,879 |
|
|
|
|
|
|
|
|
|
|
|
Dividend and earnings allocated to participating
securities |
|
|
(161 |
) |
|
|
(135 |
) |
|
|
(157 |
) |
Net
income available to common shareholders |
|
$ |
13,509 |
|
|
$ |
11,582 |
|
|
$ |
9,722 |
|
|
|
|
|
|
|
|
|
|
|
Income per share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.94 |
|
|
$ |
0.81 |
|
|
$ |
0.70 |
|
|
|
Diluted |
|
$ |
0.94 |
|
|
$ |
0.80 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,378,552 |
|
|
|
14,348,310 |
|
|
|
13,899,966 |
|
|
|
Diluted |
|
|
14,426,522 |
|
|
|
14,407,317 |
|
|
|
13,997,343 |
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed Consolidated
Statements of Operations |
(unaudited) |
(in thousands, except
for net income per share and
shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
|
|
|
|
|
September 30, |
|
September 30, |
|
Change |
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
% |
Interest income: |
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
106,222 |
|
|
$ |
82,900 |
|
|
28.1 |
% |
|
Investment securities |
|
|
8,594 |
|
|
|
5,722 |
|
|
50.2 |
% |
|
Fed funds sold |
|
|
783 |
|
|
|
311 |
|
|
151.6 |
% |
|
|
Total interest income |
|
|
115,599 |
|
|
|
88,933 |
|
|
30.0 |
% |
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
5,672 |
|
|
|
3,410 |
|
|
66.3 |
% |
|
Savings |
|
|
55 |
|
|
|
55 |
|
|
-0.2 |
% |
|
Time certificates |
|
|
9,992 |
|
|
|
7,873 |
|
|
26.9 |
% |
|
FHLB borrowings |
|
|
146 |
|
|
|
192 |
|
|
-23.9 |
% |
|
Subordinated debit issuance |
|
|
4,592 |
|
|
|
1,288 |
|
|
100.0 |
% |
|
|
Total interest expense |
|
|
20,457 |
|
|
|
12,818 |
|
|
59.6 |
% |
|
|
Net interest income |
|
|
95,142 |
|
|
|
76,115 |
|
|
25.0 |
% |
Provision for credit losses |
|
|
4,000 |
|
|
|
4,500 |
|
|
-11.1 |
% |
|
|
Net interest income after provision for |
|
|
|
|
|
|
|
|
loan losses |
|
|
91,142 |
|
|
|
71,615 |
|
|
27.3 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
Fees & service charges on deposit accounts |
|
|
956 |
|
|
|
954 |
|
|
0.2 |
% |
|
Letters of credit fee income |
|
|
2,008 |
|
|
|
1,771 |
|
|
13.4 |
% |
|
BOLI income |
|
|
262 |
|
|
|
259 |
|
|
1.2 |
% |
|
Net gain on sale of investment securities |
|
|
0 |
|
|
|
36 |
|
|
100.0 |
% |
|
Other income |
|
|
1,382 |
|
|
|
1,153 |
|
|
19.9 |
% |
|
|
Total noninterest income |
|
|
4,608 |
|
|
|
4,173 |
|
|
10.4 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
Salary and employee benefits |
|
|
23,060 |
|
|
|
19,153 |
|
|
20.4 |
% |
|
Net occupancy expense |
|
|
3,653 |
|
|
|
3,631 |
|
|
0.6 |
% |
|
Business development and promotion expense |
|
|
679 |
|
|
|
604 |
|
|
12.4 |
% |
|
Professional services |
|
|
3,163 |
|
|
|
3,805 |
|
|
-16.9 |
% |
|
Office supplies and equipment expense |
|
|
997 |
|
|
|
1,072 |
|
|
-7.0 |
% |
|
Other real estate owned related expense |
|
|
394 |
|
|
|
638 |
|
|
-38.3 |
% |
|
Other |
|
|
|
5,825 |
|
|
|
3,412 |
|
|
70.7 |
% |
|
|
Total noninterest expense |
|
|
37,771 |
|
|
|
32,315 |
|
|
16.9 |
% |
|
|
Income before provision for income taxes |
|
|
57,979 |
|
|
|
43,473 |
|
|
33.4 |
% |
Income tax expense |
|
|
22,311 |
|
|
|
17,165 |
|
|
30.0 |
% |
|
|
Net income |
|
$ |
35,668 |
|
|
$ |
26,308 |
|
|
35.6 |
% |
|
|
|
|
|
|
|
|
|
|
Dividend and earnings allocated to participating
securities |
|
|
(409 |
) |
|
|
(415 |
) |
|
-1.4 |
% |
Net
income available to common shareholders |
|
$ |
35,259 |
|
|
$ |
25,893 |
|
|
36.2 |
% |
|
|
|
|
|
|
|
|
|
|
Income per share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.46 |
|
|
$ |
1.87 |
|
|
31.5 |
% |
|
|
Diluted |
|
$ |
2.45 |
|
|
$ |
1.86 |
|
|
31.9 |
% |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,347,396 |
|
|
|
13,849,504 |
|
|
3.6 |
% |
|
|
Diluted |
|
|
14,405,770 |
|
|
|
13,956,298 |
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.58 |
|
|
$ |
0.45 |
|
|
28.9 |
% |
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed Consolidated
Statements of Financial
Condition |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks |
$ |
413,040 |
|
|
$ |
306,330 |
|
|
Fed
funds sold |
|
90,200 |
|
|
|
97,500 |
|
|
Cash and cash equivalents |
|
|
503,240 |
|
|
|
403,830 |
|
|
|
|
|
|
|
|
|
|
Securities held to maturity, at amortized cost |
|
9,076 |
|
|
|
10,337 |
|
|
Securities available-for-sale, at fair value |
|
193,890 |
|
|
|
199,833 |
|
|
Loans
and leases |
|
2,878,599 |
|
|
|
2,543,549 |
|
|
Less
allowance for loan and lease losses |
|
(28,756 |
) |
|
|
(26,478 |
) |
|
Less
net deferred loan fees |
|
(3,376 |
) |
|
|
(1,682 |
) |
|
Net loans and leases |
|
2,846,467 |
|
|
|
2,515,389 |
|
|
|
|
|
|
|
|
|
|
Other
real estate owned |
|
4,112 |
|
|
|
4,112 |
|
|
Customers' liability on acceptances |
|
5,394 |
|
|
|
772 |
|
|
Bank
furniture and fixtures, net |
|
5,574 |
|
|
|
5,313 |
|
|
Bank-owned life insurance |
|
9,004 |
|
|
|
8,825 |
|
|
Accrued interest receivable |
|
10,477 |
|
|
|
9,550 |
|
|
Investment in affordable housing |
|
35,939 |
|
|
|
23,670 |
|
|
Federal Home Loan Bank stock |
|
11,077 |
|
|
|
9,331 |
|
|
Deferred tax assets |
|
25,372 |
|
|
|
26,605 |
|
|
Other
asset |
|
5,850 |
|
|
|
4,031 |
|
|
Total assets |
$ |
3,665,472 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Deposits: |
|
|
|
|
|
Demand |
$ |
599,722 |
|
|
$ |
586,272 |
|
|
Interest-bearing demand |
|
1,298,895 |
|
|
|
1,019,058 |
|
|
Savings |
|
27,132 |
|
|
|
34,067 |
|
|
Time certificates of $250,000 or more |
|
617,231 |
|
|
|
427,172 |
|
|
Other time certificates |
|
651,502 |
|
|
|
697,155 |
|
|
Total deposits |
$ |
3,194,482 |
|
|
$ |
2,763,724 |
|
|
Acceptances outstanding |
|
5,394 |
|
|
|
772 |
|
|
Advances from Federal Home Loan Bank |
|
6,431 |
|
|
|
26,516 |
|
|
Subordinated debt issuance |
|
98,932 |
|
|
|
98,839 |
|
|
Commitments to fund investment in affordable housing
partnership |
|
|
|
20,684 |
|
|
|
10,632 |
|
|
Accrued interest payable |
|
4,542 |
|
|
|
3,199 |
|
|
Other liabilities |
|
17,982 |
|
|
|
19,851 |
|
|
Total liabilities |
|
3,348,447 |
|
|
|
2,923,533 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
|
|
Preferred stock. Authorized 25,000,000 shares; issued and
no outstanding shares at September 30, 2017 and December 31,
2016 |
|
— |
|
|
|
— |
|
|
Common stock, no par value. Authorized 100,000,000
shares; issued and outstanding 14,561,088 at September 30,
2017 and 14,232,907 at December 31, 2016, respectively. |
|
174,171 |
|
|
|
169,861 |
|
|
Treasury stock |
|
(33,233 |
) |
|
|
(19,115 |
) |
|
Additional paid-in-capital |
|
39,762 |
|
|
|
39,929 |
|
|
Accumulated income |
|
135,497 |
|
|
|
108,261 |
|
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
Unrealized gain (loss) on securities, available-for-sale,
net of tax of $601 and $(632) at September 30, 2017 and
December 31, 2016, respectively |
|
828 |
|
|
|
(871 |
) |
|
Total shareholders' equity |
|
317,025 |
|
|
|
298,065 |
|
|
Total liabilities and shareholders' equity |
$ |
3,665,472 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
|
Selected Consolidated
Financial Information |
|
(unaudited) |
|
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
|
|
|
|
|
|
2017 |
|
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
2016 |
|
|
Unaudited historical quarterly
operations data: |
|
|
|
|
|
|
|
Interest income |
$ |
42,854 |
|
$ |
38,113 |
|
$ |
34,632 |
|
$ |
33,980 |
|
$ |
31,889 |
|
|
|
Interest expense |
|
7,432 |
|
|
6,835 |
|
|
6,190 |
|
|
5,916 |
|
|
5,394 |
|
|
|
|
Interest income before provision for credit
losses |
|
35,422 |
|
|
31,278 |
|
|
28,442 |
|
|
28,064 |
|
|
26,495 |
|
|
|
Provision for credit losses |
|
1,300 |
|
|
1,200 |
|
|
1,500 |
|
|
1,900 |
|
|
1,400 |
|
|
|
Noninterest income |
|
1,243 |
|
|
1,275 |
|
|
2,090 |
|
|
1,286 |
|
|
1,350 |
|
|
|
Noninterest expense |
|
12,179 |
|
|
12,414 |
|
|
13,178 |
|
|
11,223 |
|
|
10,486 |
|
|
|
Income tax expense |
|
9,516 |
|
|
7,222 |
|
|
5,573 |
|
|
6,166 |
|
|
6,080 |
|
|
|
|
Net income |
|
13,670 |
|
|
11,717 |
|
|
10,281 |
|
|
10,061 |
|
|
9,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.94 |
|
$ |
0.81 |
|
$ |
0.71 |
|
$ |
0.71 |
|
$ |
0.70 |
|
|
|
|
Diluted |
$ |
0.94 |
|
$ |
0.80 |
|
$ |
0.71 |
|
$ |
0.71 |
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios for the
period: |
|
|
|
|
|
|
|
Return on average assets |
|
1.48 |
% |
|
1.36 |
% |
|
1.29 |
% |
|
1.28 |
% |
|
1.31 |
% |
|
|
Return on beginning equity |
|
17.77 |
% |
|
15.96 |
% |
|
13.99 |
% |
|
13.74 |
% |
|
13.92 |
% |
|
|
Net interest margin (Fully-taxable equivalent) |
|
3.95 |
% |
|
3.75 |
% |
|
3.67 |
% |
|
3.67 |
% |
|
3.59 |
% |
|
|
Noninterest expense to average assets |
|
1.32 |
% |
|
1.44 |
% |
|
1.66 |
% |
|
1.43 |
% |
|
1.39 |
% |
|
|
Efficiency ratio |
|
33.22 |
% |
|
38.13 |
% |
|
43.16 |
% |
|
38.24 |
% |
|
37.66 |
% |
|
|
Net charge-offs (recoveries) to average loans
(annualized) |
|
0.06 |
% |
|
0.18 |
% |
|
0.02 |
% |
|
0.00 |
% |
|
0.14 |
% |
|
|
|
|
|
|
|
|
|
|
|
Ratios as of period
end: |
|
|
|
|
|
|
|
Tier 1 leverage capital ratio |
|
8.54 |
% |
|
8.69 |
% |
|
9.01 |
% |
|
9.43 |
% |
|
9.47 |
% |
|
|
Common equity tier 1 risk-based capital ratio |
|
9.24 |
% |
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
9.96 |
% |
|
|
Tier 1 risk-based capital ratio |
|
9.24 |
% |
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
9.96 |
% |
|
|
Total risk-based capital ratio |
|
13.08 |
% |
|
13.04 |
% |
|
13.21 |
% |
|
14.09 |
% |
|
14.36 |
% |
|
|
Allowances for credit losses to loans and leases at end
of period |
|
1.00 |
% |
|
1.00 |
% |
|
1.04 |
% |
|
1.04 |
% |
|
1.01 |
% |
|
|
Allowance for credit losses to non-performing |
|
|
|
|
|
|
|
|
loans and leases |
|
415.32 |
% |
|
426.43 |
% |
|
357.09 |
% |
|
346.22 |
% |
|
1460.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
Average
balances: |
|
|
|
|
|
|
|
Total loans and leases |
$ |
2,817,271 |
|
$ |
2,695,208 |
|
$ |
2,563,473 |
|
$ |
2,465,492 |
|
$ |
2,344,102 |
|
|
|
Earning assets |
$ |
3,579,578 |
|
$ |
3,401,193 |
|
$ |
3,167,031 |
|
$ |
3,066,189 |
|
$ |
2,953,325 |
|
|
|
Total assets |
$ |
3,658,835 |
|
$ |
3,466,094 |
|
$ |
3,228,142 |
|
$ |
3,124,984 |
|
$ |
3,009,457 |
|
|
|
Total deposits |
$ |
3,190,344 |
|
$ |
3,002,583 |
|
$ |
2,775,830 |
|
$ |
2,666,878 |
|
$ |
2,590,702 |
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
|
Selected Consolidated
Financial Information |
|
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Interest income |
$ |
115,599 |
|
|
$ |
88,933 |
|
|
|
Interest expense |
|
20,457 |
|
|
|
12,818 |
|
|
|
|
Interest income before provision for credit
losses |
|
95,142 |
|
|
|
76,115 |
|
|
|
Provision for credit losses |
|
4,000 |
|
|
|
4,500 |
|
|
|
Noninterest income |
|
4,608 |
|
|
|
4,173 |
|
|
|
Noninterest expense |
|
37,771 |
|
|
|
32,315 |
|
|
|
Income tax expense |
|
22,311 |
|
|
|
17,165 |
|
|
|
|
Net income |
|
35,668 |
|
|
|
26,308 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
Basic |
$ |
2.46 |
|
|
$ |
1.87 |
|
|
|
|
Diluted |
$ |
2.45 |
|
|
$ |
1.86 |
|
|
|
|
|
|
|
|
|
|
Ratios for the
period: |
|
|
|
|
|
Return on average assets |
|
1.38 |
% |
|
|
1.26 |
% |
|
|
Return on beginning equity |
|
16.00 |
% |
|
|
13.30 |
% |
|
|
Net interest margin (Fully-taxable equivalent) |
|
3.78 |
% |
|
|
3.74 |
% |
|
|
Noninterest expense to average assets |
|
1.46 |
% |
|
|
1.55 |
% |
|
|
Efficiency ratio |
|
37.87 |
% |
|
|
40.25 |
% |
|
|
Net charge-offs (recoveries) to average loans |
|
0.09 |
% |
|
|
0.16 |
% |
|
|
|
|
|
|
|
|
|
Average
balances: |
|
|
|
|
|
Total loans and leases |
$ |
2,692,928 |
|
|
$ |
2,220,438 |
|
|
|
Earning assets |
$ |
3,384,472 |
|
|
$ |
2,731,363 |
|
|
|
Total assets |
$ |
3,452,952 |
|
|
$ |
2,787,977 |
|
|
|
Total deposits |
$ |
2,991,411 |
|
|
$ |
2,428,402 |
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Selected Consolidated
Financial Information |
(unaudited) |
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
|
|
|
|
|
2017 |
|
|
|
2017 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2016 |
|
|
Unaudited quarterly statement of
financial position data: |
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
503,240 |
|
|
$ |
502,534 |
|
|
$ |
450,355 |
|
|
$ |
403,830 |
|
|
$ |
405,522 |
|
|
|
Securities held-to-maturity, at amortized cost |
|
9,076 |
|
|
|
9,611 |
|
|
|
9,912 |
|
|
|
10,337 |
|
|
|
4,812 |
|
|
|
Securities available-for-sale, at fair value |
|
193,890 |
|
|
|
192,474 |
|
|
|
197,455 |
|
|
|
199,833 |
|
|
|
203,272 |
|
|
|
Loans and Leases: |
|
|
|
|
|
|
|
|
|
|
|
Real estate - Single and multi-family
residential |
|
507,738 |
|
|
$ |
494,725 |
|
|
$ |
479,279 |
|
|
$ |
490,683 |
|
|
$ |
493,489 |
|
|
|
Real estate - Land |
|
15,723 |
|
|
|
16,512 |
|
|
|
16,546 |
|
|
|
16,575 |
|
|
|
16,605 |
|
|
|
Real estate - Commercial |
|
1,279,981 |
|
|
|
1,217,254 |
|
|
|
1,160,077 |
|
|
|
1,047,321 |
|
|
|
1,037,687 |
|
|
|
Real estate - For sale housing
construction |
|
94,033 |
|
|
|
95,462 |
|
|
|
109,703 |
|
|
|
104,960 |
|
|
|
104,973 |
|
|
|
Real estate - Other construction |
|
165,244 |
|
|
|
148,580 |
|
|
|
150,322 |
|
|
|
128,434 |
|
|
|
96,147 |
|
|
|
Commercial and industrial, trade finance and
other |
|
815,880 |
|
|
|
817,481 |
|
|
|
771,676 |
|
|
|
755,576 |
|
|
|
683,766 |
|
|
|
Gross loans |
|
2,878,599 |
|
|
|
2,790,014 |
|
|
|
2,687,603 |
|
|
|
2,543,549 |
|
|
|
2,432,667 |
|
|
|
Allowance for loan and lease losses |
|
(28,756 |
) |
|
|
(27,863 |
) |
|
|
(27,857 |
) |
|
|
(26,478 |
) |
|
|
(24,556 |
) |
|
|
Net deferred loan fees |
|
(3,376 |
) |
|
|
(3,245 |
) |
|
|
(2,572 |
) |
|
|
(1,682 |
) |
|
|
(1,913 |
) |
|
|
Total loans, net |
$ |
2,846,467 |
|
|
$ |
2,758,906 |
|
|
$ |
2,657,174 |
|
|
$ |
2,515,389 |
|
|
$ |
2,406,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
|
Investment in affordable housing |
|
|
|
35,939 |
|
|
|
37,029 |
|
|
|
22,904 |
|
|
|
23,670 |
|
|
|
24,278 |
|
|
|
Federal Home Loan Bank stock |
|
|
|
11,077 |
|
|
|
11,078 |
|
|
|
9,330 |
|
|
|
9,331 |
|
|
|
9,331 |
|
|
|
Other assets |
|
|
|
61,671 |
|
|
|
63,651 |
|
|
|
61,687 |
|
|
|
55,096 |
|
|
|
52,899 |
|
|
|
Total assets |
|
$ |
3,665,472 |
|
|
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
$ |
3,110,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
Demand |
$ |
599,722 |
|
|
$ |
641,153 |
|
|
$ |
576,060 |
|
|
$ |
586,272 |
|
|
$ |
575,388 |
|
|
|
Interest-bearing demand |
|
1,298,895 |
|
|
|
1,231,595 |
|
|
|
1,137,145 |
|
|
|
1,019,058 |
|
|
|
945,358 |
|
|
|
Savings |
|
27,132 |
|
|
|
27,870 |
|
|
|
34,434 |
|
|
|
34,067 |
|
|
|
31,344 |
|
|
|
Time certificates of $250,000 or more |
|
617,231 |
|
|
|
535,211 |
|
|
|
495,177 |
|
|
|
427,172 |
|
|
|
416,807 |
|
|
|
Other time certificates |
|
651,502 |
|
|
|
685,445 |
|
|
|
707,830 |
|
|
|
697,155 |
|
|
|
691,099 |
|
|
|
Total deposits |
$ |
3,194,482 |
|
|
$ |
3,121,274 |
|
|
$ |
2,950,646 |
|
|
$ |
2,763,724 |
|
|
$ |
2,659,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances from Federal Home Loan Bank |
|
|
$ |
6,431 |
|
|
$ |
6,459 |
|
|
$ |
26,487 |
|
|
$ |
26,516 |
|
|
$ |
26,544 |
|
|
|
Subordinated debt issuance |
|
98,932 |
|
|
|
98,901 |
|
|
|
98,870 |
|
|
|
98,839 |
|
|
|
98,851 |
|
|
|
Commitments to fund investment in affordable housing
partnership |
|
20,684 |
|
|
|
20,966 |
|
|
|
10,354 |
|
|
|
10,632 |
|
|
|
11,015 |
|
|
|
Other liabilities |
|
|
|
27,918 |
|
|
|
26,570 |
|
|
|
32,189 |
|
|
|
23,822 |
|
|
|
22,760 |
|
|
|
Total liabilities |
$ |
3,348,447 |
|
|
$ |
3,274,170 |
|
|
$ |
3,118,546 |
|
|
$ |
2,923,533 |
|
|
$ |
2,819,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
common stock, no par value |
$ |
180,700 |
|
|
$ |
180,110 |
|
|
$ |
178,884 |
|
|
$ |
190,675 |
|
|
$ |
188,430 |
|
|
|
Retained earnings |
|
135,497 |
|
|
|
124,740 |
|
|
|
115,931 |
|
|
|
108,261 |
|
|
|
100,804 |
|
|
|
Accumulated other comprehensive income |
|
828 |
|
|
|
375 |
|
|
|
(432 |
) |
|
|
(871 |
) |
|
|
2,024 |
|
|
|
Total shareholders' equity |
$ |
317,025 |
|
|
$ |
305,225 |
|
|
$ |
294,383 |
|
|
$ |
298,065 |
|
|
$ |
291,258 |
|
|
|
Total liabilities and shareholders' equity |
$ |
3,665,472 |
|
|
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
$ |
3,110,424 |
|
|
|
Preferred Bank |
|
|
Loan and Credit Quality
Information |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance For Credit Losses & Loss
History |
|
|
|
|
|
|
|
Nine Months Ended |
|
Year Ended |
|
|
|
|
|
|
|
September 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 |
|
|
1,940 |
|
|
|
4,323 |
|
|
|
|
|
Mini-perm
Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land -
Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land -
Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
|
Others |
|
|
- |
|
|
|
- |
|
|
|
|
|
Total Charge-Offs |
|
|
1,940 |
|
|
|
4,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
Commercial
& Industrial |
|
|
55 |
|
|
|
985 |
|
|
|
|
|
Mini-perm
Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Commercial |
|
|
17 |
|
|
|
26 |
|
|
|
|
|
Land -
Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land -
Commercial |
|
|
146 |
|
|
|
732 |
|
|
|
|
|
Total Recoveries |
|
|
218 |
|
|
|
1,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loan
Charge-Offs |
|
|
1,722 |
|
|
|
2,580 |
|
|
|
|
Provision
for Credit Losses |
|
|
4,000 |
|
|
|
6,400 |
|
|
|
Balance at
End of Period |
|
$ |
28,756 |
|
|
$ |
26,478 |
|
|
|
Average
Loans and Leases |
|
$ |
2,692,928 |
|
|
$ |
2,282,074 |
|
|
|
Loans and
Leases at end of Period |
|
$ |
2,878,599 |
|
|
|
2,543,549 |
|
|
|
Net
Charge-Offs to Average Loans and Leases |
|
|
0.09 |
% |
|
|
0.11 |
% |
|
|
Allowances
for credit losses to loans and leases at end of period |
|
|
1.00 |
% |
|
|
1.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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