Preferred Bank (NASDAQ:PFBC), an independent
commercial bank, today reported results for the quarter and year
ended December 31, 2017. Preferred Bank (“the Bank”) reported net
income of $7.7 million or $0.52 per diluted share for the fourth
quarter of 2017. The results included a one-time, after tax charge
totaling $6.7 million due to the passage of the Tax Cuts and Jobs
Act of 2017. The charge consisted of a $6.04 million charge
to the carrying value of the Bank’s deferred tax asset (“DTA”) and
a $615,000 charge to reflect a depreciation adjustment related to
the Bank’s investments in low income housing tax credit (“LIHTC”)
funds. These were both necessitated as a result of the
reduction in the corporate income tax rates from 35% to 21% due to
the December 22, 2017 passage of the Tax Cuts and Jobs Act of 2017.
These adjustments had the effect of reducing diluted EPS by
$0.45 per diluted share for the quarter and the year. The
reported net income for the fourth quarter of 2017 compares to net
income of $10.1 million or $0.70 per diluted share for the fourth
quarter of 2016 and compares to net income of $13.7 million or
$0.94 per diluted share for the third quarter of 2017. Net income
for the full year 2017 was $43.4 million or $2.96 per diluted
share, an increase in net income of $7.0 million or 19.3% over
2016.
Highlights from the fourth quarter of 2017:
|
|
$3.77 billion |
- Linked quarter deposit growth
|
|
2.1% |
- Linked quarter loan growth
|
|
2.2% |
|
|
32.9% |
|
|
3.86% |
Highlights from the year 2017:
|
|
15.6% |
|
|
$397.5 million or 15.6% |
|
|
$499.0 million or 18.1% |
|
|
36.6% |
|
|
3.80% |
Li Yu, Chairman and CEO commented, “We had a good quarter.
Net income was $7.7 million or $0.52 per diluted share. This
was after non-recurring charges of $6.7 million or $0.45 per
diluted share for impairment of our DTA ($6.04 million) and a
depreciation adjustment on our LIHTC investment ($615,000)
resulting from the new tax law signed on December 22, 2017.
Without these charges, we estimate that net income would have been
$14.3 million or $0.97 per diluted share, an all-time record for
our Bank.
“Deposit growth in the fourth quarter was $68 million or 2.1%
growth on a linked quarter basis. This growth rate is lower
than prior quarters and one of the reasons is that we chose not to
renew approximately $45 million of rate listing service
deposits. We believe the Bank has more than sufficient
liquidity to meet upcoming funding needs for lending
activities.
“Loan growth for the quarter was $62.0 million or 2.2% on a
linked quarter basis, which was also much lower than in recent
prior quarters. During the quarter, pay-off activities were
greater than in past quarters which contributed to the lower growth
totals.
“The net interest margin for the quarter was 3.86%, an
improvement of 7 basis points from the estimated adjusted NIM of
3.79% in the third quarter (adjusted due to exclude a
one-time interest recovery). Increased leverage during the quarter,
the rate hike in December and discipline on deposit interest all
contributed to the improvement.
“As of year-end 2017, we have raised $33.5 million of capital
using the 'at-the market' (ATM) method. The Bank’s Tier 1
leverage ratio at year-end was 9.52% an improvement from the 8.54%
as of September 30, 2017. We plan to issue another $16.5
million in the first quarter of 2018, and that would complete the
entire $50 million in new capital as specified in our Stock Permit
granted by the California Department of Business Oversight.
Our capital levels should be sufficient to meet future growth.
“2017 has been a good year for Preferred Bank. For the
year, total assets grew 17%, loans grew 16% and deposits grew by
18%. On a pre-tax basis, income increased by approximately 39% from
2016 and is more indicative of our performance against 2016 and
previous years. All of these numbers substantially exceeded
our internal expectations as well as market consensus. During
the year, we also increased our work force by 11% largely in
administrative areas such as compliance, electronic banking and BSA
to prepare ourselves for 2018 and beyond.
"With good profit metrics, a highly asset-sensitive balance
sheet and a lower corporate tax rate, we are quite optimistic for
the year 2018.”
Net Interest Income and Net Interest Margin.
Net interest income before provision for loan and lease losses was
$34.6 million for the fourth quarter of 2017. This compares
favorably to the $28.1 million recorded in the fourth quarter of
2016 but is slightly below the $35.4 million recorded in the third
quarter of 2017 as that quarter was aided by a $1.4 million
interest recovery on a previously charged-off loan. The increase
over last year is due primarily to growth in interest income on
loans partially offset by an increase in interest expense on
deposits. The Bank’s taxable equivalent net interest margin was
3.86% for the fourth quarter of 2017, a 19 basis point increase
over the 3.67% achieved in the fourth quarter of 2016. This was
primarily due to an increase in overall loan yields as the Prime
rate increased three times over the course of 2017. Last quarter,
the Bank recorded a 3.95% margin but that was aided by the
aforementioned loan interest recovery. Excluding that recovery, the
margin would have been 3.79% in the third quarter of 2017 and would
have meant a 7 basis point increase in the net interest margin in
the fourth quarter of 2017.
Noninterest Income. For the fourth quarter of
2017, noninterest income was $1,215,000 compared with $1,286,000
for the same quarter last year and compared to $1,243,000 for the
third quarter of 2017. The decrease from the fourth quarter of 2016
is primarily due to a gain on a called security of $133,000 in the
fourth quarter of 2016. Service charges on deposits and letter of
credit income both increased over the fourth quarter of 2016 but
were relatively flat when compared to the third quarter of
2017.
Noninterest Expense. Total noninterest expense
was $11.8 million for the fourth quarter of 2017, an increase of
$553,000 over the same period last year and a decrease of $403,000
from the $12.2 million recorded in the third quarter of 2017.
Salaries and benefits expense totaled $7.0 million for the fourth
quarter of 2017, an increase of $321,000 over the $6.7 million
recorded for the same period last year but a decrease of $897,000
from the $7.9 million recorded in the third quarter of 2017. The
increase over the same period last year is due to staffing
increases, growth of the Bank, as well as regular merit
increases. The decrease from the third quarter of 2017 is primarily
due to a decrease in the accrual of our bonus expense. Occupancy
expense totaled $1.3 million for the quarter, an increase of
$90,000 over the $1.2 million recorded in the same period in 2016
and relatively flat when compared to the third quarter of 2017. The
increase over the prior year was due to normal rent increases as
well as the new administrative offices the Bank opened in November
2016 in El Monte, California. Professional services expense was
$1.2 million for the fourth quarter of 2017 compared to $1.5
million for the same quarter of 2016 and $963,000 recorded in the
third quarter of 2017. The increase over the third quarter of 2017
was due to increased legal fees and the decrease from the same
period last year was also due to legal fees. The Bank incurred
$169,000 in costs related to its one OREO property. This compares
to $187,000 in the fourth quarter of 2016 and $168,000 in the third
quarter of 2017. Other expenses were $1.6 million for the fourth
quarter of 2017 compared to $1.1 million for the same period last
year and $1.3 million for the third quarter of 2017. The increase
over last year was mainly due to an increase in FDIC assessments of
$325,000 and the increase over the third quarter of 2017 was due to
a recovery in the third quarter of $250,000 on a loan which was
previously charged down as a loan held for sale and subsequently
sold. In addition, the Bank recorded an off balance sheet reserve
for unfunded loans of $120,000 during the fourth quarter of
2017.
Income Taxes
The Bank recorded a provision for income taxes of $8.1 million
for the fourth quarter of 2017. In addition to that, the Bank also
recorded a charge to its DTA of $6.04 million and also recorded a
tax charge related to its investments in LIHTC funds of $615,000.
These charges were both necessitated by the signing of the Federal
Tax Act on December 22, 2017 which lowered the Federal corporate
tax rate from 35% to 21%. Excluding these charges, the Bank’s
effective tax rate (“ETR”) would have been 35.7% for the quarter.
This is down from the ETR of 38.0% for the fourth quarter of 2016
and down from the 41% ETR recorded in the third quarter of 2017.
The decrease from both periods is due to the recognition this
quarter, of certain past compensation costs not being subject to
Internal Revenue Code (“IRC”) Section 162(m).
Balance Sheet Summary
Total gross loans and leases at December 31, 2017 were $2.94
billion, an increase of $397.5 million or 15.6% over the total of
$2.54 billion as of December 31, 2016. Total deposits reached $3.26
billion, an increase of $499 million or 18.1% over the total of
$2.76 billion as of December 31, 2016. Total assets reached $3.77
billion as of December 31, 2017, an increase of $548.3 million or
17.0% over the total of $3.22 billion as of December 31, 2016.
Asset Quality
Loans
As of December 31, 2017 nonaccrual loans totaled $6.5 million, a
decrease of $1.1 million over the $7.6 million total as of December
31, 2016. Total net charge-offs for the fourth quarter of 2017 were
$334,000 compared to net charge-offs of $408,000 in the third
quarter of 2017 and compared to net recoveries of $22,000 for the
fourth quarter of 2016. The Bank recorded a provision for loan loss
of $1.5 million for the fourth quarter of 2017, compared to a
provision of $1.9 million recorded in the same quarter last year
and compared to the $1.3 million provision recorded in the third
quarter of 2017. The allowance for loan loss at December 31, 2017
was $29.9 million or 1.02% of total loans compared to $26.5 million
or 1.04% of total loans at December 31, 2016.
OREO
As of December 31, 2017 and December 31, 2016, the Bank held one
OREO property, a $4.1 million multi-family property located outside
of California.
CapitalizationAs of December 31, 2017, the
Bank’s leverage ratio was 9.52%, the common equity tier 1 capital
ratio was 10.07% and the total capital ratio was 13.83%. 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 fourth quarter and full year 2017 financial results will be
held tomorrow, January 23, 2018 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 February 6, 2018; the passcode is
10115802.
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 eleven 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 (2), 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 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 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 PresidentChief 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 |
|
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
|
|
|
|
2017 |
|
2017 |
|
2016 |
Interest
income: |
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
38,456 |
|
|
$ |
39,362 |
|
|
$ |
31,248 |
|
|
Investment securities |
|
|
3,198 |
|
|
|
3,172 |
|
|
|
2,570 |
|
|
Fed funds sold |
|
|
347 |
|
|
|
320 |
|
|
|
162 |
|
|
|
Total interest income |
|
|
42,001 |
|
|
|
42,854 |
|
|
|
33,980 |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
2,229 |
|
|
|
2,263 |
|
|
|
1,320 |
|
|
Savings |
|
|
17 |
|
|
|
17 |
|
|
|
21 |
|
|
Time certificates |
|
|
3,641 |
|
|
|
3,601 |
|
|
|
2,982 |
|
|
FHLB borrowings |
|
|
21 |
|
|
|
21 |
|
|
|
67 |
|
|
Subordinated debit |
|
|
1,531 |
|
|
|
1,530 |
|
|
|
1,526 |
|
|
|
Total interest expense |
|
|
7,439 |
|
|
|
7,432 |
|
|
|
5,916 |
|
|
|
Net interest income |
|
|
34,562 |
|
|
|
35,422 |
|
|
|
28,064 |
|
Provision
for loan losses |
|
|
1,500 |
|
|
|
1,300 |
|
|
|
1,900 |
|
|
|
Net interest income after provision for |
|
|
|
|
|
|
|
|
|
loan losses |
|
|
33,062 |
|
|
|
34,122 |
|
|
|
26,164 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest
income: |
|
|
|
|
|
|
|
Fees & service charges on deposit accounts |
|
|
312 |
|
|
|
299 |
|
|
|
258 |
|
|
Letters of credit fee income |
|
|
627 |
|
|
|
632 |
|
|
|
599 |
|
|
BOLI income |
|
|
89 |
|
|
|
88 |
|
|
|
87 |
|
|
Net gain on sale of investment securities |
|
|
4 |
|
|
|
- |
|
|
|
133 |
|
|
Other income |
|
|
183 |
|
|
|
224 |
|
|
|
209 |
|
|
|
Total noninterest income |
|
|
1,215 |
|
|
|
1,243 |
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
|
|
Salary and employee benefits |
|
|
6,981 |
|
|
|
7,878 |
|
|
|
6,660 |
|
|
Net occupancy expense |
|
|
1,289 |
|
|
|
1,257 |
|
|
|
1,199 |
|
|
Business development and promotion expense |
|
|
204 |
|
|
|
251 |
|
|
|
242 |
|
|
Professional services |
|
|
1,227 |
|
|
|
963 |
|
|
|
1,492 |
|
|
Office supplies and equipment expense |
|
|
344 |
|
|
|
334 |
|
|
|
350 |
|
|
Other real estate owned related expense |
|
|
169 |
|
|
|
168 |
|
|
|
187 |
|
|
Other |
|
|
|
1,562 |
|
|
|
1,328 |
|
|
|
1,093 |
|
|
|
Total noninterest expense |
|
|
11,776 |
|
|
|
12,179 |
|
|
|
11,223 |
|
|
|
Income before provision for income taxes |
|
|
22,501 |
|
|
|
23,186 |
|
|
|
16,227 |
|
Income tax
expense |
|
|
14,775 |
|
|
|
9,516 |
|
|
|
6,166 |
|
|
|
Net income |
|
$ |
7,726 |
|
|
$ |
13,670 |
|
|
$ |
10,061 |
|
|
|
|
|
|
|
|
|
|
|
Dividend
and earnings allocated to participating securities |
|
|
(89 |
) |
|
|
(162 |
) |
|
|
(132 |
) |
Net income
available to common shareholders |
|
$ |
7,637 |
|
|
$ |
13,508 |
|
|
$ |
9,929 |
|
|
|
|
|
|
|
|
|
|
|
Income per
share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.52 |
|
|
$ |
0.94 |
|
|
$ |
0.71 |
|
|
|
Diluted |
|
$ |
0.52 |
|
|
$ |
0.94 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,710,680 |
|
|
|
14,378,552 |
|
|
|
13,984,346 |
|
|
|
Diluted |
|
|
14,751,145 |
|
|
|
14,426,522 |
|
|
|
14,066,596 |
|
|
|
|
|
|
|
|
|
|
|
Dividends
per share |
|
$ |
0.22 |
|
|
$ |
0.20 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed Consolidated
Statements of Operations |
(unaudited) |
(in thousands, except
for net income per share and
shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
Change |
|
|
|
|
|
2017 |
|
2016 |
|
% |
Interest
income: |
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
144,678 |
|
|
$ |
114,148 |
|
|
26.7 |
% |
|
Investment securities |
|
|
11,792 |
|
|
|
8,292 |
|
|
42.2 |
% |
|
Fed funds sold |
|
|
1,130 |
|
|
|
473 |
|
|
138.9 |
% |
|
|
Total interest income |
|
|
157,600 |
|
|
|
122,913 |
|
|
28.2 |
% |
|
|
|
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
|
|
Interest-bearing demand |
|
|
7,901 |
|
|
|
4,730 |
|
|
67.0 |
% |
|
Savings |
|
|
72 |
|
|
|
76 |
|
|
-5.3 |
% |
|
Time certificates |
|
|
13,633 |
|
|
|
10,855 |
|
|
25.6 |
% |
|
FHLB borrowings |
|
|
167 |
|
|
|
259 |
|
|
-35.2 |
% |
|
Subordinated debit issuance |
|
|
6,123 |
|
|
|
2,814 |
|
|
100.0 |
% |
|
|
Total interest expense |
|
|
27,896 |
|
|
|
18,734 |
|
|
48.9 |
% |
|
|
Net interest income |
|
|
129,704 |
|
|
|
104,179 |
|
|
24.5 |
% |
Provision
for credit losses |
|
|
5,500 |
|
|
|
6,400 |
|
|
-14.1 |
% |
|
|
Net interest income after provision for |
|
|
|
|
|
|
|
|
loan losses |
|
|
124,204 |
|
|
|
97,779 |
|
|
27.0 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest
income: |
|
|
|
|
|
|
|
Fees & service charges on deposit accounts |
|
|
1,269 |
|
|
|
1,212 |
|
|
4.7 |
% |
|
Letters of credit fee income |
|
|
2,635 |
|
|
|
2,371 |
|
|
11.2 |
% |
|
BOLI income |
|
|
351 |
|
|
|
346 |
|
|
1.4 |
% |
|
Net gain on sale of investment securities |
|
|
4 |
|
|
|
169 |
|
|
100.0 |
% |
|
Other income |
|
|
1,565 |
|
|
|
1,361 |
|
|
15.0 |
% |
|
|
Total noninterest income |
|
|
5,824 |
|
|
|
5,459 |
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
|
|
Salary and employee benefits |
|
|
30,041 |
|
|
|
25,813 |
|
|
16.4 |
% |
|
Net occupancy expense |
|
|
4,942 |
|
|
|
4,830 |
|
|
2.3 |
% |
|
Business development and promotion expense |
|
|
883 |
|
|
|
845 |
|
|
4.4 |
% |
|
Professional services |
|
|
4,390 |
|
|
|
5,297 |
|
|
-17.1 |
% |
|
Office supplies and equipment expense |
|
|
1,340 |
|
|
|
1,422 |
|
|
-5.8 |
% |
|
Other real estate owned related expense |
|
|
563 |
|
|
|
825 |
|
|
-31.8 |
% |
|
Other |
|
|
|
7,389 |
|
|
|
4,506 |
|
|
64.0 |
% |
|
|
Total noninterest expense |
|
|
49,548 |
|
|
|
43,538 |
|
|
13.8 |
% |
|
|
Income before provision for income taxes |
|
|
80,480 |
|
|
|
59,700 |
|
|
34.8 |
% |
Income tax
expense |
|
|
37,086 |
|
|
|
23,331 |
|
|
59.0 |
% |
|
|
Net income |
|
$ |
43,394 |
|
|
$ |
36,369 |
|
|
19.3 |
% |
|
|
|
|
|
|
|
|
|
|
Dividend
and earnings allocated to participating securities |
|
|
(499 |
) |
|
|
(547 |
) |
|
-8.7 |
% |
Net income
available to common shareholders |
|
$ |
42,895 |
|
|
$ |
13,508 |
|
|
217.6 |
% |
|
|
|
|
|
|
|
|
|
|
Income per
share available to common shareholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.97 |
|
|
$ |
2.58 |
|
|
15.2 |
% |
|
|
Diluted |
|
$ |
2.96 |
|
|
$ |
2.56 |
|
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,438,964 |
|
|
|
13,883,497 |
|
|
4.0 |
% |
|
|
Diluted |
|
|
14,492,712 |
|
|
|
13,987,257 |
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
Dividends
per share |
|
$ |
0.80 |
|
|
$ |
0.63 |
|
|
27.0 |
% |
|
|
|
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed Consolidated
Statements of Financial
Condition |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
|
(Unaudited) |
|
(Audited) |
|
Assets |
|
|
|
|
|
|
|
|
|
Cash and
due from banks |
$ |
446,822 |
|
|
$ |
306,330 |
|
|
Fed funds
sold |
|
108,500 |
|
|
|
97,500 |
|
|
Cash and cash equivalents |
|
555,322 |
|
|
|
403,830 |
|
|
|
|
|
|
|
Securities
held to maturity, at amortized cost |
|
8,780 |
|
|
|
10,337 |
|
|
Securities
available-for-sale, at fair value |
|
188,203 |
|
|
|
199,833 |
|
|
Loans and
leases |
|
2,941,093 |
|
|
|
2,543,549 |
|
|
Less
allowance for loan and lease losses |
|
(29,921 |
) |
|
|
(26,478 |
) |
|
Less net
deferred loan fees |
|
(3,099 |
) |
|
|
(1,682 |
) |
|
Net loans and leases |
|
2,908,073 |
|
|
|
2,515,389 |
|
|
|
|
|
|
|
Loans held
for sale, at lower of cost or fair value |
|
440 |
|
|
|
- |
|
|
|
|
|
|
|
Other real
estate owned |
|
4,112 |
|
|
|
4,112 |
|
|
Customers'
liability on acceptances |
|
7,272 |
|
|
|
772 |
|
|
Bank
furniture and fixtures, net |
|
5,684 |
|
|
|
5,313 |
|
|
Bank-owned
life insurance |
|
9,066 |
|
|
|
8,825 |
|
|
Accrued
interest receivable |
|
11,291 |
|
|
|
9,550 |
|
|
Investment
in affordable housing |
|
34,708 |
|
|
|
23,670 |
|
|
Federal
Home Loan Bank stock |
|
11,077 |
|
|
|
9,331 |
|
|
Deferred
tax assets |
|
17,476 |
|
|
|
26,605 |
|
|
Income tax
receivable |
|
2,713 |
|
|
|
- |
|
|
Other
asset |
|
5,642 |
|
|
|
4,031 |
|
|
Total assets |
$ |
3,769,859 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Deposits: |
|
|
|
|
Demand |
$ |
659,487 |
|
|
$ |
586,272 |
|
|
Interest-bearing demand |
|
1,353,974 |
|
|
|
1,019,058 |
|
|
Savings |
|
24,429 |
|
|
|
34,067 |
|
|
Time certificates of $250,000 or more |
|
621,648 |
|
|
|
427,172 |
|
|
Other time certificates |
|
603,152 |
|
|
|
697,155 |
|
|
Total deposits |
$ |
3,262,690 |
|
|
$ |
2,763,724 |
|
|
Acceptances outstanding |
|
7,272 |
|
|
|
772 |
|
|
Advances from Federal Home Loan Bank |
|
6,401 |
|
|
|
26,516 |
|
|
Subordinated debt issuance |
|
98,963 |
|
|
|
98,839 |
|
|
Commitments to fund investment in affordable housing
partnership |
|
18,523 |
|
|
|
10,632 |
|
|
Accrued interest payable |
|
3,833 |
|
|
|
3,199 |
|
|
Other liabilities |
|
17,143 |
|
|
|
19,851 |
|
|
Total liabilities |
|
3,414,825 |
|
|
|
2,923,533 |
|
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
Shareholders' equity: |
|
|
|
|
Preferred stock. Authorized 25,000,000 shares; issued and no
outstanding shares at December 31, 2017 and December 31, 2016 |
|
— |
|
|
|
— |
|
|
Common stock, no par value. Authorized 100,000,000 shares;
issued and outstanding 15,122,313 at December 31, 2017 and
14,232,907 at December 31, 2016, respectively. |
|
207,948 |
|
|
|
169,861 |
|
|
Treasury stock |
|
(33,233 |
) |
|
|
(19,115 |
) |
|
Additional paid-in-capital |
|
39,462 |
|
|
|
39,929 |
|
|
Accumulated income |
|
139,684 |
|
|
|
108,261 |
|
|
Accumulated other comprehensive income (loss): |
|
|
|
|
Unrealized gain (loss) on securities, available-for-sale, net
of tax of $504 and $(632) at December 31, 2017 and December 31,
2016, respectively |
|
1,173 |
|
|
|
(871 |
) |
|
Total shareholders' equity |
|
355,034 |
|
|
|
298,065 |
|
|
Total liabilities and shareholders' equity |
$ |
3,769,859 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
PREFERRED BANK |
Selected Consolidated Financial
Information |
(unaudited) |
(in thousands, except for
ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|
|
|
|
2017 |
2017 |
2017 |
2017 |
2016 |
Unaudited historical quarterly operations
data: |
|
|
|
|
|
Interest income |
$ |
42,001 |
|
$ |
42,854 |
|
$ |
38,113 |
|
$ |
34,632 |
|
$ |
33,980 |
|
|
Interest expense |
|
7,439 |
|
|
7,432 |
|
|
6,835 |
|
|
6,190 |
|
|
5,916 |
|
|
Interest income before provision for credit losses |
|
34,562 |
|
|
35,422 |
|
|
31,278 |
|
|
28,442 |
|
|
28,064 |
|
|
Provision for credit losses |
|
1,500 |
|
|
1,300 |
|
|
1,200 |
|
|
1,500 |
|
|
1,900 |
|
|
Noninterest income |
|
1,215 |
|
|
1,243 |
|
|
1,275 |
|
|
2,090 |
|
|
1,286 |
|
|
Noninterest expense |
|
11,776 |
|
|
12,179 |
|
|
12,414 |
|
|
13,178 |
|
|
11,223 |
|
|
Income tax expense |
|
14,775 |
|
|
9,516 |
|
|
7,222 |
|
|
5,573 |
|
|
6,166 |
|
|
Net income |
|
7,726 |
|
|
13,670 |
|
|
11,717 |
|
|
10,281 |
|
|
10,061 |
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
Basic |
$ |
0.52 |
|
$ |
0.94 |
|
$ |
0.81 |
|
$ |
0.71 |
|
$ |
0.71 |
|
|
Diluted |
$ |
0.52 |
|
$ |
0.94 |
|
$ |
0.80 |
|
$ |
0.71 |
|
$ |
0.70 |
|
|
|
|
|
|
|
|
Ratios for the period: |
|
|
|
|
|
|
Return on average assets |
|
0.83 |
% |
|
1.48 |
% |
|
1.36 |
% |
|
1.29 |
% |
|
1.28 |
% |
|
Return on beginning equity |
|
9.67 |
% |
|
17.77 |
% |
|
15.96 |
% |
|
13.99 |
% |
|
13.74 |
% |
|
Net interest margin (Fully-taxable equivalent) |
|
3.86 |
% |
|
3.95 |
% |
|
3.75 |
% |
|
3.67 |
% |
|
3.67 |
% |
|
Noninterest expense to average assets |
|
1.27 |
% |
|
1.32 |
% |
|
1.44 |
% |
|
1.66 |
% |
|
1.43 |
% |
|
Efficiency ratio |
|
32.92 |
% |
|
33.22 |
% |
|
38.13 |
% |
|
43.16 |
% |
|
38.24 |
% |
|
Net charge-offs (recoveries) to average loans
(annualized) |
|
0.05 |
% |
|
0.06 |
% |
|
0.18 |
% |
|
0.02 |
% |
|
0.00 |
% |
|
|
|
|
|
|
|
Ratios as of period end: |
|
|
|
|
|
|
Tier 1 leverage capital ratio |
|
9.52 |
% |
|
8.54 |
% |
|
8.69 |
% |
|
9.01 |
% |
|
9.43 |
% |
|
Common equity tier 1 risk-based capital ratio |
|
10.07 |
% |
|
9.24 |
% |
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
Tier 1 risk-based capital ratio |
|
10.07 |
% |
|
9.24 |
% |
|
9.13 |
% |
|
9.15 |
% |
|
9.83 |
% |
|
Total risk-based capital ratio |
|
|
13.83 |
% |
|
13.08 |
% |
|
13.04 |
% |
|
13.21 |
% |
|
14.09 |
% |
|
Allowances for credit losses to loans and leases at end
of period |
|
1.02 |
% |
|
1.00 |
% |
|
1.00 |
% |
|
1.04 |
% |
|
1.04 |
% |
|
Allowance for credit losses to non-performing |
|
|
|
|
|
|
loans and leases |
|
461.28 |
% |
|
415.32 |
% |
|
426.43 |
% |
|
357.09 |
% |
|
346.22 |
% |
|
|
|
|
|
|
|
|
|
Average balances: |
|
|
|
|
|
|
Total loans and leases |
$ |
2,853,134 |
|
$ |
2,817,271 |
|
$ |
2,695,208 |
|
$ |
2,563,473 |
|
$ |
2,465,492 |
|
|
Earning assets |
$ |
3,572,826 |
|
$ |
3,579,578 |
|
$ |
3,401,193 |
|
$ |
3,167,031 |
|
$ |
3,066,189 |
|
|
Total assets |
$ |
3,678,237 |
|
$ |
3,658,833 |
|
$ |
3,466,094 |
|
$ |
3,228,142 |
|
$ |
3,124,984 |
|
|
Total deposits |
$ |
3,179,679 |
|
$ |
3,190,344 |
|
$ |
3,002,583 |
|
$ |
2,775,830 |
|
$ |
2,666,878 |
|
PREFERRED
BANK |
|
Selected Consolidated
Financial Information |
|
(unaudited) |
|
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
2017 |
|
2016 |
|
|
Interest income |
$ |
157,600 |
|
|
$ |
122,913 |
|
|
|
Interest expense |
|
27,896 |
|
|
|
18,734 |
|
|
|
Interest income before provision for credit losses |
|
129,704 |
|
|
|
104,179 |
|
|
|
Provision for credit losses |
|
5,500 |
|
|
|
6,400 |
|
|
|
Noninterest income |
|
5,824 |
|
|
|
5,459 |
|
|
|
Noninterest expense |
|
49,548 |
|
|
|
43,538 |
|
|
|
Income tax expense |
|
37,086 |
|
|
|
23,331 |
|
|
|
Net income |
|
43,394 |
|
|
|
36,369 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
Basic |
$ |
2.97 |
|
|
$ |
2.58 |
|
|
|
Diluted |
$ |
2.96 |
|
|
$ |
2.56 |
|
|
|
|
|
|
|
|
|
|
Ratios for the
period: |
|
|
|
|
|
Return on average assets |
|
1.24 |
% |
|
|
1.26 |
% |
|
|
Return on beginning equity |
|
14.56 |
% |
|
|
13.30 |
% |
|
|
Net interest margin (Fully-taxable equivalent) |
|
3.80 |
% |
|
|
3.74 |
% |
|
|
Noninterest expense to average assets |
|
1.41 |
% |
|
|
1.55 |
% |
|
|
Efficiency ratio |
|
36.56 |
% |
|
|
40.25 |
% |
|
|
Net charge-offs (recoveries) to average loans |
|
0.08 |
% |
|
|
0.16 |
% |
|
|
|
|
|
|
|
|
|
Average
balances: |
|
|
|
|
|
Total loans and leases |
$ |
2,733,369 |
|
|
$ |
2,220,438 |
|
|
|
Earning assets |
$ |
3,431,985 |
|
|
$ |
2,731,363 |
|
|
|
Total assets |
$ |
3,509,769 |
|
|
$ |
2,787,977 |
|
|
|
Total deposits |
$ |
3,038,910 |
|
|
$ |
2,428,402 |
|
|
PREFERRED
BANK |
|
Selected Consolidated
Financial Information |
|
(unaudited) |
|
(in thousands, except
for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
|
|
|
|
|
2017 |
|
2017 |
|
2017 |
|
2017 |
|
2016 |
|
|
Unaudited quarterly statement of financial position
data: |
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
555,322 |
|
|
$ |
503,240 |
|
|
$ |
502,534 |
|
|
$ |
450,355 |
|
|
$ |
403,830 |
|
|
|
|
Securities held-to-maturity, at amortized cost |
|
8,780 |
|
|
|
9,076 |
|
|
|
9,611 |
|
|
|
9,912 |
|
|
|
10,337 |
|
|
|
|
Securities available-for-sale, at fair value |
|
188,203 |
|
|
|
193,890 |
|
|
|
192,474 |
|
|
|
197,455 |
|
|
|
199,833 |
|
|
|
|
Loans and Leases: |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate - Single and multi-family residential |
|
513,953 |
|
|
|
507,738 |
|
|
$ |
494,725 |
|
|
$ |
479,279 |
|
|
$ |
490,683 |
|
|
|
|
Real estate - Land |
|
10,863 |
|
|
|
15,723 |
|
|
|
16,512 |
|
|
|
16,546 |
|
|
|
16,575 |
|
|
|
|
Real estate - Commercial |
|
1,244,486 |
|
|
|
1,279,981 |
|
|
|
1,217,254 |
|
|
|
1,160,077 |
|
|
|
1,047,321 |
|
|
|
|
Real estate - For sale housing construction |
|
85,199 |
|
|
|
94,033 |
|
|
|
95,462 |
|
|
|
109,703 |
|
|
|
104,960 |
|
|
|
|
Real estate - Other construction |
|
198,602 |
|
|
|
165,244 |
|
|
|
148,580 |
|
|
|
150,322 |
|
|
|
128,434 |
|
|
|
|
Commercial and industrial, trade finance and other |
|
887,990 |
|
|
|
815,880 |
|
|
|
817,481 |
|
|
|
771,676 |
|
|
|
755,576 |
|
|
|
|
Gross loans |
|
2,941,093 |
|
|
|
2,878,599 |
|
|
|
2,790,014 |
|
|
|
2,687,603 |
|
|
|
2,543,549 |
|
|
|
|
Allowance for loan and lease losses |
|
(29,921 |
) |
|
|
(28,756 |
) |
|
|
(27,863 |
) |
|
|
(27,857 |
) |
|
|
(26,478 |
) |
|
|
|
Net deferred loan fees |
|
(3,099 |
) |
|
|
(3,376 |
) |
|
|
(3,245 |
) |
|
|
(2,572 |
) |
|
|
(1,682 |
) |
|
|
|
Net loans, excluding loans held for sale |
$ |
2,908,073 |
|
|
$ |
2,846,467 |
|
|
$ |
2,758,906 |
|
|
$ |
2,657,174 |
|
|
$ |
2,515,389 |
|
|
|
|
Loans held for sale |
$ |
440 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
Net loans and leases |
$ |
2,908,513 |
|
|
$ |
2,846,467 |
|
|
$ |
2,758,906 |
|
|
$ |
2,657,174 |
|
|
$ |
2,515,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
$ |
4,112 |
|
|
|
|
Investment in affordable housing |
|
|
|
34,708 |
|
|
|
35,939 |
|
|
|
37,029 |
|
|
|
22,904 |
|
|
|
23,670 |
|
|
|
|
Federal
Home Loan Bank stock |
|
|
|
11,077 |
|
|
|
11,077 |
|
|
|
11,078 |
|
|
|
9,330 |
|
|
|
9,331 |
|
|
|
|
Other
assets |
|
|
|
59,144 |
|
|
|
61,671 |
|
|
|
63,651 |
|
|
|
61,687 |
|
|
|
55,096 |
|
|
|
|
Total assets |
|
$ |
3,769,859 |
|
|
$ |
3,665,472 |
|
|
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
$ |
659,487 |
|
|
$ |
599,722 |
|
|
$ |
641,153 |
|
|
$ |
576,060 |
|
|
$ |
586,272 |
|
|
|
|
Interest-bearing demand |
|
1,353,974 |
|
|
|
1,298,895 |
|
|
|
1,231,595 |
|
|
|
1,137,145 |
|
|
|
1,019,058 |
|
|
|
|
Savings |
|
24,429 |
|
|
|
27,132 |
|
|
|
27,870 |
|
|
|
34,434 |
|
|
|
34,067 |
|
|
|
|
Time certificates of $250,000 or more |
|
621,648 |
|
|
|
617,231 |
|
|
|
535,211 |
|
|
|
495,177 |
|
|
|
427,172 |
|
|
|
|
Other time certificates |
|
603,152 |
|
|
|
651,502 |
|
|
|
685,445 |
|
|
|
707,830 |
|
|
|
697,155 |
|
|
|
|
Total deposits |
$ |
3,262,690 |
|
|
$ |
3,194,482 |
|
|
$ |
3,121,274 |
|
|
$ |
2,950,646 |
|
|
$ |
2,763,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances
from Federal Home Loan Bank |
|
|
$ |
7,272 |
|
|
$ |
6,431 |
|
|
$ |
6,459 |
|
|
$ |
26,487 |
|
|
$ |
26,516 |
|
|
|
|
Subordinated debt issuance |
|
98,963 |
|
|
|
98,932 |
|
|
|
98,901 |
|
|
|
98,870 |
|
|
|
98,839 |
|
|
|
|
Commitments to fund investment in affordable housing
partnership |
|
18,523 |
|
|
|
20,684 |
|
|
|
20,966 |
|
|
|
10,354 |
|
|
|
10,632 |
|
|
|
|
Other
liabilities |
|
|
|
27,377 |
|
|
|
27,918 |
|
|
|
26,570 |
|
|
|
32,189 |
|
|
|
23,822 |
|
|
|
|
Total liabilities |
$ |
3,414,825 |
|
|
$ |
3,348,447 |
|
|
$ |
3,274,170 |
|
|
$ |
3,118,546 |
|
|
$ |
2,923,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net common stock, no par value |
$ |
214,177 |
|
|
$ |
180,700 |
|
|
$ |
180,110 |
|
|
$ |
178,884 |
|
|
$ |
190,675 |
|
|
|
|
Retained earnings |
|
139,684 |
|
|
|
135,497 |
|
|
|
124,740 |
|
|
|
115,931 |
|
|
|
108,261 |
|
|
|
|
Accumulated other comprehensive income |
|
1,173 |
|
|
|
828 |
|
|
|
375 |
|
|
|
(432 |
) |
|
|
(871 |
) |
|
|
|
Total shareholders' equity |
$ |
355,034 |
|
|
$ |
317,025 |
|
|
$ |
305,225 |
|
|
$ |
294,383 |
|
|
$ |
298,065 |
|
|
|
|
Total liabilities and shareholders' equity |
$ |
3,769,859 |
|
|
$ |
3,665,472 |
|
|
$ |
3,579,395 |
|
|
$ |
3,412,929 |
|
|
$ |
3,221,598 |
|
|
|
|
Preferred Bank |
|
|
Loan and Credit Quality
Information |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance For Credit Losses & Loss
History |
|
|
|
|
|
|
|
Year Ended |
|
Year Ended |
|
|
|
|
|
|
|
December 31, 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 |
|
|
2,274 |
|
|
|
4,323 |
|
|
|
|
|
Mini-perm Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land - Commercial |
|
|
- |
|
|
|
- |
|
|
|
|
|
Others |
|
|
- |
|
|
|
- |
|
|
|
|
|
Total Charge-Offs |
|
|
2,274 |
|
|
|
4,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
Commercial & Industrial |
|
|
55 |
|
|
|
985 |
|
|
|
|
|
Mini-perm Real Estate |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Construction - Commercial |
|
|
17 |
|
|
|
26 |
|
|
|
|
|
Land - Residential |
|
|
- |
|
|
|
- |
|
|
|
|
|
Land - Commercial |
|
|
145 |
|
|
|
732 |
|
|
|
|
|
Total Recoveries |
|
|
217 |
|
|
|
1,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loan Charge-Offs |
|
|
2,057 |
|
|
|
2,580 |
|
|
|
|
Provision for Credit Losses |
|
|
5,500 |
|
|
|
6,400 |
|
|
|
Balance at
End of Period |
|
$ |
29,921 |
|
|
$ |
26,478 |
|
|
|
Average
Loans and Leases |
|
$ |
3,431,985 |
|
|
$ |
2,282,074 |
|
|
|
Loans and
Leases at end of Period |
|
$ |
2,941,533 |
|
|
|
2,543,549 |
|
|
|
Net
Charge-Offs to Average Loans and Leases |
|
|
0.08 |
% |
|
|
0.11 |
% |
|
|
Allowances
for credit losses to loans and leases at end of period |
|
|
1.02 |
% |
|
|
1.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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