LOS ANGELES, July 5, 2012 (GLOBE NEWSWIRE) -- Preferred Bank (Nasdaq:PFBC) (the "Bank"), today announced developments regarding two different loans which will negatively impact the Bank's second quarter financial results.
Two Significant Loan Charges
In the case of the first loan, the Bank recently received the results of the annual Shared National Credit (SNiC) Report this past week. The report requires the Bank to place a $13.9 million (Bank's portion) loan on nonaccrual status and further requires the Bank to write off 45% of the principal balance. This loan, which is administered by a very large national bank, is $219 million in total and is collateralized by real estate. This loan has been current to this date as to contractually due principal and interest payments; however, the loan matured as of April 30, 2012, and the borrower was not able to re margin the loan based on updated collateral values. However, as of July 2, 2012, the loan renewal and modification were signed requiring the borrower to pledge the cash flows from a separate, large and renowned commercial real estate property to support the principal and interest payments on this loan. Management believes that the ultimate collection of interest and all principal is likely based on information supplied by the lead bank regarding the global cash flow position of the borrower/guarantor group. In any event, management has placed the remaining portion of this loan in held-for-sale status.
The Bank has 10 other loans that fall under the SNiC reporting and grading which total $56.6 million. None of these other loans had any adverse rating.
In the case of the second loan relationship, management has discovered significant irregular borrower activity associated with a $16.9 million loan relationship. A complete investigation has commenced; however, initial estimates indicate the potential loan collateral shortfall could reach as high as $8 million. This lending relationship, which spanned seven years, was already classified as substandard and consists of four loans including a line of credit collateralized by accounts receivable and inventory as well as owner/user real estate financing. The Bank's internal review indicates that the lending relationship was monitored internally in complete accordance with the Bank's policies and procedures.
"The potential loss in this case appears to be the result of irregular activity which is isolated to this particular loan relationship," said Li Yu, Chairman, President and CEO of Preferred Bank. "Bank management is working aggressively with outside legal counsel in order to maximize the recovery of the loan workout. The Board will continue their work in reviewing this case to ensure that enhanced procedures are implemented, if needed."
Based on the current assessment of the Bank's allowance adequacy analysis and due to these two events, the Bank expects to report a net loss for the quarter ended June 30, 2012 ranging from $5.5 million to $5.7 million.
The Bank does not believe this loss will affect the results of operations beyond that of the second quarter of 2012. Total non-performing loan levels, excluding loans held for sale at June 30, 2012 are expected to show a mild improvement from March 31, 2012 totals.
In other areas of performance measurement, the Bank expects to report positive trends in loan and deposit growth, net interest margin and liquidity for the second quarter 2012.
About Preferred Bank
Preferred Bank is one of the largest independent commercial banks in California focusing on the Chinese-American market. 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 nine full-service branch banking offices in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Anaheim and Pico Rivera, California. 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. Preferred Bank continues to benefit from the significant migration to Southern California of ethnic Chinese from China and other areas of East Asia. While its business is not solely dependent on the Chinese-American market, it represents an important element of the bank's operating strategy, especially for its branch network and deposit products and services. Preferred Bank believes it is well positioned to compete effectively with the smaller Chinese-American community banks, the larger commercial banks and other major banks operating in Southern California by offering a high degree of personal service and responsiveness, experienced multi-lingual staff and substantial lending limits.
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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 2011 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.