LOS ANGELES, April 18, 2023 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended March 31, 2023. Preferred Bank (“the Bank”) reported net income of $38.1 million or $2.61 per diluted share for the first quarter of 2023. This represents an increase of $12.0 million or 46.3% over the same quarter last year but a small decrease of $1.5 million from the fourth quarter of 2022. The primary driver of the increase over the prior year quarter was net interest income which increased by $23.7 million or 47.3% over the same period last year. The decrease in net income on a linked quarter basis was due mainly to a $4.2 million loss on sale of a $5.0 million corporate note issued by Signature Bank of New York (SBNY). Also on a linked quarter basis, net interest income was relatively flat as both interest income and interest expense increased by nearly the same amount while noninterest expense was down slightly this quarter compared to last.
The unprecedented turmoil created by the failures of Silicon Valley Bank (SVB) and SBNY created a difficult operating environment and as a result, the Bank’s total deposits declined slightly from year-end 2022. In that regard, we believe it is important to highlight how the Bank’s balance sheet was managed prior to this crisis:
At Year End 2022:
- Total cash on hand of $768 million equaled 13.8% of total deposits
- Tangible common equity was 9.82% - low amount of AOCI adjustment
- Held-to-Maturity portfolio totaled only $22.5 million, market value of $20.5 million
- Our loan to deposit ratio was only 91.3%
- No short term borrowings
Highlights for the Quarter:
- Net income of $38.1 million or $2.61 per diluted share. Net income was affected by the loss on sale of Signature Bank subordinated debt of $4.16 million.
- Net interest income $73.7 in the first quarter of 2023, compared to $74.1 for the fourth quarter 2022. Note that the first quarter of 2023 has two fewer days of operation compared to the previous quarter.
- Return of average assets was 2.41%
- Return on beginning equity of 24.47%
- Net interest margin was 4.77%
- Total loans decreased $17 million from year-end 2022
- Total deposits decreased $149 million from year-end 2022
- Efficiency ratio was 26.0%
- Quarter-end cash on hand was $886 million or 16.4% of total deposits
- Quarter-end held to maturity security portfolio of $22.2 million with market value of $20.6 million
- The allowance for credit losses to total loans increased to 1.36%
Li Yu, Chairman and CEO, commented, “I am truly pleased to report first quarter 2023 net income of $38.1 million or $2.61 per diluted share under a highly strained operating environment.
“We in the banking industry have been truly humbled by the historic events of early March when two good-sized banks failed within days of each other. We have learned a great deal in the weeks following these failures and the following are my observations:
- The definition for transactional accounts should be revised. True, they are “core deposits” by definition, but we now know that only holds true in good times. Conversely, they are the source of a deposit “run” in more stressful conditions. I now appreciate our TCD (time certificate of deposit) portfolio even more. Aside from knowing the duration of our funding at a known cost, we did not experience even one TCD withdrawal during the second week of March.
- The golden rule of not borrowing short to lend or invest long, still stands. In doing this however, we are going against the grain, so to speak. I cannot count how many times we have seen the disappointment in the faces of our loan officers when their floating rate loan gets paid off by a low fixed rate long-term loan. The events of early March only confirm my belief that it is well worth the agony in order to have a better positioned balance sheet.
- We must respect the fact that government policy change is always one of our biggest risks that we face in the industry. Back in 2021, we were all convinced that inflation was ‘transitory’ by public officials. I highly doubt that anyone was preparing at the time for a nearly 500 basis point rate increase in 2022.
- We managers of publicly traded banks will continue to be confronted by “beat” or “miss” of our quarterly financial results. But it is very clear to me that we must place more weight in longer-term balance sheet management. I hope our shareholders will also do so.
“Going forward, Preferred Bank will continue to maintain its balance sheet flexibility by keeping a relatively short duration balance sheet, maintain high levels of liquidity, control our overhead and operate a simple business model.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $73.7 million for the first quarter of 2023. This was a significant increase from the $50.0 million recorded in the same quarter last year but down slightly from the $74.1 million posted in the fourth quarter of 2022. The FOMC rate hikes throughout 2022 and into 2023 drove loan portfolio yields higher, as most of the Bank’s loans are tied to the Prime rate. Interest expense increased this quarter slightly more than did interest income as deposit rates continued to climb during most of the quarter. Despite the increasing deposit rates, the Bank’s taxable equivalent net interest margin rose 2 basis points on a linked quarter basis to 4.77% from 4.75% last quarter. Comparing to the same quarter last year, the margin was up by an impressive 135 basis points over the 3.42% posted this quarter last year.
Noninterest Income. For the first quarter of 2023, noninterest income was ($1.1 million) compared with $2.3 million for the same quarter last year and compared to $2.8 million for the fourth quarter of 2022. The decrease compared to both quarters was mainly due to the loss on sale of the SBNY corporate note which was sold in the days following its failure. Letter of credit (“LC”) fees were $1.3 million for the quarter, and increase of $392,000 over the same period last year and a small increase of $79,000 over last quarter. Gains on sales of SBA loans were $340,000 compared to $0 in both comparable periods as the Bank’s SBA department is now originating and selling loans. Finally, service charges on deposits were up slightly over both comparable periods.
Noninterest Expense. Total noninterest expense was $18.9 million for the first quarter of 2023 compared to $20.0 million for the fourth quarter of 2022 and compared to the $16.2 million recorded in the same period last year. Comparing this quarter to the first quarter of last year; personnel expense increased by $2.1 million or 17.9% and other expense increased by $721,000 or 57.9%. The personnel expense increase was mainly due to new hires, merit increases and an increase in incentive compensation. The increase in other expense was mainly due to an increase in FDIC premiums of $510,000 over the same period last year. In comparing to the prior quarter; personnel expense was up by $775,000 or 6.0% and other expense was up by $299,000 or 17.9%. Offsetting this, the Bank incurred a $2.1 million in OREO expenses last quarter (valuation allowance and loss on sale). For the quarter ended March 31, 2023, the Bank’s efficiency ratio was 26.1% slightly higher than the 26.0% posted last quarter but easily surpassing the 30.9% posted this quarter last year.
Income Taxes. The Bank recorded a provision for income taxes of $15.2 million for the first quarter of 2023. This represents an effective tax rate (“ETR”) of 28.5% and slightly higher than the 28.0% ETR for the fourth quarter of 2022 but even with the 28.5% ETR recorded in the first quarter of 2022. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.
Balance Sheet Summary
Total gross loans at March 31, 2023 were $5.06 billion, a decrease of $17.1 million from the total of $5.07 billion as of December 31, 2022. Total deposits decreased to $5.41 billion from the 5.56 billion as of December 31, 2022. Total assets were $6.46 billion, an increase of $36.2 million over the total of $6.43 billion as of December 31, 2022.
Uninsured Deposits
As of March 31, 2023, total uninsured deposits represented approximately 49.5 % of total deposits. Since mid-March, we have been diligently working with our larger deposit clients to enroll them in the IntraFi/ICS program to ensure that all of their deposits are FDIC insured. Since mid-March, we have been working with IntraFi/ICS and another firm in order to parse out our larger deposit accounts through their networks in order to increase the insurance coverage on our depositor base. Along these lines, we also hope to bring back some depositors who left in the aftermath of SVN and SBNY.
Balance Sheet Fair Market Values from December 31, 2022
With so much focus recently on ASC Topic 825, Financial Instruments, formerly known as FASB 107, we felt it would be beneficial for shareholders to view the Bank’s disclosure in its recently filed 2022 Annual Report on Form 10-K.
| December 31, 2022 | ||||||
| Carrying Amount | Estimated Fair Value | |||||
| Assets: | ||||||
| Cash and cash equivalents | $ | 767,526 | $ | 767,526 | ||
| Securities held-to-maturity | 22,459 | 20,517 | ||||
| Securities available-for-sale | 428,295 | 428,295 | ||||
| Loans, net of ACL and net deferred loan fees | 4,996,382 | 5,066,775 | ||||
| Accrued interest receivable | 23,593 | 23,593 | ||||
| Federal Home Loan Bank stock | 15,000 | N/A | ||||
| Liabilities: | ||||||
| Demand deposits and savings: | ||||||
| Non-interest bearing | $ | 1,192,091 | $ | 1,192,091 | ||
| Interest-bearing | 2,334,739 | 2,334,739 | ||||
| Time deposits | 2,030,167 | 2,055,438 | ||||
| Subordinated debt issuance | 147,995 | 164,477 | ||||
| Accured interest payable | 2,608 | 2,608 | ||||
Liquidity
As of March 31, 2023, the Bank had $886 million in cash and fed funds on the balance sheet representing 16.4% of total deposits. In addition, the Bank had $304 million in FHLB borrowing availability, $100 million in available funds from the FRB Discount window and $200 million in available for sale securities that were unpledged. All summed, this totals $1.49 billion of total liquidity or 27.6% of total deposits. The Bank still has a considerable number of loans yet to be pledged to the FHLB so the total availability of liquidity will increase over the coming month.
Asset Quality
As of March 31, 2023, nonaccrual loans totaled just $271,000, down from the $5.5 million reported as of December 31, 2022 and down from the $2.2 million reported as of March 31, 2022. In addition, OREO and repossessed assets totaled $18.6 million as of March 31, 2023, down from the $22.0 million as of December 31, 2022 as the Bank was able to sell most of the equipment associated with the other foreclosed assets. In addition to that, the Bank’s total classified assets remained constant at $43.1 million compared to $43.1 million as of December 31, 2022. Total net charge-offs were $43,000 for the first quarter of 2023 as compared to net charge off of $1.2 million in the same quarter last year and compared to $0 in the prior quarter. Management is acutely aware that commercial real estate is falling under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, with delinquencies and nonaccrual loans down and classified assets flat, this weakness has yet to appear. We will be vigilant going forward.
Allowance for Credit Losses
The provision for credit losses for the first quarter of 2023 was $500,000 compared to $2.0 million last quarter and compared to the reversal of $250,000 in the same quarter last year. The economic indicators and most likely scenarios did not require a total ACL in excess of what was recorded. The Bank’s allowance coverage ratio now stands at 1.36% of total loans.
Capitalization
As of March 31, 2023, the Bank’s leverage ratio was 10.63%, the common equity tier 1 capital ratio was 11.30% and the total capital ratio stood at 14.91%. As of December 31, 2022, the Bank’s leverage ratio was 10.30%, the common equity tier 1 ratio was 10.81% and the total risk-based capital ratio was 14.39%.
| GAAP – Non-GAAP Reconciliation -First quarter 2023 PPPT ROBE | |||
| Net Income | $ | 38,074 | |
| Add: Provision for credit losses | 500 | ||
| Add: Income tax expense | 15,176 | ||
| Pre-provision and pre-tax income | $ | 53,750 | |
| Total equity – 12/31/22 | $ | 631,071 | |
| Pre-provision and pre-tax ROBE | 34.54 | % | |
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s first quarter 2023 financial results will be held tomorrow, April 19, 2023 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.
Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at 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 April 26, 2023; the passcode is 5434053.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)) and one branch in Flushing, New York. In addition, the Bank operates a Loan Production Office in the Houston, Texas suburb of Sugar Land. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy
shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2022 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: | AT FINANCIAL PROFILES: |
| Edward J. Czajka | Jeffrey Haas |
| Executive Vice President | General Information |
| Chief Financial Officer | (310) 622-8240 |
| (213) 891-1188 | PFBC@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 | ||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||
| 2023 | 2022 | 2022 | ||||||||||||
| Interest income: | ||||||||||||||
| Loans, including fees | $ | 95,881 | $ | 87,159 | $ | 52,119 | ||||||||
| Investment securities | 12,979 | 11,028 | 2,886 | |||||||||||
| Fed funds sold | 224 | 192 | 19 | |||||||||||
| Total interest income | 109,084 | 98,379 | 55,024 | |||||||||||
| Interest expense: | ||||||||||||||
| Interest-bearing demand | 17,038 | 13,906 | 1,431 | |||||||||||
| Savings | 39 | 32 | 19 | |||||||||||
| Time certificates | 16,593 | 9,004 | 2,217 | |||||||||||
| FHLB borrowings | 374 | - | - | |||||||||||
| Subordinated debt | 1,325 | 1,325 | 1,325 | |||||||||||
| Total interest expense | 35,369 | 24,267 | 4,992 | |||||||||||
| Net interest income | 73,715 | 74,112 | 50,032 | |||||||||||
| Provision for (reversal of) credit losses | 500 | 2,000 | (250 | ) | ||||||||||
| Net interest income after provision for (reversal of) | ||||||||||||||
| credit losses | 73,215 | 72,112 | 50,282 | |||||||||||
| Noninterest income: | ||||||||||||||
| Fees & service charges on deposit accounts | 694 | 631 | 671 | |||||||||||
| Letters of credit fee income | 1,324 | 1,245 | 933 | |||||||||||
| BOLI income | 101 | 102 | 99 | |||||||||||
| Net (loss) gain on called and sale of investment securities | (4,117 | ) | 297 | - | ||||||||||
| Net gain on sale of loans | 340 | - | - | |||||||||||
| Other income | 592 | 533 | 563 | |||||||||||
| Total noninterest income | (1,066 | ) | 2,808 | 2,266 | ||||||||||
| Noninterest expense: | ||||||||||||||
| Salary and employee benefits | 13,728 | 12,953 | 11,640 | |||||||||||
| Net occupancy expense | 1,474 | 1,444 | 1,422 | |||||||||||
| Business development and promotion expense | 105 | 320 | 101 | |||||||||||
| Professional services | 1,149 | 1,028 | 1,243 | |||||||||||
| Office supplies and equipment expense | 404 | 460 | 489 | |||||||||||
| Loss on sale of OREO, valuation allowance and related expense | 72 | 2,103 | 16 | |||||||||||
| Other | 1,967 | 1,668 | 1,246 | |||||||||||
| Total noninterest expense | 18,899 | 19,976 | 16,157 | |||||||||||
| Income before provision for income taxes | 53,250 | 54,944 | 36,391 | |||||||||||
| Income tax expense | 15,176 | 15,384 | 10,364 | |||||||||||
| Net income | $ | 38,074 | $ | 39,560 | $ | 26,027 | ||||||||
| Dividend and earnings allocated to participating securities | - | - | (1 | ) | ||||||||||
| Net income available to common shareholders | $ | 38,074 | $ | 39,560 | $ | 26,026 | ||||||||
| Income per share available to common shareholders | ||||||||||||||
| Basic | $ | 2.64 | $ | 2.76 | $ | 1.76 | ||||||||
| Diluted | $ | 2.61 | $ | 2.71 | $ | 1.74 | ||||||||
| Weighted-average common shares outstanding | ||||||||||||||
| Basic | 14,430,606 | 14,357,326 | 14,765,337 | |||||||||||
| Diluted | 14,602,149 | 14,617,377 | 14,978,667 | |||||||||||
| Cash dividends per common share | $ | 0.55 | $ | 0.55 | $ | 0.43 | ||||||||
| PREFERRED BANK | ||||||||||
| Condensed Consolidated Statements of Financial Condition | ||||||||||
| (unaudited) | ||||||||||
| (in thousands) | ||||||||||
| March 31, | December 31, | |||||||||
| 2023 | 2022 | |||||||||
| (Unaudited) | (Audited) | |||||||||
| Assets | ||||||||||
| Cash and due from banks | $ | 865,691 | $ | 747,526 | ||||||
| Fed funds sold | 20,000 | 20,000 | ||||||||
| Cash and cash equivalents | 885,691 | 767,526 | ||||||||
| Securities held to maturity, at amortized cost | 22,155 | 22,459 | ||||||||
| Securities available-for-sale, at fair value | 367,492 | 428,295 | ||||||||
| Loans | 5,057,728 | 5,074,793 | ||||||||
| Less allowance for credit losses | (68,929 | ) | (68,472 | ) | ||||||
| Less amortized deferred loan fees, net | (10,286 | ) | (9,939 | ) | ||||||
| Loans, net | 4,978,513 | 4,996,382 | ||||||||
| Other real estate owned and repossessed assets | 18,628 | 21,990 | ||||||||
| Customers' liability on acceptances | 107 | 1,731 | ||||||||
| Bank furniture and fixtures, net | 8,784 | 8,999 | ||||||||
| Bank-owned life insurance | 10,425 | 10,357 | ||||||||
| Accrued interest receivable | 26,532 | 23,593 | ||||||||
| Investment in affordable housing partnerships | 59,009 | 61,173 | ||||||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | ||||||||
| Deferred tax assets | 43,713 | 43,218 | ||||||||
| Operating lease right-of-use assets | 22,188 | 21,718 | ||||||||
| Other assets | 3,300 | 2,917 | ||||||||
| Total assets | $ | 6,461,537 | $ | 6,425,358 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Deposits: | ||||||||||
| Non-interest bearing demand deposits | $ | 1,050,992 | $ | 1,192,091 | ||||||
| Interest-bearing deposits: | 1,751,439 | 2,295,212 | ||||||||
| Savings | 33,861 | 39,527 | ||||||||
| Time certificates of $250,000 or more | 1,329,720 | 1,138,727 | ||||||||
| Other time certificates | 1,241,754 | 891,440 | ||||||||
| Total deposits | 5,407,766 | 5,556,997 | ||||||||
| Acceptances outstanding | 107 | 1,731 | ||||||||
| Advances from Federal Home Loan Bank | 150,000 | - | ||||||||
| Subordinated debt issuance, net | 148,055 | 147,995 | ||||||||
| Commitments to fund investment in affordable housing partnerships | 26,709 | 27,490 | ||||||||
| Operating lease liabilities | 21,076 | 20,949 | ||||||||
| Accrued interest payable | 4,529 | 2,608 | ||||||||
| Other liabilities | 46,754 | 37,162 | ||||||||
| Total liabilities | 5,804,996 | 5,794,932 | ||||||||
| Shareholders' equity | 656,541 | 630,426 | ||||||||
| Total liabilities and shareholders' equity | $ | 6,461,537 | $ | 6,425,358 | ||||||
| Book value per common share | $ | 45.49 | $ | 43.91 | ||||||
| Number of common shares outstanding | 14,432,122 | 14,358,145 | ||||||||
| PREFERRED BANK | ||||||||||||||||||
| Selected Consolidated Financial Information | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| (in thousands, except for ratios) | ||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||
| Unaudited historical quarterly operations data: | ||||||||||||||||||
| Interest income | $ | 109,084 | $ | 98,379 | $ | 78,420 | $ | 62,559 | $ | 55,024 | ||||||||
| Interest expense | 35,369 | 24,267 | 11,630 | 6,135 | 4,992 | |||||||||||||
| Interest income before provision for credit losses | 73,715 | 74,112 | 66,790 | 56,424 | 50,032 | |||||||||||||
| Provision (reversal of) for credit losses | 500 | 2,000 | 2,700 | 2,900 | (250 | ) | ||||||||||||
| Noninterest income | (1,066 | ) | 2,808 | 2,187 | 2,601 | 2,266 | ||||||||||||
| Noninterest expense | 18,899 | 19,976 | 17,400 | 17,140 | 16,157 | |||||||||||||
| Income tax expense | 15,176 | 15,384 | 13,688 | 10,916 | 10,364 | |||||||||||||
| Net income | $ | 38,074 | $ | 39,560 | $ | 35,189 | $ | 28,069 | $ | 26,027 | ||||||||
| Earnings per share | ||||||||||||||||||
| Basic | $ | 2.64 | $ | 2.76 | $ | 2.44 | $ | 1.90 | $ | 1.76 | ||||||||
| Diluted | $ | 2.61 | $ | 2.71 | $ | 2.40 | $ | 1.87 | $ | 1.74 | ||||||||
| Ratios for the period: | ||||||||||||||||||
| Return on average assets | 2.41 | % | 2.48 | % | 2.25 | % | 1.84 | % | 1.75 | % | ||||||||
| Return on beginning equity | 24.47 | % | 26.58 | % | 23.60 | % | 18.91 | % | 17.99 | % | ||||||||
| Net interest margin (Fully-taxable equivalent) | 4.77 | % | 4.75 | % | 4.37 | % | 3.77 | % | 3.42 | % | ||||||||
| Noninterest expense to average assets | 1.20 | % | 1.25 | % | 1.11 | % | 1.12 | % | 1.08 | % | ||||||||
| Efficiency ratio | 26.01 | % | 25.97 | % | 25.23 | % | 29.04 | % | 30.89 | % | ||||||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.00 | % | 0.00 | % | -0.19 | % | 0.00 | % | 0.11 | % | ||||||||
| Ratios as of period end: | ||||||||||||||||||
| Tier 1 leverage capital ratio | 10.63 | % | 10.30 | % | 9.95 | % | 9.92 | % | 9.92 | % | ||||||||
| Common equity tier 1 risk-based capital ratio | 11.30 | % | 10.81 | % | 10.46 | % | 10.61 | % | 11.20 | % | ||||||||
| Tier 1 risk-based capital ratio | 11.30 | % | 10.81 | % | 10.46 | % | 10.61 | % | 11.20 | % | ||||||||
| Total risk-based capital ratio | 14.91 | % | 14.39 | % | 14.09 | % | 14.31 | % | 15.12 | % | ||||||||
| Allowances for credit losses to loans at end of period | 1.36 | % | 1.35 | % | 1.33 | % | 1.25 | % | 1.27 | % | ||||||||
| Allowance for credit losses to non-performing loans | 254.56x | 12.49x | 10.75x | 5.27x | 27.15x | |||||||||||||
| Average balances: | ||||||||||||||||||
| Total securities | $ | 442,852 | $ | 434,830 | $ | 410,649 | $ | 430,203 | $ | 455,899 | ||||||||
| Total loans | 5,012,862 | 4,981,561 | 4,908,870 | 4,777,353 | 4,367,095 | |||||||||||||
| Total earning assets | 6,276,630 | 6,193,330 | 6,076,616 | 6,008,024 | 5,938,720 | |||||||||||||
| Total assets | 6,400,849 | 6,328,017 | 6,215,184 | 6,133,703 | 6,044,155 | |||||||||||||
| Total time certificate of deposits | 2,209,370 | 1,872,239 | 1,749,257 | 1,810,886 | 1,869,654 | |||||||||||||
| Total interest bearing deposits | 4,451,299 | 4,287,287 | 3,973,105 | 3,982,888 | 3,947,616 | |||||||||||||
| Total deposits | 5,479,945 | 5,468,562 | 5,373,252 | 5,301,370 | 5,215,810 | |||||||||||||
| Total interest bearing liabilities | 4,630,982 | 4,435,245 | 4,121,005 | 4,130,729 | 4,095,399 | |||||||||||||
| Total equity | 650,963 | 613,729 | 598,188 | 606,260 | 597,214 | |||||||||||||
| PREFERRED BANK | ||||||||||||||||||||||
| Selected Consolidated Financial Information | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands, except for ratios) | ||||||||||||||||||||||
| As of | ||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||||||
| Unaudited quarterly statement of financial position data: | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 885,691 | $ | 767,526 | $ | 749,484 | $ | 768,658 | $ | 985,162 | ||||||||||||
| Securities held-to-maturity, at amortized cost | 22,155 | 22,459 | 12,442 | 12,784 | 13,496 | |||||||||||||||||
| Securities available-for-sale, at fair value | 367,492 | 428,295 | 377,534 | 400,597 | 430,280 | |||||||||||||||||
| Loans: | ||||||||||||||||||||||
| Real estate – Mortgage: | ||||||||||||||||||||||
| Real estate—Residential | $ | 612,908 | $ | 609,292 | $ | 587,812 | $ | 581,412 | $ | 539,614 | ||||||||||||
| Real estate—Commercial | 2,813,680 | 2,730,726 | 2,693,852 | 2,583,484 | 2,367,862 | |||||||||||||||||
| Total Real Estate – Mortgage | 3,426,588 | 3,340,018 | 3,281,664 | 3,164,896 | 2,907,476 | |||||||||||||||||
| Real estate – Construction: | ||||||||||||||||||||||
| R/E Construction — Residential | 175,286 | 193,027 | 179,955 | 168,420 | 141,218 | |||||||||||||||||
| R/E Construction — Commercial | 142,319 | 204,478 | 188,083 | 203,217 | 209,726 | |||||||||||||||||
| Total real estate construction loans | 317,605 | 397,505 | 368,038 | 371,637 | 350,944 | |||||||||||||||||
| Commercial and industrial | 1,299,325 | 1,320,830 | 1,330,028 | 1,336,631 | 1,281,559 | |||||||||||||||||
| SBA | 7,306 | 11,339 | 8,067 | 22,186 | 32,554 | |||||||||||||||||
| Trade finance | 6,885 | 4,521 | 22,634 | 24,663 | 18,919 | |||||||||||||||||
| Consumer and others | 19 | 580 | 115 | 128 | 115 | |||||||||||||||||
| Gross loans | 5,057,728 | 5,074,793 | 5,010,546 | 4,920,141 | 4,591,567 | |||||||||||||||||
| Allowance for credit losses on loans | (68,929 | ) | (68,472 | ) | (66,472 | ) | (61,396 | ) | (58,496 | ) | ||||||||||||
| Net deferred loan fees | (10,286 | ) | (9,939 | ) | (9,695 | ) | (9,525 | ) | (8,573 | ) | ||||||||||||
| Net loans | $ | 4,978,513 | $ | 4,996,382 | $ | 4,934,379 | $ | 4,849,220 | $ | 4,524,498 | ||||||||||||
| Other real estate owned and repossessed assets | $ | 18,628 | $ | 21,990 | $ | 26,075 | $ | 21,449 | $ | 15,547 | ||||||||||||
| Investment in affordable housing partnerships | 59,009 | 61,173 | 62,745 | 54,874 | 56,946 | |||||||||||||||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | 15,000 | 15,000 | 15,000 | |||||||||||||||||
| Other assets | 115,049 | 112,533 | 115,184 | 110,459 | 101,427 | |||||||||||||||||
| Total assets | $ | 6,461,537 | $ | 6,425,358 | $ | 6,292,843 | $ | 6,233,041 | $ | 6,142,356 | ||||||||||||
| Liabilities: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Demand | $ | 1,050,992 | $ | 1,192,091 | $ | 1,341,199 | $ | 1,385,934 | $ | 1,251,613 | ||||||||||||
| Interest-bearing demand | 1,751,439 | 2,295,212 | 2,263,775 | 2,239,501 | 2,159,178 | |||||||||||||||||
| Savings | 33,861 | 39,527 | 38,151 | 39,784 | 39,946 | |||||||||||||||||
| Time certificates of $250,000 or more | 1,329,720 | 1,138,727 | 971,378 | 870,376 | 924,317 | |||||||||||||||||
| Other time certificates | 1,241,754 | 891,440 | 841,173 | 872,357 | 934,615 | |||||||||||||||||
| Total deposits | $ | 5,407,766 | $ | 5,556,997 | $ | 5,455,676 | $ | 5,407,952 | $ | 5,309,669 | ||||||||||||
| Acceptances outstanding | $ | 107 | $ | 1,731 | $ | 10,058 | $ | 11,053 | $ | 8,222 | ||||||||||||
| Advance from Federal Home Loan Bank | 150,000 | - | - | - | - | |||||||||||||||||
| Subordinated debt issuance, net | 148,055 | 147,995 | 147,936 | 147,877 | 147,818 | |||||||||||||||||
| Commitments to fund investment in affordable housing partnerships | 26,709 | 27,490 | 28,611 | 20,036 | 22,606 | |||||||||||||||||
| Other liabilities | 72,359 | 60,074 | 60,009 | 54,531 | 58,756 | |||||||||||||||||
| Total liabilities | $ | 5,804,996 | $ | 5,794,287 | $ | 5,702,290 | $ | 5,641,449 | $ | 5,547,071 | ||||||||||||
| Equity: | ||||||||||||||||||||||
| Net common stock, no par value | $ | 181,208 | $ | 184,604 | $ | 180,324 | $ | 197,997 | $ | 209,065 | ||||||||||||
| Retained earnings | 505,207 | 475,072 | 443,409 | 414,393 | 392,610 | |||||||||||||||||
| Accumulated other comprehensive income | (29,874 | ) | (28,605 | ) | (33,180 | ) | (20,798 | ) | (6,390 | ) | ||||||||||||
| Total shareholders' equity | $ | 656,541 | $ | 631,071 | $ | 590,553 | $ | 591,592 | $ | 595,285 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 6,461,537 | $ | 6,425,358 | $ | 6,292,843 | $ | 6,233,041 | $ | 6,142,356 | ||||||||||||
| PREFERRED BANK | |||||||||||||||||||||||||
| Quarter-to-Date Average Balances, Yields and Rates | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| Three months ended March 31, | Three months ended December 31, | Three months ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||||||||||
| Interest | Average | Interest | Average | Interest | Average | ||||||||||||||||||||
| Average | Income or | Yield/ | Average | Income or | Yield/ | Average | Income or | Yield/ | |||||||||||||||||
| Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||
| ASSETS | (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||
| Loans (1,2) | $ | 5,013,740 | $ | 95,881 | 7.76 | % | $ | 4,981,561 | $ | 87,159 | 6.94 | % | $ | 4,367,095 | $ | 52,119 | 4.84 | % | |||||||
| Investment securities (3) | 442,852 | 3,994 | 3.66 | % | 434,830 | 3,993 | 3.64 | % | 455,899 | 2,224 | 1.98 | % | |||||||||||||
| Federal funds sold | 20,222 | 224 | 4.50 | % | 20,000 | 192 | 3.81 | % | 20,122 | 19 | 0.38 | % | |||||||||||||
| Other earning assets | 799,816 | 9,087 | 4.61 | % | 756,939 | 7,139 | 3.74 | % | 1,095,604 | 770 | 0.29 | % | |||||||||||||
| Total interest-earning assets | 6,276,630 | 109,186 | 7.05 | % | 6,193,330 | 98,483 | 6.31 | % | 5,938,720 | 55,132 | 3.76 | % | |||||||||||||
| Deferred loan fees, net | (9,937 | ) | (10,003 | ) | (6,322 | ) | |||||||||||||||||||
| Allowance for credit losses on loans | (68,466 | ) | (66,515 | ) | (59,951 | ) | |||||||||||||||||||
| Non-interest earning assets: | |||||||||||||||||||||||||
| Cash and due from banks | 11,527 | 11,569 | 11,589 | ||||||||||||||||||||||
| Bank furniture and fixtures | 8,977 | 9,237 | 10,440 | ||||||||||||||||||||||
| Right of use assets | 21,867 | 22,002 | 21,754 | ||||||||||||||||||||||
| Other assets | 160,251 | 168,397 | 127,925 | ||||||||||||||||||||||
| Total assets | $ | 6,400,849 | $ | 6,328,017 | $ | 6,044,155 | |||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||
| Interest-bearing demand and savings | $ | 2,241,929 | $ | 17,077 | 3.09 | % | $ | 2,415,048 | $ | 13,938 | 2.29 | % | $ | 2,077,962 | $ | 1,450 | 0.28 | % | |||||||
| TCD $250K or more | 1,266,072 | 10,743 | 3.44 | % | 1,017,302 | 6,014 | 2.35 | % | 929,170 | 1,027 | 0.45 | % | |||||||||||||
| Other time certificates | 943,298 | 5,850 | 2.52 | % | 854,937 | 2,990 | 1.39 | % | 940,484 | 1,190 | 0.51 | % | |||||||||||||
| Total interest-bearing deposits | 4,451,299 | 33,670 | 3.07 | % | 4,287,287 | 22,942 | 2.12 | % | 3,947,616 | 3,667 | 0.38 | % | |||||||||||||
| Advance from Fedferal home loan bank | 31,667 | 374 | 4.78 | % | - | - | 0.00 | % | - | - | 0.00 | % | |||||||||||||
| Subordinated debt, net | 148,016 | 1,325 | 3.63 | % | 147,958 | 1,325 | 3.55 | % | 147,783 | 1,325 | 3.64 | % | |||||||||||||
| Total interest-bearing liabilities | 4,630,982 | 35,369 | 3.10 | % | 4,435,245 | 24,267 | 2.17 | % | 4,095,399 | 4,992 | 0.49 | % | |||||||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||||||
| Demand deposits | 1,028,646 | 1,181,275 | 1,268,194 | ||||||||||||||||||||||
| Lease Liability | 20,993 | 21,542 | 22,463 | ||||||||||||||||||||||
| Other liabilities | 69,265 | 76,226 | 60,885 | ||||||||||||||||||||||
| Total liabilities | 5,749,886 | 5,714,288 | 5,446,941 | ||||||||||||||||||||||
| Shareholders’ equity | 650,963 | 613,729 | 597,214 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 6,400,849 | $ | 6,328,017 | $ | 6,044,155 | |||||||||||||||||||
| Net interest income | $ | 73,817 | $ | 74,216 | $ | 50,140 | |||||||||||||||||||
| Net interest spread | 3.96 | % | 4.14 | % | 3.27 | % | |||||||||||||||||||
| Net interest margin | 4.77 | % | 4.75 | % | 3.42 | % | |||||||||||||||||||
| Cost of Deposits: | |||||||||||||||||||||||||
| Non-interest bearing demand deposits | $ | 1,028,646 | $ | 1,181,275 | $ | 1,268,194 | |||||||||||||||||||
| Interest-bearing deposits | 4,451,299 | 33,670 | 3.07 | % | 4,287,287 | 22,942 | 2.12 | % | 3,947,616 | 3,667 | 0.38 | % | |||||||||||||
| Total Deposits | $ | 5,479,945 | $ | 33,670 | 2.49 | % | $ | 5,468,562 | $ | 22,942 | 1.66 | % | $ | 5,215,810 | $ | 3,667 | 0.29 | % | |||||||
| (1) | Includes non-accrual loans and loans held for sale | ||||||||||||||||||||||||
| (2) | Net loan fee income of $1.2 million, $972,000 and $765,000 for the quarter ended March 31, 2023, December 31, 2022, and March 31, 2022, respectively, are included in the yield computations | ||||||||||||||||||||||||
| (3) | Yields on securities have been adjusted to a tax-equivalent basis | ||||||||||||||||||||||||
| Preferred Bank | |||||||||||
| Loan and Credit Quality Information | |||||||||||
| Allowance For Credit Losses History | |||||||||||
| Quarter Ended | Year ended | ||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| (Dollars in 000's) | |||||||||||
| Allowance For Credit Losses | |||||||||||
| Balance at Beginning of Period | $ | 68,472 | $ | 59,969 | |||||||
| Charge-Offs | |||||||||||
| Commercial & Industrial | 44 | 1,222 | |||||||||
| Mini-perm Real Estate | - | 1 | |||||||||
| Total Charge-Offs | 44 | 1,223 | |||||||||
| Recoveries | |||||||||||
| Commercial & Industrial | 1 | - | |||||||||
| Mini-perm Real Estate | - | 2,376 | |||||||||
| Total Recoveries | 1 | 2,376 | |||||||||
| Net Charge-Offs (recoveries) | 43 | (1,153 | ) | ||||||||
| Provision forCredit Losses: | 500 | 7,350 | |||||||||
| Balance at End of Period | $ | 68,929 | $ | 68,472 | |||||||
| Average Loans Held for Investment | $ | 5,012,862 | $ | 4,760,815 | |||||||
| Loans Held for Investment at End of Period | $ | 5,057,728 | $ | 5,074,793 | |||||||
| Net Charge-Offs (recoveries) to Average Loans | 0.00 | % | -0.02 | % | |||||||
| Allowances for Credit Losses to Loans at End of Period | 1.36 | % | 1.35 | % | |||||||
