Market Overview

Preferred Bank Reports Fourth Quarter And Year End Results

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LOS ANGELES, Jan. 21, 2016 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), an independent commercial bank, today reported results for the quarter and year ended December 31, 2015.

The comparability of financial information for the fourth quarter and full year of 2015 to 2014, is affected by the acquisition of United International Bank ("UIB") which was effective November 20, 2015. Operating results for fourth quarter and full year 2015 include the combined operations of both entities from November 21, 2015.

Preferred Bank ("the Bank") reported net income of $7.5 million or $0.54 per diluted share for the fourth quarter of 2015. This compares to net income of $6.9 million or $0.50 per diluted share for the fourth quarter of 2014 and compares to net income of $7.9 million or $0.57 per diluted share for the third quarter of 2015. Net income for the fourth quarter was impacted by merger-related costs which totaled $658,000 on a pre-tax basis during the quarter. Excluding these costs, after-tax income would have been $8.1 million or $0.57 per share.

Highlights from the fourth quarter of 2015:

 Fourth QuarterFull Year
 20152015
Organic linked loan growth $72.7 million$305.6 million
Organic loan growth percentage 4.0% 19.1%
Organic linked deposit growth$143.0 million$354.6 million
Organic deposit growth percentage 7.2% 20.0%
Return on average assets 1.28% 1.35%
Return on beginning equity 11.64% 12.65%
Efficiency ratio 43.3% 40.9%
Annualized net interest income growth 13.36% 18.11%

Li Yu, Chairman and CEO commented, "For the year ended December 31, 2015, Preferred Bank earned net income of $29.7 million, which is a 20.8% increase from 2014 net income of $24.6 million. Diluted earnings per share were $2.13 as compared to $1.78 for 2014. Net income for the fourth quarter was $7.5 million or $0.54 per share. During the quarter, we closed the acquisition of United International Bank of New York. Costs related to the acquisition and integration were $658,000 for the quarter.

"The acquisition increased our deposits and loans by $158.0 million and $149.2 million, respectively. Organic loan growth for the year was 19.1% and organic deposit growth for the year was 20.0% for 2015. Likewise, excluding the acquisition, loans and deposits grew organically at 4.0% and 7.2%, respectively, measured on a linked-quarter basis.

"During the quarter, total nonperforming assets declined to $6.4 million. The reduction was largely the result of moving a nonperforming loan to OREO status and the related charge-off of the previously allocated allowance.

"The New York acquisition provides our Bank with an entrance into a very vibrant new market and the deployment of some excess capital. Other highlights of the quarter and the year include the following:

  • Continued success in overhead control and efficiency ratio improvement
  • Further diversification of the loan portfolio
  • Substantial growth in core deposits
  • Slightly expanded net interest margin year over year in a very competitive market

"As our Bank's loan portfolio is approximately 90% floating rate, we should continue to benefit from any future rate increases in 2016. We remain very positive on all aspects of the Bank's operations."

Quarterly Results
Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $22.3 million for the fourth quarter of 2015. This compares favorably to the $19.4 million recorded in the fourth quarter of 2014 and to the $21.6 million recorded in the third quarter of 2015. The increase over both comparable periods is due primarily to loan growth, and was aided by the UIB acquisition on November 20, 2015. The Bank's taxable equivalent net interest margin was 3.88% for the fourth quarter of 2015, a 12 basis point decrease from the 4.00% achieved in the third quarter of 2015 and a 10 basis point decrease from the 3.98% recorded in the fourth quarter of 2014. The margin for the third quarter of 2015 was aided by a $1.0 million interest recovery.

Noninterest Income. For the fourth quarter of 2015, noninterest income was $953,000 compared with $751,000 for the same quarter last year and compared to $940,000 for the third quarter of 2015. Service charges on deposits were down $81,000 compared to the same period last year and down $36,000 compared to the third quarter of 2015. Trade finance income was $453,000 for the fourth quarter of 2015, an increase of $251,000 compared to the same period last year and an increase of $73,000 compared to the third quarter of 2015. This was primarily due to higher deal volume. Other income was $162,000, an increase of $31,000 over the fourth quarter of 2014 and a decrease of $23,000 from the third quarter of 2015.

Noninterest Expense. Total noninterest expense was $9.9 million for the fourth quarter of 2015, an increase of $1.8 million over the same period last year and an increase of $1.2 million over the third quarter of 2015. Salaries and benefits expense totaled $5.3 million for the fourth quarter of 2015 compared to $5.1 million for the same period last year and compared to $4.9 million for the third quarter of 2015. The increase over both comparable periods was due mainly to staffing increases as well as the addition of UIB. Occupancy expense totaled $1.0 million compared to the $773,000 recorded in the same period in 2014 and the $908,000 recorded in the third quarter of 2015. The increase over the prior year was due to the addition of the New York office with the UIB acquisition as well as the new Tarzana Valley branch which opened in early 2015. Professional services expense was $1.4 million for the fourth quarter of 2015 compared to $966,000 for the same quarter of 2014 and $1.3 million recorded in the third quarter of 2015. Other expenses were $1.6 million for the fourth quarter of 2015, of which $658,000 were acquisition-related charges. Excluding these, other expenses were $957,000, up from the $867,000 recorded in the same period in 2014. Total other expense in the third quarter of 2015 was $1,269,000, of which $415,000 was acquisition-related resulting in an adjusted other expense total of $854,000.

Income Taxes

The Bank recorded a provision for income taxes of $5.5 million for the fourth quarter of 2015. This represents an effective tax rate ("ETR") of 42.3% for the quarter. This is up from the ETR of 40.6% for the third quarter of 2015. This increase is due to purchase accounting related to the acquisition of UIB during the period, as well as the Bank's growing profitability in 2015 relative to tax exempt income and deductible items.

Annual Results
Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses increased to $83.8 million compared to $71.0 million for 2014. This is primarily due to growth in the loan portfolio over the course of 2015 and to a lesser extent, the UIB acquisition. Interest income grew by $14.4 million or 17.9% while interest expense increased by just $1.5 million or 16.2%. The Bank's taxable equivalent net interest margin was 3.92% for 2015, up 3 basis points from the 3.89% level posted in 2014.

Noninterest Income. Noninterest income reached $3.9 million in 2015, an increase of $271,000 over the $3.6 million recorded in 2014. This was due to an increase in Trade Finance income of $526,000 partially offset by a decrease in service charges of $354,000. Other income increased from $652,000 in 2014 to $744,000 in 2015.

Noninterest Expense. Total noninterest expense was $35.7 million in 2015, an increase of $5.3 million over the $30.4 million posted in 2014. Most of the increase in noninterest expense was in personnel expense as that increased from $17.9 million in 2014 to $21.0 million in 2015, a $3.1 million or 17.0% increase. Most of the increase is due to increased staffing levels over 2014 levels but also due to the UIB acquisition. Occupancy expense was $3.7 million, up from the $3.2 million recorded in 2014. This was mainly due to the new Tarzana Branch office as well as the acquisition of UIB. Professional services expense totaled $5.0 million for 2015 compared to $4.1 million in 2014. This increase was mainly due to an increase in legal fees associated with mostly legacy cases. Net gain/loss on OREO was a net gain of $480,000 in 2015, down from a net gain $1.1 million in 2014. Other expenses were $4.9 million in 2015, a $238,000 increase from the $4.6 million recorded in 2014.

Balance Sheet Summary

Total gross loans and leases at December 31, 2015 were $2.06 billion, an increase of $455.8 million or 28.4% over the total of $1.60 billion as of December 31, 2014. Of that total growth, $149.2 million is attributable to the acquisition of UIB. The tables below indicate loans by type as of December 31, 2015 as compared to the end of 2014:

Loans by Type – Year over Year  (ooo's)

Loan Type   (000's)December 31, 2015December 31, 2014$ Change% Change
R/E – Residential/Multifamily$  415,097 $  283,958 $  131,139  46.2%
R/E – Land 16,713  13,621  3,092  22.7%
R/E – Commercial 861,317  653,380  207,937  31.8%
R/E – Construction 131,404  126,485  4,919  3.9%
Commercial & Industrial 635,465  526,705  108,760  20.6%
Total$  2,059,996 $  1,604,149 $  455,847  28.4%

Total deposits as of December 31, 2015 were $2.29 billion, an increase of $512.9 million from the $1.78 billion at December 31, 2014. Of that increase, $158.0 million is attributable to the acquisition of UIB. As of December 31, 2015 compared to December 31, 2014;  noninterest-bearing demand deposits increased by $118.1 million or 26.6%, interest-bearing demand and savings deposits increased by $231.6 million or 42.3% and time deposits increased by $163.1 million or 20.8%. Total assets were $2.6 billion, a $547.0 million or 26.6% increase from the total of $2.05 billion as of December 31, 2014.

Asset Quality
As of December 31, 2015 nonaccrual loans totaled $2.3 million, down from the $8.1 million total as of December 31, 2014. Total net charge-offs for the fourth quarter of 2015 were $1.7 million compared to $203,000 for the third quarter of 2015, which was made up of one charge-off for $1.8 million, slightly offset by recoveries totaling $95,000 across several loans. The Bank recorded a provision for loan losses of $300,000 for the fourth quarter of 2015. Although nonperforming loan and economic trends continue to be positive, management believes that due to growth and other factors, this provision is appropriate in order to maintain an allowance level deemed sufficient. This is a decrease from the $500,000 provision recorded in the same quarter last year and to the $500,000 provision recorded in the second quarter of 2015. The allowance for loan loss at December 31, 2015 was $22.7 million or 1.10% of total loans compared to $23.0 million or 1.43% of total loans at December 31, 2014.

OREO

As of December 31, 2015, the Bank holds one OREO property, a $4.1 million multi-family property located outside of California.

Capitalization
As of December 31, 2015, the Bank's tier 1 leverage ratio was 10.49%, the common equity tier 1 capital ratio was 11.02% and the total capital ratio was 11.99%. As of December 31, 2014, the Bank's tier 1 leverage ratio was 11.73%, the tier 1 risk based capital ratio was 12.72% and the total risk based capital ratio was 13.97%.

Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank's fourth quarter 2015 financial results will be held tomorrow, January 22, 2016 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 866-652-5200 (domestic) or 412-317-6060 (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, 2016; the passcode is 10079341.

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 Alhambra, Century City,  City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Anaheim, Pico Rivera, Tarzana and San Francisco, 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. 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 2014 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank's website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank's website at www.preferredbank.com.

Financial Tables to Follow

 PREFERRED BANK 
 Condensed Consolidated Statements of Operations 
 (unaudited) 
 (in thousands, except for net income per share and shares) 
          
      For the Quarter Ended 
     December 31, September 30, December 31,
      2015   2015   2014 
 Interest income:       
  Loans, including fees  $  23,792  $  22,812  $  20,265 
  Investment securities     1,585     1,531     1,519 
  Fed funds sold     46     37     37 
   Total interest income     25,423     24,380     21,821 
          
 Interest expense:       
  Interest-bearing demand     871     794     763 
  Savings     14     14     16 
  Time certificates     2,150     1,929     1,627 
  FHLB borrowings     70     46     32 
   Total interest expense     3,105     2,783     2,438 
   Net interest income     22,318     21,597     19,383 
 Provision for loan losses     300     500     500 
   Net interest  income after provision for       
    loan losses     22,018     21,097     18,883 
          
 Noninterest income:       
  Fees & service charges on deposit accounts     254     290     335 
  Trade finance income     453     380     202 
  BOLI  income     86     85     83 
  Other income     161     185     131 
   Total noninterest income     954     940     751 
          
 Noninterest expense:       
  Salary and employee benefits     5,286     4,893     5,059 
  Net occupancy expense     1,024     908     773 
  Business development and promotion expense     246     133     77 
  Professional services     1,421     1,289     966 
  Office supplies and equipment expense     336     267     314 
  Other real estate owned related (income) expense  and valuation allowance on LHFS     1     (19)    65 
  Other     1,614     1,269     867 
   Total noninterest expense     9,928     8,740     8,121 
   Income before provision for income taxes     13,044     13,297     11,513 
 Income tax expense     5,518     5,396     4,645 
   Net income  $  7,526  $  7,901  $  6,868 
          
 Income per share available to common shareholders       
   Basic  $  0.55  $  0.57  $  0.51 
   Diluted  $  0.54  $  0.57  $  0.50 
          
 Weighted-average common shares outstanding       
   Basic     13,547,197     13,509,986     13,345,631 
   Diluted     13,743,157     13,690,228     13,689,342 
          



 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 
      2015  2014  %
 Interest income:            
  Loans, including fees  $  88,235 $  74,080   19.1%
  Investment securities     6,304    6,107   3.2%
  Fed funds sold     163    140   16.4%
   Total interest income     94,702    80,327   17.9%
         
 Interest expense:      
  Interest-bearing demand     3,160    2,773   13.9%
  Savings     59    72   -18.4%
  Time certificates     7,455    6,367   17.1%
  FHLB borrowings     182    128   42.5%
   Total interest expense     10,856    9,340   16.2%
   Net interest income     83,846    70,987   18.1%
 Provision for credit losses     1,800    3,350   -46.3%
   Net interest  income after provision for      
    loan losses     82,046    67,637   21.3%
         
 Noninterest income:      
  Fees & service charges on deposit accounts     1,178    1,532   -23.1%
  Trade finance income     1,630    1,104   47.7%
  BOLI  income     339    331   2.4%
  Net gain (loss) on sale of investment securities     -    2   -100.0%
  Other income     745    652   14.3%
   Total noninterest income     3,892    3,621   7.5%
         
 Noninterest expense:      
  Salary and employee benefits     20,998    17,945   17.0%
  Net occupancy expense     3,681    3,195   15.2%
  Business development and promotion expense     611    420   45.7%
  Professional services     4,968    4,092   21.4%
  Office supplies and equipment expense     1,119    1,267   -11.7%
  Other real estate owned related income and valuation allowance on LHFS     (480)   (1,120)  -57.1%
  Other      4,851    4,612   5.2%
   Total noninterest expense     35,748    30,411   17.5%
   Income before provision for income taxes     50,191    40,847   22.9%
 Income tax expense     20,485    16,255   26.0%
   Net income  $  29,706 $  24,592   20.8%
         
 Income per share available to common shareholders      
   Basic  $  2.16 $  1.83   18.4%
   Diluted  $  2.13 $  1.78   19.6%
         
 Weighted-average common shares outstanding      
   Basic     13,484,216    13,290,258   1.5%
   Diluted     13,677,892    13,620,027   0.4%



 PREFERRED BANK 
 Condensed Consolidated Statements of Financial Condition 
 (unaudited) 
 (in thousands) 
        
        
    December 31, December 31, 
     2015   2014  
 Assets      
        
 Cash and due from banks $  296,175  $  215,194  
 Fed funds sold    13,000     25,000  
  Cash and cash equivalents    309,175     240,194  
        
 Securities held to maturity, at amortized cost    5,830     7,815  
 Securities available-for-sale, at fair value    169,613     150,539  
 Loans and leases    2,059,996     1,604,149  
 Less allowance for loan and lease losses    (22,658)    (22,974) 
 Less net deferred loan fees    (3,092)    (2,100) 
  Net loans and leases    2,034,246     1,579,075  
        
 Other real estate owned    4,112     8,811  
 Customers' liability on acceptances    897     156  
 Bank furniture and fixtures, net    5,251     4,132  
 Bank-owned life insurance    8,763     8,525  
 Accrued interest receivable    8,128     6,497  
 Investment in affordable housing    16,119     17,999  
 Federal Home Loan Bank stock    7,162     6,155  
 Deferred tax assets    23,291     21,357  
 Income tax receivable    94     -  
 Other asset    8,363     2,899  
  Total assets $  2,601,044  $  2,054,154  
        
        
 Liabilities and Shareholders' Equity     
        
 Liabilities:      
 Deposits:      
  Demand $  561,522  $  443,385  
  Interest-bearing demand  748,918   525,781  
  Savings  30,703   22,211  
  Time certificates of $250,000 or more  321,537   276,197  
  Other time certificates  626,494   508,685  
   Total deposits $  2,289,174  $  1,776,259  
  Acceptances outstanding    897     156  
  Advances from Federal Home Loan Bank    26,632     20,000  
  Commitments to fund investment in affordable housing partnership      3,958     8,151  
  Accrued interest payable    1,919     1,419  
  Other liabilities    14,375     13,143  
  Total liabilities    2,336,955     1,819,128  
        
 Commitments and contingencies     
 Shareholders' equity:     
  Preferred stock. Authorized 25,000,000 shares; no issued and outstanding     
  shares at December 31, 2015 and December 31, 2014       
  Common stock, no par value. Authorized 100,000,000 shares; issued     
  and outstanding 13,884,942 and 13,503,458 shares at December 31, 2015  and December 31, 2014, respectively    166,560     164,023  
  Treasury stock    (19,115)    (19,115) 
  Additional paid-in-capital    34,650     29,631  
  Accumulated income    81,045     58,552  
  Accumulated other comprehensive income:     
  Unrealized gain on securities, available-for-sale, net of tax of $718 and $1,405  at December 31, 2015 and December 31, 2014   949     1,935  
  Total shareholders' equity    264,089     235,026  
  Total liabilities and shareholders' equity $  2,601,044  $  2,054,154  



 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, 
     2015   2015   2015   2015   2014  
 Unaudited historical quarterly operations data:           
  Interest income  $  25,423  $  24,380  $  23,053  $  21,846  $  21,821  
  Interest expense     3,105     2,783     2,486     2,482     2,438  
  Interest income before provision for credit losses     22,318     21,597     20,567     19,364     19,383  
  Provision for credit losses    300     500     500     500     500  
  Noninterest income     954     940     1,131     868     751  
  Noninterest expense     9,928     8,740     8,462     8,618     8,121  
  Income tax expense     5,518     5,396     5,147     4,424     4,645  
  Net income     7,526     7,901     7,589     6,690     6,868  
              
  Earnings per share            
  Basic  $  0.55  $  0.57  $  0.55  $  0.49  $  0.51  
  Diluted  $  0.54  $  0.57  $  0.55  $  0.48  $  0.50  
              
 Ratios for the period:             
  Return on average assets  1.27%  1.42%  1.44%  1.28%  1.37% 
  Return on beginning equity  11.61%  12.55%  12.49%  11.54%  11.92% 
  Net interest margin (Fully-taxable equivalent)  3.88%  4.00%  4.01%  3.83%  3.98% 
  Noninterest expense to average assets  1.68%  1.58%  1.60%  1.65%  1.62% 
  Efficiency ratio   42.66%  38.78%  39.00%  42.60%  40.33% 
  Net charge-offs (recoveries) to average loans (annualized)  0.36%  0.05%  0.03%  0.02%  0.05% 
              
 Ratios as of period end:            
  Tier 1 leverage capital ratio  10.49%  11.47%  11.59%  11.26%  11.73% 
  Common equity tier 1 risk-based capital ratio  11.02%  11.80%  11.91%  12.10%  N/A  
  Tier 1 risk-based capital ratio  11.02%  11.80%  11.91%  12.10%  12.72% 
  Total risk-based capital ratio  11.99%  12.93%  13.07%  13.30%  13.97% 
  Allowances for credit losses to loans and leases at end of period  1.10%  1.31%  1.36%  1.40%  1.43% 
  Allowance for credit losses to non-performing             
  loans and leases   969.52%  303.27%  299.06%  288.16%  268.19% 
              
 Average balances:             
  Total loans and leases  $  1,876,544  $  1,741,762  $  1,673,710  $  1,612,556  $  1,555,868  
  Earning assets  $  2,297,154  $  2,160,075  $  2,070,542  $  2,064,435  $  1,943,034  
  Total assets  $  2,345,319  $  2,201,060  $  2,117,610  $  2,115,354  $  1,990,417  
  Total deposits  $  2,039,567  $  1,907,719  $  1,832,688  $  1,834,920  $  1,707,908  
   
 (1) Risk-based capital ratios were calculated under BASEL III rules, which became effective on January 1, 2015.  Ratios for the prior periods were calculated under Basel I rules.  
 (2) Loans held for sale are excluded   
 (3) Loans held for sale are included   



 

 PREFERRED BANK  
 Selected Consolidated Financial Information  
 (in thousands, except for ratios)  
        
    For the Year Ended 
    December 31, December 31, 
     2015   2014  
  Interest income $  94,702  $  80,327  
  Interest expense    10,856     9,340  
   Interest income before provision for credit losses    83,846     70,987  
  Provision for credit losses    1,800     3,350  
  Noninterest income    3,892     3,621  
  Noninterest expense    35,748     30,411  
  Income tax expense    20,485     16,255  
   Net income    29,706     24,592  
        
  Earnings per share     
   Basic $  2.16  $  1.83  
   Diluted $  2.13  $  1.78  
        
 Ratios for the period:     
  Return on average assets  1.35%  1.31% 
  Return on beginning equity  12.64%  11.88% 
  Net interest margin (Fully-taxable equivalent)  3.92%  3.89% 
  Noninterest expense to average assets  1.62%  1.62% 
  Efficiency ratio  40.74%  40.76% 
  Net charge-offs (recoveries) to average loans  0.12%  -0.01% 
        
 Average balances:     
  Total loans and leases* $  1,731,871  $  1,438,122  
  Earning assets $  2,154,355  $  1,836,375  
  Total assets $  2,200,557  $  1,880,019  
  Total deposits $  1,909,397  $  1,620,709  
        
 * Loans held for sale are included   
 ** Loans held for sale are excluded   
  



 
 PREFERRED BANK 
 Selected Consolidated Financial Information 
 (unaudited) 
 (in thousands, except for ratios) 
 
  As of 
           
  December 31, September 30, June 30, March 31, December 31,
   2015   2015   2015   2015   2014 
 Unaudited quarterly statement of financial position data:          
 Assets:          
  Cash and cash equivalents $  309,175  $  232,707  $  208,015  $  242,053  $  240,194 
  Securities held-to-maturity, at amortized cost    5,830     6,307     6,806     7,139     7,815 
  Securities available-for-sale, at fair value    169,613     164,378     161,775     165,330     150,539 
  Loans and Leases:          
  Real estate - Single and multi-family residential $  415,097  $  328,124  $  290,186  $  306,284  $  283,958 
  Real estate - Land for housing    14,408     14,429     13,102     11,658     12,132 
  Real estate - Land for income properties    2,305     1,876     1,891     1,906     1,489 
  Real estate - Commercial    861,317     770,494     712,383     676,034     653,380 
  Real estate - For sale housing construction    73,858     79,406     71,945     50,458     48,892 
  Real estate - Other construction    57,546     48,438     49,413     84,065     77,593 
  Commercial and industrial    596,887     555,680     570,408     502,453     495,827 
  Trade finance and other    38,578     38,602     40,403     38,234     30,878 
  Gross loans    2,059,996     1,837,049     1,749,731     1,671,092     1,604,149 
  Allowance for loan and lease losses    (22,658)    (24,055)    (23,758)    (23,388)    (22,974)
  Net deferred loan fees    (3,092)    (2,476)    (2,179)    (2,216)    (2,100)
  Total loans, net $  2,034,246  $  1,810,518  $  1,723,794  $  1,645,488  $  1,579,075 
           
  Other real estate owned $  4,112  $  -  $  -  $  8,811  $  8,811 
  Investment in affordable housing    16,119     16,589     17,059     17,529     17,999 
  Federal Home Loan Bank stock    7,162     6,677     6,677     6,155     6,155 
  Other assets    54,786     45,370     46,030     45,208     43,566 
  Total assets $  2,601,044  $  2,282,546  $  2,170,156  $  2,137,713  $  2,054,154 
           
 Liabilities:          
  Deposits:          
  Demand $  561,522  $  477,523  $  519,501  $  493,440  $  443,385 
  Interest-bearing demand  748,918   697,402   568,243   585,286   525,781 
  Savings  30,703   21,159   23,855   24,056   22,211 
  Time certificates of $250,000 or more  321,537   263,949   260,205   243,360   276,197 
  Other time certificates  626,494   527,602   510,394   510,809   508,685 
   Total deposits $  2,289,174  $  1,987,635  $  1,882,198  $  1,856,950  $  1,776,258 
           
  Advances from Federal Home Loan Bank $  26,632  $  20,000  $  20,000  $  20,000  $  20,000 
  Commitments to fund investment in affordable housing partnership    3,958     4,139     4,139     7,726     8,151 
  Other liabilities     17,191     13,590     13,954     9,299     14,718 
  Total liabilities $  2,336,955  $  2,025,364  $  1,920,291  $  1,893,974  $  1,819,128 
           
 Equity:          
  Net common stock, no par value $  182,095  $  180,260  $  179,360  $  177,978  $  174,539 
  Retained earnings    81,045     75,679     69,431     63,545     58,552 
  Accumulated other comprehensive income    949     1,243     1,074     2,216     1,935 
  Total shareholders' equity $  264,089  $  257,182  $  249,865  $  243,739  $  235,026 
  Total liabilities and shareholders' equity $  2,601,044  $  2,282,546  $  2,170,156  $  2,137,713  $  2,054,154 
 



   
Preferred Bank  
Loan and Credit Quality Information  
          
Allowance For Credit Losses & Loss History  
     Year Ended Year Ended  
     December 31, 2015 December 31, 2014  
      (Dollars in 000's)  
Allowance For Credit Losses      
Balance at Beginning of Period $  22,974  $  19,494   
 Charge-Offs      
  Commercial & Industrial    1,475     436   
  Mini-perm Real Estate    1,793     4,243   
  Construction - Residential    -      -    
  Construction - Commercial    -      -    
  Land - Residential    -      -    
  Land - Commercial    -      -    
  Others    -      -    
    Total Charge-Offs    3,268     4,679   
          
 Recoveries      
  Commercial & Industrial    131     3   
  Mini-perm Real Estate    144     -    
  Construction - Residential    -      -    
  Construction - Commercial    20     134   
  Land - Residential    100     -    
  Land - Commercial    757     4,672   
    Total Recoveries    1,152     4,809   
          
 Net Loan Charge-Offs    2,116     (130)  
 Provision for Credit Losses    1,800     3,350   
Balance at End of Period $  22,658  $  22,974   
Average Loans and Leases* $  1,731,871  $  1,438,122   
Loans and Leases at end of Period* $  2,059,996  $  1,604,149   
Net Charge-Offs to Average Loans and Leases  0.12%  -0.01%  
Allowances for credit losses to loans and leases at end of period **  1.10%  1.43%  
          
 * Loans held for sale are included    
 ** Loans held for sale are excluded    
     
AT THE COMPANY: Edward J. Czajka Executive Vice President Chief Financial Officer (213) 891-1188 AT FINANCIAL PROFILES: Kristen Papke General Information (310) 663-8007 kpapke@finprofiles.com

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