Market Overview

Preferred Bank Reports Second Quarter Results

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LOS ANGELES, July 20, 2015 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), an independent commercial bank focusing on the diversified California market, today reported results for the quarter ended June 30, 2015. Preferred Bank ("the Bank") reported net income of $7.6 million or $0.55 per diluted share for the second quarter of 2015. This compares to net income of $6.2 million or $0.45 per diluted share for the second quarter of 2014 and compares to net income of $6.7 million or $0.48 per diluted share for the first quarter of 2015. Earnings for the second quarter were aided by a special FHLB stock dividend of $227,000 as well as a gain on sale of OREO of $325,000.

Highlights from the second quarter of 2015:

  • Linked quarter loan growth was $78.6 million
  • Net interest margin expanded to 4.01%
  • ROA was 1.44%
  • ROBE was 12.49%
  • Efficiency ratio was 39.0%

Li Yu, Chairman and CEO commented, "The quarter ended June 30, 2015 was a very successful one for the Bank. Net income was $7.6 million compared to $6.2 million in the same quarter of 2014. On a diluted per share basis, we earned $0.55; a 22% increase from the $0.45 one year ago. This quarter's earnings were aided by a $325,000 gain on sale of OREO and a special FHLB cash dividend of $227,000.

During the quarter, we sold the last piece of OREO at a gain as earlier discussed. Non-performing assets now total $7.9 million at June 30, 2015, which represents the lowest level of NPA's in the last seven years.

Loan growth is another highlight of the quarter. Despite the historically high payoffs in the quarter, our successful new loan origination efforts have resulted in total loan growth of $78.6 million, a 4.7% increase on a linked quarter basis.

Deposit growth during the second quarter lagged behind loan growth. In the quarter, deposit growth was $25.2 million or a 1.4% on a linked quarter basis. This variance in the pace of loan growth versus deposit growth as well as the special FHLB dividend, are the main reasons for the improved net interest margin for the quarter.

Our Bank has an incentive bonus program directly linking quarterly bonus accruals with the level of profitability of the Bank. With a successful second quarter operation, salaries and benefits expense also increased. However, the efficiency ratio was a stellar 39.0% as other noninterest expense remained under control.

We are pleased with the performance of the Bank in all aspects and we look forward to steady performance for the remainder of 2015."

Quarterly Results

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $20.6 million for the second quarter of 2015. This compares favorably to the $17.1 million recorded in the second quarter of 2014 and to the $19.4 million recorded in the first quarter of 2015. The increase over both comparable periods is due primarily to loan growth. The Bank's taxable equivalent net interest margin was 4.01% for the second quarter of 2015, an 18 basis point increase over the 3.83% achieved in the first quarter of 2015 and an 8 basis point increase over the 3.93% recorded in the second quarter of 2014. The increase in the margin over the first quarter of 2015 was primarily due to lower average cash balances as well as a special FHLB cash dividend of $227,000 which was recorded in the second quarter of 2015. The variance over the second quarter of 2014 was due to loan growth as well as the special FHLB cash dividend. The special FHLB dividend contributed approximately 4 basis points to the net interest margin for the second quarter of 2015.

Noninterest Income. For the second quarter of 2015, noninterest income was $1,131,000 compared with $914,000 for the same quarter last year and compared to $868,000 for the first quarter of 2015. Service charges on deposits were down $63,000 compared to the same period last year but up $37,000 compared to the first quarter of 2015. Trade finance income was $491,000 for the second quarter of 2015, an increase of $160,000 compared to the same period last year and an increase of $184,000 over the first quarter of 2015. This was primarily due to higher deal volume. Other income was $220,000, an increase of $118,000 over the second quarter of 2014 and an increase of $41,000 over the first quarter of 2015.

Noninterest Expense. Total noninterest expense was $8.5 million for the second quarter of 2015, an increase of $1.8 million over the same period last year and down slightly from the $8.6 million recorded in the first quarter of 2015. Salaries and benefits expense totaled $5.5 million for the second quarter of 2015 compared to $3.9 million for the same period last year and compared to $5.3 million for the first quarter of 2015. The increase over the second quarter of 2014 was due mainly to staffing increases and a higher bonus accrual and the increase over the prior quarter was mainly due to a higher bonus accrual, which is commensurate with earnings. Occupancy expense was $899,000 compared to the $804,000 recorded in the same period in 2014 and the $851,000 recorded in the first quarter of 2015. The increase over both periods was due primarily to the new San Fernando Valley branch expenses and normal cost increases. Professional services expense was $1,175,000 for the second quarter of 2015 compared to $1,347,000 for the same quarter of 2014 and $1,083,000 recorded in the first quarter of 2015. The decrease from the prior year was due to consulting expense which ran high in 2014 due to BSA remediation efforts. Net gain on OREO and other credit items was $(552,000) for the quarter compared to $(1,150,000) in the same period last year and compared to $89,000 in the first quarter of 2015. During the second quarter of 2015, a gain on sale of OREO property was recorded for $325,000 and the Bank also received rental income on the same property of $211,000. Other expenses were $1,046,000 in the second quarter of 2015, down from the $1,348,000 recorded in the same period in 2014 but up slightly over the $920,000 recorded in the first quarter of 2015.

Income Taxes

The Bank recorded a provision for income taxes of $5.1 million for the second quarter of 2015. This represents an effective tax rate ("ETR") of 40.4% for the quarter. This is up slightly from the ETR of 39.8% for the first quarter of 2015. This small increase is due to the Bank's growing profitability in 2015 relative to tax exempt income and deductible items.

Balance Sheet Summary

Total gross loans and leases (including loans held for sale) at June 30, 2015 were $1.75 billion, an increase of $145.6 million or 9.1% over the total of $1.60 billion as of December 31, 2014. The tables below indicate loans by type as of June 30, 2015 as compared to the end of 2014:

Loans by Type – Year over Year (ooo's)
         
Loan Type (000's) June 30, 2015 December 31, 2014 $ Change % Change
R/E – Residential/Multifamily $ 290,186 $ 283,958 $ 6,228 2.2%
R/E – Land 14,993 13,621 1,372 10.1%
R/E – Commercial 712,383 653,380 59,003 9.0%
R/E – Construction 121,358 126,485 (5,127) -4.1%
Commercial & Industrial 610,811 526,705 84,106 16.0%
Total $ 1,749,731 $ 1,604,149 $ 145,582 9.1%

Total deposits as of June 30, 2015 were $1.88 billion, an increase of $105.9 million from the $1.78 billion at December 31, 2014. As of June 30, 2015 compared to December 31, 2014; noninterest-bearing demand deposits increased by $76.1 million or 17.2%, interest-bearing demand and savings deposits increased by $44.1 million or 8.0% and time deposits decreased by $14.3 million or 1.8%. Total assets were $2.17 billion, a $116.0 million or 5.6% increase from the total of $2.05 billion as of December 31, 2014.

Asset Quality

As of June 30, 2015 nonaccrual loans totaled $7.9 million, down slightly from the $8.1 million total as of December 31, 2014. Total net charge-offs for the second quarter of 2015 were $130,000 compared to $86,000 for the first quarter of 2015, and consisted mainly of a charge-off of $797,000 on a loan for which the reserve had been previously established, partially offset by a recovery of $655,000 on a loan for which there is an ongoing repayment plan. The Bank recorded a provision for loan losses of $500,000 for the second 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 compares to a $1.1 million provision recorded in the same quarter last year and to the $500,000 provision recorded in the first quarter of 2015.  The allowance for loan loss at June 30, 2015 was $23.8 million or 1.36% of total loans compared to $23.0 million or 1.43% of total loans at December 31, 2014.

OREO

As of June 30, 2015, the Bank holds no OREO properties. During the quarter, the Bank sold its remaining OREO property. Proceeds from the sale were approximately $9.1 million against the Bank's book value of $8.8 million which resulted in a gain of $325,000.

Capitalization

As of June 30, 2015, the Bank's tier 1 leverage ratio was 11.59%, the common equity tier 1 capital ratio was 11.91% and the total capital ratio was 13.07%. 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 second quarter 2015 financial results will be held tomorrow, July 21, 2015 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 and Chief Financial Officer Edward J. Czajka 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 August 6, 2015; the passcode is 10069030.

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. 

The Preferred Bank logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11817

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 Three Months Ended 
  June 30, March 31, June 30,
  2015 2015 2014
Interest income:       
Loans, including fees   $ 21,276  $ 20,355  $ 17,681
Investment securities   1,731  1,457  1,565
Fed funds sold   46  34  48
Total interest income   23,053  21,847  19,294
       
Interest expense:       
Interest-bearing demand   709  786  627
Savings   15  15  17
Time certificates   1,727  1,649  1,554
FHLB borrowings   35  32  31
Total interest expense   2,486  2,482  2,229
Net interest income   20,567  19,365  17,065
Provision for loan losses   500  500  1,100
Net interest income after provision for loan losses   20,067  18,865  15,965
       
Noninterest income:       
Fees & service charges on deposit accounts   336  299  399
Trade finance income   491  307  331
BOLI income   84  83  82
Other income   220  178  102
Total noninterest income   1,131  868  914
       
Noninterest expense:       
Salary and employee benefits   5,507  5,312  3,867
Net occupancy expense   899  851  804
Business development and promotion expense   124  109  122
Professional services   1,175  1,083  1,347
Office supplies and equipment expense   263  254  285
Other real estate owned related (income) expense and valuation allowance on LHFS   (552)  89  (1,150)
Other   1,046  920  1,348
Total noninterest expense   8,462  8,618  6,623
Income before provision for income taxes   12,736  11,114  10,256
Income tax expense   5,147  4,424  4,047
Net income   $ 7,589  $ 6,690  $ 6,209
       
Income and dividend allocated to participating securities   (144)  (128)  (80)
Net income available to common shareholders   $ 7,445  $ 6,562  $ 6,129
       
       
Income per share available to common shareholders       
Basic   $ 0.55  $ 0.49  $ 0.46
Diluted   $ 0.55  $ 0.48  $ 0.45
       
Weighted-average common shares outstanding       
Basic   13,480,609  13,397,081  13,261,820
Diluted   13,659,167  13,805,565  13,612,772
       
PREFERRED BANK 
Condensed Consolidated Statements of Operations 
(unaudited) 
 (in thousands, except for net income per share and shares) 
       
       
  For the Six Months Ended  
  June 30, June 30,  Change 
  2015 2014 %
Interest income:       
Loans, including fees   $ 41,631  $ 35,023 18.9%
Investment securities   3,188  2,954 7.9%
Fed funds sold   80  67 19.6%
Total interest income   44,899  38,044 18.0%
       
Interest expense:       
Interest-bearing demand   1,495  1,273 17.4%
Savings   30  36 -17.8%
Time certificates   3,377  3,104 8.8%
FHLB borrowings   66  63 4.2%
Total interest expense   4,968  4,476 11.0%
Net interest income   39,931  33,568 19.0%
Provision for credit losses   1,000  2,350 -57.4%
Net interest income after provision for loan losses   38,931  31,218 24.7%
       
Noninterest income:       
Fees & service charges on deposit accounts   635  855 -25.7%
Trade finance income   797  630 26.7%
BOLI income   168  164 2.2%
Other income   399  293 36.0%
Total noninterest income   1,999  1,942 3.0%
       
Noninterest expense:       
Salary and employee benefits   10,819  8,602 25.8%
Net occupancy expense   1,749  1,605 9.0%
Business development and promotion expense   233  208 12.1%
Professional services   2,259  2,108 7.2%
Office supplies and equipment expense   517  623 -16.9%
Other real estate owned related income and valuation allowance on LHFS   (463)  (1,228) -62.3%
Other   1,966  2,537 -22.5%
Total noninterest expense   17,080  14,455 18.2%
Income before provision for income taxes   23,850  18,705 27.5%
Income tax expense   9,571  7,343 30.3%
Net income   $ 14,279  $ 11,362 25.7%
       
Income and dividend allocated to participating securities   (245)  (126) 94.6%
Net income available to common shareholders   $ 14,034  $ 11,236 24.9%
       
       
Income per share available to common shareholders       
Basic   $ 1.04  $ 0.85 23.1%
Diluted   $ 1.03  $ 0.83 24.4%
       
Weighted-average common shares outstanding       
Basic   13,439,105  13,251,908 1.4%
Diluted   13,626,991  13,570,967 0.4%
       
 
PREFERRED BANK 
Condensed Consolidated Statements of Financial Condition 
(unaudited) 
(in thousands) 
     
     
  June 30, December 31,
  2015 2014
Assets     
     
Cash and due from banks   $ 163,015  $ 215,194
Fed funds sold   45,000  25,000
Cash and cash equivalents   208,015  240,194
     
Securities held to maturity, at amortized cost   6,806  7,815
Securities available-for-sale, at fair value   161,775  150,539
Loans and leases   1,749,731  1,604,149
Less allowance for loan and lease losses   (23,758)  (22,974)
Less net deferred loan fees   (2,179)  (2,100)
Net loans and leases   1,723,794  1,579,075
     
Loans held for sale, at lower of cost or fair value   --  --
     
Other real estate owned   --  8,811
Customers' liability on acceptances   1,365  156
Bank furniture and fixtures, net   4,281  4,132
Bank-owned life insurance   8,643  8,525
Accrued interest receivable   6,860  6,497
Investment in affordable housing   17,059  17,999
Federal Home Loan Bank stock   6,677  6,155
Deferred tax assets   21,982  21,357
Income tax receivable   197  --
Other asset   2,702  2,899
Total assets   $ 2,170,156  $ 2,054,154
     
     
Liabilities and Shareholders' Equity     
     
Liabilities:     
Deposits:     
Demand   $ 519,501  $ 443,385
Interest-bearing demand  568,243 525,781
Savings  23,855 22,211
Time certificates of $250,000 or more  260,205 276,197
Other time certificates  510,394 508,685
Total deposits   $ 1,882,198  $ 1,776,259
Acceptances outstanding   1,365  156
Advances from Federal Home Loan Bank   20,000  20,000
Commitments to fund investment in affordable housing partnership   4,139  8,151
Accrued interest payable   1,426  1,419
Other liabilities   11,163  13,143
Total liabilities   1,920,291  1,819,128
     
Commitments and contingencies     
Shareholders' equity:     
Preferred stock. Authorized 25,000,000 shares; no issued and outstanding shares at June 30, 2015 and December 31, 2014  --  -- 
Common stock, no par value. Authorized 20,000,000 shares; issued and outstanding 13,759,939 and 13,503,458 shares at June 30, 2015 and December 31, 2014, respectively   165,383  164,023
Treasury stock   (19,115)  (19,115)
Additional paid-in-capital   33,092  29,631
Accumulated income   69,431  58,552
Accumulated other comprehensive income:     
Unrealized gain on securities, available-for-sale, net of tax of $779 and $1,405 at June 30, 2015 and December 31, 2014  1,074  1,935
Total shareholders' equity   249,865  235,026
Total liabilities and shareholders' equity   $ 2,170,156  $ 2,054,154
     
 
 PREFERRED BANK 
 Selected Consolidated Financial Information 
 (unaudited) 
 (in thousands, except for ratios) 
           
  For the Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
  2015 2015 2014 2014 2014
Unaudited historical quarterly operations data:           
Interest income   $ 23,053  $ 21,846  $ 21,821  $ 20,462  $ 19,294
Interest expense   2,486  2,482  2,438  2,426  2,229
Interest income before provision for credit losses   20,567  19,364  19,383  18,036  17,065
Provision for credit losses   500  500  500  500  1,100
Noninterest income   1,131  868  751  928  914
Noninterest expense   8,462  8,618  8,121  7,836  6,623
Income tax expense   5,147  4,424  4,645  4,266  4,047
Net income   7,589  6,690  6,868  6,362  6,209
           
Earnings per share           
Basic   $ 0.55  $ 0.49  $ 0.51  $ 0.47  $ 0.46
Diluted   $ 0.55  $ 0.48  $ 0.50  $ 0.46  $ 0.45
           
Ratios for the period:           
Return on average assets  1.44% 1.28% 1.37% 1.29% 1.39%
Return on beginning equity  12.49% 11.54% 11.92% 11.34% 11.61%
Net interest margin (Fully-taxable equivalent)  4.01% 3.83% 3.98% 3.78% 3.93%
Noninterest expense to average assets  1.60% 1.65% 1.62% 1.59% 1.48%
Efficiency ratio  39.00% 42.60% 40.33% 41.32% 36.84%
Net charge-offs (recoveries) to average loans (annualized)  0.03% 0.02% 0.05% -1.16% 0.87%
           
Ratios as of period end:           
Tier 1 leverage capital ratio(1)  11.59% 11.26% 11.73% 11.62% 12.31%
Common equity tier 1 risk-based capital ratio(1)  11.91% 12.10% N/A N/A N/A
Tier 1 risk-based capital ratio(1)  11.91% 12.10% 12.72% 12.75% 13.16%
Total risk-based capital ratio(1)  13.07% 13.30% 13.97% 14.00% 14.28%
Allowances for credit losses to loans and leases at end of period(2)  1.36% 1.40% 1.43% 1.49% 1.24%
Allowance for credit losses to non-performing loans and leases  299.06% 288.16% 268.19% 210.40% 101.58%
           
Average balances:           
Total loans and leases(3)   $ 1,673,710  $ 1,612,556  $ 1,555,868  $ 1,464,336  $ 1,378,444
Earning assets   $ 2,070,542  $ 2,064,435  $ 1,943,034  $ 1,908,411  $ 1,752,032
Total assets   $ 2,117,610  $ 2,115,354  $ 1,990,417  $ 1,952,270  $ 1,792,317
Total deposits   $ 1,832,688  $ 1,834,920  $ 1,707,908  $ 1,684,628  $ 1,543,739
           
 
(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 Six Months Ended
  June 30, June 30,
  2015 2014
Interest income   $ 44,899  $ 38,044
Interest expense   4,968  4,476
Interest income before provision for credit losses   39,931  33,568
Provision for credit losses   1,000  2,350
Noninterest income   1,999  1,942
Noninterest expense   17,080  14,455
Income tax expense   9,571  7,343
Net income   14,279  11,362
     
Earnings per share     
Basic   $ 1.04  $ 0.85
Diluted   $ 1.03  $ 0.83
     
Ratios for the period:     
Return on average assets  1.36% 1.29%
Return on beginning equity  12.25% 11.07%
Net interest margin (Fully-taxable equivalent)  3.92% 3.89%
Noninterest expense to average assets  1.63% 1.64%
Efficiency ratio  40.73% 40.71%
Net charge-offs (recoveries) to average loans  0.03% 0.59%
     
Average balances:     
Total loans and leases*   $ 1,643,293  $ 1,358,911
Earning assets   $ 2,067,503  $ 1,736,091
Total assets   $ 2,116,464  $ 1,778,591
Total deposits   $ 1,833,779  $ 1,534,290
     
* 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
  June 30, March 31, December 31, September 30, June 30,
  2015 2015 2014 2014 2014
 Unaudited quarterly statement of financial position data:           
 Assets:           
 Cash and cash equivalents   $ 208,015  $ 242,053  $ 240,194  $ 248,232  $ 232,585
 Securities held-to-maturity, at amortized cost   6,806  7,139  7,815  8,188  8,709
 Securities available-for-sale, at fair value   161,775  165,330  150,539  164,247  176,579
 Loans and Leases:           
 Real estate - Single and multi-family residential   $ 290,186  $ 306,284  $ 283,958  $ 229,353  $ 208,080
 Real estate - Land for housing   13,102  11,658  12,132  12,156  13,536
 Real estate - Land for income properties   1,891  1,906  1,489  1,507  1,529
 Real estate - Commercial   712,383  676,034  653,380  678,778  700,023
 Real estate - For sale housing construction   71,945  50,458  48,892  44,614  36,069
 Real estate - Other construction   49,413  84,065  77,593  80,411  63,708
 Commercial and industrial   570,408  502,453  495,827  443,966  374,128
 Trade finance and other   40,403  38,234  30,878  33,967  40,756
 Gross loans   1,749,731  1,671,092  1,604,149  1,524,752  1,437,829
 Allowance for loan and lease losses   (23,758)  (23,388)  (22,974)  (22,662)  (17,897)
 Net deferred loan fees   (2,179)  (2,216)  (2,100)  (2,368)  (2,159)
 Loans excluding loans held for sale   1,723,794  1,645,488  1,579,075  1,499,722  1,417,773
 Loans held for sale   --   --   --   --   5,632
 Total loans, net   $ 1,723,794  $ 1,645,488  $ 1,579,075  $ 1,499,722  $ 1,423,405
           
 Other real estate owned   $ --  $ 8,811  $ 8,811  $ --  $ 2,755
 Investment in affordable housing   17,059  17,529  17,999  18,460  8,706
 Federal Home Loan Bank stock   6,677  6,155  6,155  6,155  6,155
 Other assets   46,030  45,208  43,566  51,146  45,124
 Total assets   $ 2,170,156  $ 2,137,713  $ 2,054,154  $ 1,996,150  $ 1,904,018
           
 Liabilities:           
 Deposits:           
 Demand   $ 519,501  $ 493,440  $ 443,385  $ 403,881  $ 388,497
 Interest-bearing demand  568,243 585,286 525,781 554,769 489,313
 Savings  23,855 24,056 22,211 22,552 24,712
 Time certificates of $250,000 or more  260,205 243,360 276,197 250,087 250,276
 Other time certificates  510,394 510,809 508,685 489,765 497,021
 Total deposits   $ 1,882,198  $ 1,856,950  $ 1,776,259  $ 1,721,054  $ 1,649,819
           
 Advances from Federal Home Loan Bank   $ 20,000  $ 20,000  $ 20,000  $ 20,000  $ 20,000
 Commitments to fund investment in affordable housing partnership   4,139  7,726  8,151  9,481  -- 
 Other liabilities   13,954  9,299  14,717  16,963  11,542
 Total liabilities   $ 1,920,291  $ 1,893,974  $ 1,819,127  $ 1,767,498  $ 1,681,361
           
 Equity:           
 Net common stock, no par value   $ 179,360  $ 177,978  $ 174,539  $ 173,581  $ 172,642
 Retained earnings   69,431  63,545  58,553  53,015  48,042
 Accumulated other comprehensive income   1,074  2,216  1,935  2,056  1,973
 Total shareholders' equity   $ 249,865  $ 243,739  $ 235,027  $ 228,652  $ 222,657
 Total liabilities and shareholders' equity   $ 2,170,156  $ 2,137,713  $ 2,054,154  $ 1,996,150  $ 1,904,018
           
 
Preferred Bank
Loan and Credit Quality Information
     
Allowance For Credit Losses & Loss History
  Six Months Ended Year Ended
  June 30, 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  1,096  436
Mini-perm Real Estate  --   4,243
Construction - Residential  --   -- 
Construction - Commercial  --   -- 
Land - Residential  --   -- 
Land - Commercial  --   -- 
Others  --   -- 
Total Charge-Offs  1,096  4,679
     
Recoveries    
Commercial & Industrial  53  3
Mini-perm Real Estate  1  -- 
Construction - Residential  --   -- 
Construction - Commercial  20  134
Land - Residential  100  -- 
Land - Commercial  706  4,672
Total Recoveries  880  4,809
     
Net Loan Charge-Offs  216  (130)
Provision for Credit Losses  1,000  3,350
Balance at End of Period  $ 23,758  $ 22,974
Average Loans and Leases*  $ 1,643,293  $ 1,438,122
Loans and Leases at end of Period*  $ 1,749,731  $ 1,604,149
Net Charge-Offs to Average Loans and Leases 0.03% -0.01%
Allowances for credit losses to loans and leases at end of period ** 1.36% 1.43%
     
     
* Loans held for sale are included 
** Loans held for sale are excluded 
 
CONTACT: 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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