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Press Release

Preferred Bank Reports Quarterly Results

Company Release - 7/25/2024

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LOS ANGELES, July 25, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.6 million or $2.48 per diluted share for the second quarter of 2024. This represents a slight increase in net income of $126,000 over the prior quarter but down by $4.3 million from the same quarter last year. The decrease in net income from the prior year was due to lower net interest income because of rising deposit costs. Despite the decrease in net income, Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.

Highlights for the Quarter:

Return on average assets was 1.97%

Return on beginning equity of 19.44%

Net interest margin (NIM) was 3.96%

Total loans increased by $103 million or 1.9% for the quarter

Total deposits increased $77 million or 1.3% for the quarter

Efficiency ratio was 28.3%

Li Yu, Chairman and CEO, commented, “I am pleased to report Preferred Bank’s second quarter net income of $33.6 million or $2.48 per fully diluted share. For the quarter, total loans grew $103 million or 1.95% on a linked quarter basis. Deposits also grew $77 million or 1.33% linked quarter.

“This quarter, total non-performing loans (NPL’s) increased $22.2 million to $40.6 million as several previously criticized loans have changed from performing status to non-accrual status. This migration is typical in the process of problem loan resolution. We are confident that these NPL’s are either fully-reserved or well-protected by collateral and cash flow. It is not likely that the resolution of these loans will present any significant impact to the Bank’s future earnings. Criticized loans at June 30, 2024, decreased $13.0 million from the previous quarter-end and in-migration into this category seems to have slowed down. There was only one loan newly classified/criticized in the quarter. The loan was supported by adequate collateral value and cash flow with no loss exposure identified.

“During the quarter, we have charged-off $9.0 million of loans that were fully reserved for at the end of the previous quarter. Provision expense for the quarter was $2.5 million. The allowance for credit losses now stands at 1.34% of total loans at June 30, 2024.

“We continue to work on our balance sheet in order to reduce the asset sensitivity in the balance sheet. We are confident that with this work, when interest rates ease the impact on our earnings will be quite modest. Meanwhile, lower interest rates will typically give way to better organic growth which will positively impact earnings.

“The regulatory approval for our $150 million stock buyback plan from 2023 has expired with $72.5 million worth of stock repurchased thus far. We are seeking regulatory approval to extend or renew the plan. We are also pleased to report that with the $72.5 million buyback, the Bank 's tangible common equity (TCE) ratio actually improved from 10.02% as of June 30, 2023 to 10.55% as of June 30, 2024. We attribute this to the Bank’s top echelon earnings capability.

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $66.1 million for the second quarter of 2024. This was a decrease from the $73.3 million recorded in the same quarter last year and down slightly from the $68.5 million posted in the first quarter of 2024. A rising cost of deposits was partially to blame for the decrease in net interest income but so was the addition of new nonaccrual loans whose accrued interest totaled $1.4 million which had to be reversed out of loan interest income. This helped to drive the Bank’s net interest margin down to 3.96% for the quarter. This compares to a margin of 4.19% in the prior quarter and down from 4.58% one year ago. The interest reversals on the nonaccrual loans had the effect of reducing the Bank’s NIM by 8 basis points for the quarter.

Noninterest Income. For the second quarter of 2024, noninterest income was $3.4 million compared with $3.1 million for the same quarter last year and compared to $3.1 million for the first quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $246,000 and gains on sales of SBA loans which increased by $250,000 partially offset by a decrease in other income of $131,000. In comparing to the same quarter last year; LC fee income was up by $173,000 and gains on SBA loan sales were up by $167,000.

Noninterest Expense. Total noninterest expense was $19.7 million for the second quarter of 2024 compared to $20.0 million for the first quarter of 2024 and compared to the $20.9 million recorded in the same period last year. The primary reason for the decrease from the prior year is the $2.8 million valuation allowance recorded in the second quarter of last year on the Bank’s other real estate owned (OREO) property. Partially offsetting that is an increase in professional services; mainly legal fees for loan resolutions. In comparing this quarter to the first quarter of 2024; personnel expenses decreased by $956,000 and other professional services increased by $375,000, again due mainly to legal fees. For the quarter ended June 30, 2024, the Bank’s efficiency ratio was 28.3%, a tick higher than the 28.0% recorded last quarter and up off the 27.3% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.7 million for the second quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded in the same period last year. 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 June 30, 2024 were $5.43 billion, an increase of $155.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits increased to $5.88 billion, up $169.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.85 billion, an increase of $187.3 million over the total of $6.66 billion as of December 31, 2023.

Asset Quality

As of June 30, 2024, nonaccrual loans increased to $40.6 million, up from the $18.3 million reported as of March 31, 2024 and also up from the $28.7 million as of December 31, 2023. The increase was primarily due to the addition of an $18 million loan secured by a hotel and the addition of two C&I loans totaling $13.5 million as well as a $6.1 million loan also secured by a hotel. These additions were partially offset by the sale of a non-performing note during the quarter which totaled $12.3 million. OREO and repossessed assets totaled $16.7 million as of June 30, 2024, no change from the prior quarter or from December 31, 2023. Criticized loans decreased from $86.6 million as of March 31, 2024 to $73.7 million as of June 30, 2024. Total net charge-offs (recoveries) were $9.0 million for the second quarter of 2024 as compared to $3.4 million last quarter and compared to $0 for the second quarter last year. Below is more detail of our loan quality:

Loan Quality

June 30, 2024

March 31, 2024

Criticized loans still accruing

$

33,101

$

68,304

Loans on nonaccrual status

40,551

18,314

Total Criticized Loans

$

73,652

$

86,618

Non-performing loans (non-accrual status) includes the following:

A hotel loan of $18.0 million, in a very populated area of Los Angeles, with cash flow sufficient to service the debt and loan-to-value ratio (LTV) of 51%.

Two commercial and industrial (C&I) loans totaling $13.5 million. The estimated net exposure is fully reserved.

A $6.1 million loan in San Francisco collateralized by a motel with LTV of 71%. This note was sold in July at par, so that credit is already resolved.

Two real estate loans totaling $1.8 million, which are now paying as agreed. These loans will be reinstated to performing status in the third quarter of 2024.

Allowance for Credit Losses

The provision for credit losses for the second quarter of 2024 was $2.5 million compared to $4.4 million last quarter and compared to $2.5 million in the same quarter last year. The aforementioned charge-offs recorded during the quarter as well as loan growth were the primary drivers of the provision for the quarter. The Bank’s allowance coverage ratio is 1.34% of total loans as compared to 1.49% last quarter.

Capitalization

As of June 30, 2024, the Bank’s leverage ratio was 10.89%, the common equity tier 1 capital ratio was 11.52% and the total capital ratio stood at 14.93%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2024 financial results will be held tomorrow, July 26, 2024 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 August 9, 2024; the passcode is 7823115.

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 twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, 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 2023 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

June 30,

March 31,

June 30,

2024

2024

2023

Interest income:

Loans, including fees

$

109,451

$

109,980

$

102,220

Investment securities

17,552

16,257

15,919

Fed funds sold

291

283

272

Total interest income

127,294

126,520

118,411

Interest expense:

Interest-bearing demand

24,205

22,290

16,406

Savings

79

75

47

Time certificates

35,578

34,330

25,436

FHLB borrowings

-

-

1,888

Subordinated debt

1,325

1,325

1,325

Total interest expense

61,187

58,020

45,102

Net interest income

66,107

68,500

73,309

Provision for credit losses

2,500

4,400

2,500

Net interest income after provision for

credit losses

63,607

64,100

70,809

Noninterest income:

Fees & service charges on deposit accounts

819

845

844

Letters of credit fee income

1,749

1,503

1,576

BOLI income

105

105

103

Net loss on called and sale of investment securities

-

-

-

Net gain on sale of loans

353

103

186

Other income

378

509

392

Total noninterest income

3,404

3,065

3,101

Noninterest expense:

Salary and employee benefits

12,944

13,900

12,520

Net occupancy expense

1,716

1,711

1,476

Business development and promotion expense

403

266

200

Professional services

1,832

1,457

1,343

Office supplies and equipment expense

477

473

398

Loss on sale of OREO, valuation allowance and related expense

29

135

2,838

Other

2,296

2,086

2,077

Total noninterest expense

19,697

20,028

20,852

Income before provision for income taxes

47,314

47,137

53,058

Income tax expense

13,722

13,671

15,122

Net income

$

33,592

$

33,466

$

37,936

Income per share available to common shareholders

Basic

$

2.51

$

2.48

$

2.63

Diluted

$

2.48

$

2.44

$

2.61

Weighted-average common shares outstanding

Basic

13,362,522

13,508,878

14,419,959

Diluted

13,548,400

13,736,986

14,560,693

Cash dividends per common share

$

0.70

$

0.70

$

0.55

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

2024

2023

%

Interest income:

Loans, including fees

$

219,431

$

198,101

10.8

%

Investment securities

33,809

28,898

17.0

%

Fed funds sold

574

496

15.8

%

Total interest income

253,814

227,495

11.6

%

Interest expense:

Interest-bearing demand

46,495

33,444

39.0

%

Savings

154

86

78.8

%

Time certificates

69,908

42,029

66.3

%

FHLB borrowings

-

2,262

-100.0

%

Subordinated debt

2,650

2,650

0.0

%

Total interest expense

119,207

80,471

48.1

%

Net interest income

134,607

147,024

-8.4

%

Provision for credit losses

6,900

3,000

130.0

%

Net interest income after provision for credit losses

127,707

144,024

-11.3

%

Noninterest income:

Fees & service charges on deposit accounts

1,664

1,538

8.2

%

Letters of credit fee income

3,252

2,900

12.1

%

BOLI income

210

204

3.0

%

Net loss on called and sale of investment securities

-

(4,117

)

-100.0

%

Net gain on sale of loans

456

526

-13.3

%

Other income

887

984

-9.9

%

Total noninterest income

6,469

2,035

217.8

%

Noninterest expense:

Salary and employee benefits

26,844

26,248

2.3

%

Net occupancy expense

3,427

2,950

16.2

%

Business development and promotion expense

669

305

119.3

%

Professional services

3,289

2,492

32.0

%

Office supplies and equipment expense

950

802

18.5

%

Loss on sale of OREO, valuation allowance and related expense

164

2,910

-94.4

%

Other

4,382

4,045

8.3

%

Total noninterest expense

39,725

39,752

-0.1

%

Income before provision for income taxes

94,451

106,307

-11.2

%

Income tax expense

27,393

30,298

-9.6

%

Net income

$

67,058

$

76,009

-11.8

%

Income per share available to common shareholders

Basic

$

4.99

$

5.27

-5.3

%

Diluted

$

4.93

$

5.21

-5.5

%

Weighted-average common shares outstanding

Basic

13,435,700

14,425,253

-6.9

%

Diluted

13,608,783

14,581,458

-6.7

%

Dividends per share

$

1.40

$

1.10

27.3

%

PREFERRED BANK

Condensed Consolidated Statements of Financial Condition

(unaudited)

(in thousands)

June 30,

December 31,

2024

2023

(Unaudited)

(Audited)

Assets

Cash and due from banks

$

895,677

$

890,852

Fed funds sold

22,000

20,000

Cash and cash equivalents

917,677

910,852

Securities held-to-maturity, at amortized cost

20,605

21,171

Securities available-for-sale, at fair value

331,909

313,842

Loans held for sale, at lower of cost or fair value

955

360

Loans

5,428,600

5,273,498

Less allowance for credit losses

(72,848

)

(78,355

)

Less amortized deferred loan fees, net

(10,502

)

(11,079

)

Loans, net

5,345,250

5,184,064

Other real estate owned and repossessed assets

16,716

16,716

Customers' liability on acceptances

-

315

Bank furniture and fixtures, net

9,506

9,694

Bank-owned life insurance

10,772

10,632

Accrued interest receivable

36,618

33,892

Investment in affordable housing partnerships

60,432

65,276

Federal Home Loan Bank stock, at cost

15,000

15,000

Deferred tax assets

48,719

48,991

Income tax receivable

6,421

2,391

Operating lease right-of-use assets

22,564

22,050

Other assets

3,436

4,030

Total assets

$

6,846,580

$

6,659,276

Liabilities and Shareholders' Equity

Deposits:

Noninterest bearing demand deposits

$

675,767

$

786,995

Interest bearing deposits:

2,326,214

2,075,156

Savings

28,251

29,167

Time certificates of $250,000 or more

1,406,149

1,317,862

Other time certificates

1,442,381

1,500,162

Total deposits

5,878,762

5,709,342

Acceptances outstanding

-

315

Subordinated debt issuance, net

148,351

148,232

Commitments to fund investment in affordable housing partnerships

27,946

30,824

Operating lease liabilities

19,149

19,766

Accrued interest payable

15,086

16,124

Other liabilities

34,158

39,568

Total liabilities

6,123,452

5,964,171

Shareholders' equity

723,128

695,105

Total liabilities and shareholders' equity

$

6,846,580

$

6,659,276

Book value per common share

$

54.23

$

50.54

Number of common shares outstanding

13,334,752

13,753,246

PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

For the Quarter Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2024

2023

2023

2023

Unaudited historical quarterly operations data:

Interest income

$

127,294

$

126,520

$

124,964

$

125,529

$

118,411

Interest expense

61,187

58,020

55,568

52,575

45,102

Interest income before provision for credit losses

66,107

68,500

69,396

72,954

73,309

Provision for credit losses

2,500

4,400

3,500

3,500

2,500

Noninterest income

3,404

3,065

2,106

2,972

3,101

Noninterest expense

19,697

20,028

17,873

19,009

20,852

Income tax expense

13,722

13,671

14,290

15,225

15,122

Net income

$

33,592

$

33,466

$

35,839

$

38,192

$

37,936

Earnings per share

Basic

$

2.51

$

2.48

$

2.63

$

2.74

$

2.63

Diluted

$

2.48

$

2.44

$

2.60

$

2.71

$

2.61

Ratios for the period:

Return on average assets

1.97

%

2.00

%

2.15

%

2.25

%

2.32

%

Return on beginning equity

19.44

%

19.36

%

21.21

%

22.66

%

23.18

%

Net interest margin (Fully-taxable equivalent)

3.96

%

4.19

%

4.24

%

4.39

%

4.58

%

Noninterest expense to average assets

1.15

%

1.20

%

1.07

%

1.12

%

1.28

%

Efficiency ratio

28.34

%

27.99

%

25.00

%

25.04

%

27.29

%

Net charge-offs (recoveries) to average loans (annualized)

0.68

%

0.26

%

-0.00

%

0.01

%

-0.00

%

Ratios as of period end:

Tangible common equity ratio

10.55

%

10.35

%

10.43

%

10.10

%

10.02

%

Tier 1 leverage capital ratio

10.89

%

10.80

%

10.85

%

10.46

%

10.61

%

Common equity tier 1 risk-based capital ratio

11.52

%

11.50

%

11.57

%

11.63

%

11.51

%

Tier 1 risk-based capital ratio

11.52

%

11.50

%

11.57

%

11.63

%

11.51

%

Total risk-based capital ratio

14.93

%

15.08

%

15.18

%

15.32

%

15.14

%

Allowances for credit losses to loans at end of period

1.34

%

1.49

%

1.49

%

1.46

%

1.40

%

Allowance for credit losses to non-performing loans

1.79x

4.33x

2.73x

3.86x

13.86x

Average balances:

Total securities

$

353,357

$

348,961

$

349,863

$

368,968

$

397,905

Total loans

5,320,360

5,263,562

5,126,918

5,086,241

5,044,004

Total earning assets

6,728,498

6,585,853

6,499,469

6,597,557

6,432,950

Total assets

6,863,829

6,718,018

6,627,349

6,719,859

6,558,651

Total time certificate of deposits

2,884,259

2,852,860

2,767,385

2,680,854

2,617,872

Total interest bearing deposits

5,203,034

5,004,834

4,906,947

4,800,227

4,549,519

Total deposits

5,901,976

5,761,488

5,689,713

5,654,350

5,481,457

Total interest bearing liabilities

5,351,347

5,153,089

5,055,143

5,069,014

4,847,596

Total equity

715,190

704,996

683,141

678,020

677,306

PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

For the Six Months Ended

June 30,

June 30,

2024

2023

Interest income

$

253,814

$

227,495

Interest expense

119,207

80,471

Interest income before provision for credit losses

134,607

147,024

Provision for credit losses

6,900

3,000

Noninterest income

6,469

2,035

Noninterest expense

39,725

39,752

Income tax expense

27,393

30,298

Net income

$

67,058

$

76,009

Earnings per share

Basic

$

4.99

$

5.27

Diluted

$

4.93

$

5.21

Ratios for the period:

Return on average assets

1.99

%

2.37

%

Return on beginning equity

19.40

%

24.31

%

Net interest margin (Fully-taxable equivalent)

4.07

%

4.67

%

Noninterest expense to average assets

1.18

%

1.24

%

Efficiency ratio

28.16

%

26.67

%

Net charge-off (recoveries) to average loans

0.47

%

0.00

%

Average balances:

Total securities

$

351,159

$

420,254

Total loans

5,291,961

5,028,520

Total earning assets

6,657,176

6,355,222

Total assets

6,790,924

6,480,186

Total time certificate of deposits

2,868,560

2,414,750

Total interest bearing deposits

5,103,935

4,501,301

Total deposits

5,831,732

5,480,705

Total interest bearing liabilities

5,252,219

4,740,508

Total equity

710,093

664,207

PREFERRED BANK

Selected Consolidated Financial Information

(unaudited)

(in thousands, except for ratios)

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2024

2023

2023

2023

Unaudited quarterly statement of financial position data:

Assets:

Cash and cash equivalents

$

917,677

$

936,600

$

910,852

$

1,021,108

$

1,049,745

Securities held-to-maturity, at amortized cost

20,605

20,904

21,171

21,474

21,818

Securities available-for-sale, at fair value

331,909

333,411

313,842

335,608

352,548

Loans:

Real estate – Mortgage:

Real estate—Residential

$

732,251

$

724,101

$

688,058

$

663,021

$

631,795

Real estate—Commercial

2,833,430

2,777,608

2,760,761

2,688,148

2,744,074

Total Real Estate – Mortgage

3,565,681

3,501,709

3,448,819

3,351,169

3,375,869

Real estate – Construction:

R/E Construction — Residential

238,062

236,596

246,201

226,482

186,239

R/E Construction — Commercial

247,582

213,727

179,775

164,666

153,418

Total real estate construction loans

485,644

450,323

425,976

391,148

339,657

Commercial and industrial

1,371,694

1,369,529

1,394,871

1,383,216

1,398,213

SBA

5,463

3,914

3,469

2,424

4,427

Consumer and others

118

379

363

285

345

Gross loans

5,428,600

5,325,854

5,273,498

5,128,242

5,118,511

Allowance for credit losses on loans

(72,848

)

(79,311

)

(78,355

)

(74,849

)

(71,429

)

Net deferred loan fees

(10,502

)

(10,460

)

(11,079

)

(10,240

)

(10,464

)

Net loans, excluding loans held for sale

$

5,345,250

$

5,236,083

$

5,184,064

$

5,043,153

$

5,036,618

Loans held for sale

$

955

$

605

$

360

$

-

$

176

Net loans

$

5,346,205

$

5,236,688

$

5,184,424

$

5,043,153

$

5,036,794

Other real estate owned and repossessed assets

$

16,716

$

16,716

$

16,716

$

16,716

$

16,728

Investment in affordable housing partnerships

60,432

62,854

65,276

54,679

56,844

Federal Home Loan Bank stock, at cost

15,000

15,000

15,000

15,000

15,000

Other assets

138,036

134,040

131,995

124,793

118,465

Total assets

$

6,846,580

$

6,756,213

$

6,659,276

$

6,632,530

$

6,667,942

Liabilities:

Deposits:

Demand

$

675,767

$

709,767

$

786,995

$

838,300

$

870,282

Interest bearing demand

2,326,214

2,159,948

2,075,156

2,091,384

2,005,298

Savings

28,251

29,261

29,167

30,427

32,089

Time certificates of $250,000 or more

1,406,149

1,349,927

1,317,862

1,283,461

1,244,128

Other time certificates

1,442,381

1,552,805

1,500,162

1,439,699

1,437,194

Total deposits

$

5,878,762

$

5,801,708

$

5,709,342

$

5,683,271

$

5,588,991

Acceptances outstanding

$

-

$

-

$

315

$

103

$

448

Advance from Federal Home Loan Bank

-

-

-

-

150,000

Subordinated debt issuance, net

148,351

148,292

148,232

148,173

148,114

Commitments to fund investment in affordable housing partnerships

27,946

29,647

30,824

20,824

20,930

Other liabilities

68,393

77,008

75,458

109,651

90,692

Total liabilities

$

6,123,452

$

6,056,655

$

5,964,171

$

5,962,022

$

5,999,175

Equity:

Net common stock, no par value

$

113,510

$

115,915

$

134,534

$

143,584

$

167,404

Retained earnings

640,675

616,417

592,325

566,027

535,373

Accumulated other comprehensive income

(31,057

)

(32,774

)

(31,754

)

(39,103

)

(34,010

)

Total shareholders' equity

$

723,128

$

699,558

$

695,105

$

670,508

$

668,767

Total liabilities and shareholders' equity

$

6,846,580

$

6,756,213

$

6,659,276

$

6,632,530

$

6,667,942

PREFERRED BANK

Quarter-to-Date Average Balances, Yield and Rates

(Unaudited)

Three months ended June 30,

Three months ended March 31,

Three months ended June 30,

2024

2024

2023

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)

$

5,324,410

$

109,451

8.27

%

$

5,265,940

$

109,980

8.40

%

$

5,044,517

$

102,220

8.13

%

Investment securities (3)

353,357

3,652

4.16

%

348,961

3,430

3.95

%

397,905

3,709

3.74

%

Federal funds sold

20,866

291

5.61

%

20,390

283

5.58

%

20,000

272

5.45

%

Other earning assets

1,029,865

13,999

5.47

%

950,562

12,928

5.47

%

970,528

12,311

5.09

%

Total interest earning assets

6,728,498

127,393

7.61

%

6,585,853

126,621

7.73

%

6,432,950

118,512

7.39

%

Deferred loan fees, net

(10,459

)

(10,694

)

(10,417

)

Allowance for credit losses on loans

(79,119

)

(78,349

)

(68,956

)

Noninterest earning assets:

Cash and due from banks

10,626

11,244

12,712

Bank furniture and fixtures

9,787

10,084

9,005

Right of use assets

22,886

22,003

21,988

Other assets

181,610

177,877

161,369

Total assets

$

6,863,829

$

6,718,018

$

6,558,651

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

Interest bearing demand and savings

$

2,318,775

$

24,284

4.21

%

$

2,151,974

$

22,365

4.18

%

$

1,931,647

$

16,453

3.42

%

TCD $250K or more

1,379,116

17,295

5.04

%

1,341,298

16,501

4.95

%

1,259,305

12,772

4.07

%

Other time certificates

1,505,143

18,283

4.89

%

1,511,562

17,829

4.74

%

1,358,567

12,664

3.74

%

Total interest bearing deposits

5,203,034

59,862

4.63

%

5,004,834

56,695

4.56

%

4,549,519

41,889

3.69

%

Advance from Federal Home Loan Bank

-

-

0.00

%

-

-

0.00

%

150,000

1,888

5.05

%

Subordinated debt, net

148,313

1,325

3.59

%

148,255

1,325

3.59

%

148,077

1,325

3.59

%

Total interest bearing liabilities

5,351,347

61,187

4.60

%

5,153,089

58,020

4.53

%

4,847,596

45,102

3.73

%

Noninterest bearing liabilities:

Demand deposits

698,942

756,654

931,938

Lease liability

19,828

19,500

20,708

Other liabilities

78,522

83,779

81,103

Total liabilities

6,148,639

6,013,022

5,881,345

Shareholders’ equity

715,190

704,996

677,306

Total liabilities and shareholders’ equity

$

6,863,829

$

6,718,018

$

6,558,651

Net interest income

$

66,206

$

68,601

$

73,410

Net interest spread

3.02

%

3.20

%

3.66

%

Net interest margin

3.96

%

4.19

%

4.58

%

Cost of Deposits:

Noninterest bearing demand deposits

$

698,942

$

756,654

$

931,938

Interest bearing deposits

5,203,034

59,862

4.63

%

5,004,834

56,695

4.56

%

4,549,519

41,889

3.69

%

Total Deposits

$

5,901,976

$

59,862

4.08

%

$

5,761,488

$

56,695

3.96

%

$

5,481,457

$

41,889

3.07

%

(1)

Includes non-accrual loans and loans held for sale

(2)

Net loan fee income of $1.3 million, $1.1 million and $902,000 for the quarter ended June 30, 2024, March 31, 20243 and June 30, 2023, respectively, are included in the yield computations

(3)

Yields on securities have been adjusted to a tax-equivalent basis

PREFERRED BANK

Year-to-Date Average Balances, Yield and Rates

(Unaudited)

Six Months ended June 30,

2024

2023

Interest

Average

Interest

Average

Average

Income or

Yield/

Average

Income or

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

ASSETS

(Dollars in thousands)

Interest earning assets:

Loans (1,2)

$

5,295,175

$

219,431

8.33

%

$

5,029,214

$

198,101

7.94

%

Investment securities (3)

351,159

7,082

4.06

%

420,254

7,703

3.70

%

Federal funds sold

20,628

574

5.60

%

20,110

496

4.97

%

Other earning assets

990,214

26,927

5.47

%

885,644

21,398

4.87

%

Total interest earning assets

6,657,176

254,014

7.67

%

6,355,222

227,698

7.23

%

Deferred loan fees, net

(10,576

)

(10,178

)

Allowance for credit losses on loans

(78,734

)

(68,713

)

Noninterest earning assets:

Cash and due from banks

10,729

11,920

Bank furniture and fixtures

9,936

8,991

Right of use assets

22,444

21,928

Other assets

179,949

161,016

Total assets

$

6,790,924

$

6,480,186

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest bearing liabilities:

Deposits:

Interest bearing demand/ savings

$

2,235,375

$

46,649

4.20

%

$

2,086,551

$

33,530

3.24

%

TCD $250K or more

1,360,207

33,796

5.00

%

1,262,670

23,515

3.76

%

Other time certificates

1,508,353

36,112

4.81

%

1,152,080

18,514

3.24

%

Total interest \bearing deposits

5,103,935

116,557

4.59

%

4,501,301

75,559

3.39

%

Short-term borrowings

-

-

0.00

%

-

-

0.00

%

Advance from Federal Home Loan Bank

-

-

0.00

%

91,160

2,262

5.00

%

Subordinated debt, net

148,284

2,650

3.59

%

148,047

2,650

3.61

%

Total interest bearing liabilities

5,252,219

119,207

4.56

%

4,740,508

80,471

3.42

%

Noninterest bearing liabilities:

Demand deposits

727,797

979,404

Lease liability

19,664

20,850

Other liabilities

81,151

75,217

Total liabilities

6,080,831

5,815,979

Shareholders’ equity

710,093

664,207

Total liabilities and shareholders’ equity

$

6,790,924

$

6,480,186

Net interest income

$

134,807

$

147,227

Net interest spread

3.11

%

3.80

%

Net interest margin

4.07

%

4.67

%

Cost of Deposits:

Noninterest bearing demand deposits

$

727,797

$

979,404

Interest bearing deposits

5,103,935

116,557

4.59

%

4,501,301

75,559

3.39

%

Total Deposits

$

5,831,732

$

116,557

4.02

%

$

5,480,705

$

75,559

2.78

%

(1)

Includes non-accrual loans and loans held for sale

(2)

Net loan fee income of $2.4 million and $2.1 million for the year ended June 30, 2024 and 2023, 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

Six Months Ended

Year ended

June 30, 2024

December 31, 2023

(Dollars in 000's)

Allowance For Credit Losses

Balance at Beginning of Period

$

78,355

$

68,472

Charge-Offs

Commercial & Industrial

12,409

124

Mini-perm Real Estate

-

-

Total Charge-Offs

12,409

124

Recoveries

Commercial & Industrial

2

7

Mini-perm Real Estate

-

-

Total Recoveries

2

7

Net Charge-Offs

12,407

117

Provision for Credit Losses:

6,900

10,000

Balance at End of Period

$

72,848

$

78,355

Average Loans Held for Investment

$

5,295,175

$

5,067,870

Loans Held for Investment at End of Period

$

5,428,600

$

5,273,498

Net Charge-Offs to Average Loans

0.47

%

0.00

%

Allowances for Credit Losses to Loans at End of Period

1.34

%

1.49

%

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