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Preferred Bank Reports Quarterly and Annual Earnings

GlobeNewswire Thursday, 17 January 2019
LOS ANGELES, Jan. 17, 2019 (GLOBE NEWSWIRE) -- *Preferred Bank (NASDAQ: PFBC)*, an independent commercial bank, today reported results for the quarter and year ended December 31, 2018. Preferred Bank (“the Bank”) reported net income of $18.7 million or $1.22 per diluted share for the fourth quarter of 2018. This compares favorably to net income of $7.7 million or $0.52 per diluted share for the fourth quarter of 2017 and to net income of $18.3 million or $1.20 per diluted share for the third quarter of 2018. The fourth quarter of 2017 was negatively impacted by a charge to the Bank’s deferred tax asset of $6.7 million due to the passage of the Tax Cut and Jobs Act in December of 2017. Net income for the year ended December 31, 2018 was $71.0 million or $4.64 per diluted share compared to net income of $43.4 million or $2.96 per diluted share for 2017. Again, the year 2017 was negatively impacted by the deferred tax asset charge.Highlights from the fourth quarter of 2018:

· Return on Assets

1.82%
· Return on Beginning Equity

18.50%
· Linked quarter deposit growth

3.44%

· Linked quarter loan growth

1.77%
· Efficiency ratio

29.84%
· Net interest margin

4.13%

Li Yu, Chairman and CEO, commented, “For the fourth quarter, Preferred Bank’s net income was $18.7 million or $1.22 per diluted share.  We ended the year 2018 with net income of $71.0 million or $4.64 per diluted share which represented increases of 63.6% and 56.7% over 2017, respectively.”

Fourth quarter net income included the following extraordinary items:

· We sold the OREO property in Las Vegas for a net gain of $2.04 million.

· We made a sizeable provision for loan loss of $5,550,000. The increase is mostly related to our New York nonperforming loan relationship.

Through bankruptcy proceedings, we acquired the title to the above-mentioned New York multi-family properties on January 16, 2019.  As these properties had not been properly managed and stabilized, together with a recent New York condo market headwind, the appraisal value came in much less than the previous valuation.  Therefore, in December we recorded a charge-off on these loans to reflect the lower valuation, less estimated selling costs.  These loans were transferred to OREO on January 16, 2019.

During the quarter, we continued to experience elevated pay-off activity as evidenced by the slightly lower growth rate in loans.  Loan growth for the quarter was $58 million or 1.77% and for the year total loans grew by $392 million or 13.34%.

Deposits increased by $121 million or 3.44% on a linked quarter basis and for the year, total deposits grew by $377 million or 11.55%.

During the fourth quarter, the net interest margin (“NIM”) improved to 4.13%, a 9 basis point improvement over the third quarter of 2018.  Likewise, the Bank’s efficiency ratio also improved to 29.8%.  Our return on equity (“ROE”) and our efficiency ratio are among the top of our peer group, both locally and nationwide.

We are approaching 2019 with extreme caution.  There are a great diversity of forecasts with regard to a potential recession, a credit cycle, a trade war, interest rates and overall economic growth.  Our focus will be to keep our business model uncomplicated, maintain a low efficiency ratio and keep our margin healthy.”

*Net Interest Income and Net Interest Margin.* Net interest income before provision for loan and lease losses was $41.4 million for the fourth quarter of 2018. This compares favorably to the $34.6 million recorded in the fourth quarter of 2017 and to the $39.2 million recorded in the third quarter of 2018. The comparisons to both prior periods is favorable due to both loan growth and higher loan rates partially offset by an increase in interest expense on deposits. The Bank’s taxable equivalent net interest margin was 4.13% for the fourth quarter of 2018, a 9 basis point increase over the 4.04% achieved in the third quarter of 2018 and a 27 basis point increase from the 3.86% posted in the fourth quarter of 2017. The margin has benefitted greatly from the last few Fed rate hikes. With 78% of the loan portfolio tied to the Prime rate, and with the sizeable cash position, the margin expanded even in the face of higher deposit costs.

*Noninterest Income.* For the fourth quarter of 2018, noninterest income was $4,405,000 compared with $1,215,000 for the same quarter last year and compared to $1,676,000 for the third quarter of 2018. The increase over both periods is primarily due to the aforementioned gain on sale of OREO which was $2.04 million. In addition to that, the Bank received a legal fee recovery of $610,000 on a recession-era loan. Service charges on deposits were $290,000, an increase over the prior quarter but down from the fourth quarter of 2017. Letter of credit fees were $956,000 for the fourth quarter, a decrease from the $1,091,000 recorded in the third quarter of 2018 but up significantly over the $627,000 posted in the same quarter last year.

*Noninterest Expense.* Total noninterest expense was $13.7 million for the fourth quarter of 2018, an increase of $1.9 million over the fourth quarter of 2017 and an increase of $100,000 from the $13.6 million recorded in the third quarter of 2018. Salaries and benefits expense totaled $8.6 million for the fourth quarter of 2018, an increase of $1.66 million over the $7.0 million recorded in the fourth quarter of 2017 and down slightly compared to the $8.7 million recorded in the third quarter of 2018. The increase over the prior year is due mainly to staffing increases as well as an increase in bonus expense, commensurate with our higher profitability. Occupancy expense totaled $1.3 million for the quarter and was fairly even with the prior quarter and was up slightly over the same period last year. Professional services expense was $1.5 million for the fourth quarter of 2018 compared to $1.2 million for the same quarter of 2017 and $1.3 million recorded in the third quarter of 2018. The increase over the prior quarter and the prior year is due primarily to higher legal fees. Other expenses were $1.4 million for the fourth quarter of 2018 compared to $1.6 million for the fourth quarter of 2017 and $1.5 million in the third quarter of 2018.

*Income Taxes*

The Bank recorded a provision for income taxes of $8.0 million for the fourth quarter of 2018. This represents an effective tax rate (“ETR”) of 29.9% and an increase from the ETR of 28.0% for the third quarter of 2018 but down significantly from the 65.7% recorded in the fourth quarter of 2017. The fourth quarter of 2017 included a special charge to the Bank’s deferred tax asset of $6.7 million in connection with the passage of the Tax Cut and Jobs Act in December 2017. Aside from that charge, the Bank’s ETR would have been approximately 35.7% for the fourth quarter of 2017.

*Balance Sheet Summary*

Total gross loans and leases (both held for sale and held for investment) at December 31, 2018 were $3.33 billion, an increase of $58.0 million or 1.8% over the total of $3.28 billion as of September 30, 2018. Total deposits increased by $120.9 over the $3.52 billion as of September 30, 2018. Total assets reached $4.22 billion as of December 31, 2018, an increase of $139.3 million or 3.4% over the total of $4.08 billion as of September 30, 2018. For the year, total loans increased by $392.3 million of 13.3%, total deposits grew by $377.0 million or 11.6% and total assets grew by $445.6 million or 11.8%.

*Asset Quality*

As of December 31, 2018, nonaccrual loans totaled $44.8 million, up from the total of $6.5 million as of December 31, 2017 and down from the $50.4 million as of September 30, 2018. The increase over year end 2017 is due to the addition of the aforementioned New York loans. On January 16, 2019, the New York multi-family loans totaling $36.9 million were moved into OREO status.

Total net charge-offs for the fourth quarter of 2018 were $6.5 million compared to net recoveries of $314,000 in the third quarter of 2018 and compared to net charge-offs of $334,000 for the fourth quarter of 2017. The Bank recorded a provision for loan loss of $5.55 million for the fourth quarter of 2018, compared to $1.5 million in the fourth quarter of 2017 and compared to $1.88 million recorded in the third quarter of 2018. The allowance for loan loss at December 31, 2018 was $31.1 million or 0.93% of total loans compared to $29.9 million or 1.02% of total loans at December 31, 2017.

As of December 31, 2018 total classified loans stood at $46.2 million compared to $52.0 million as of September 30, 2018 and $9.0 million as of December 31, 2017. Upon the transfer of the N.Y. loans to OREO, the Bank’s total classified loans will drop back down to $9.3 million, comparable to year-end 2017 levels.

*Capitalization*

As of December 31, 2018, the Bank’s leverage ratio was 10.11%, the common equity tier 1 capital ratio was 10.38% and the total capital ratio was 13.72%. As of December 31, 2017, the Bank’s leverage ratio was 9.52%, the common equity tier 1 ratio was 10.07% and the total risk based capital ratio was 13.83%.

*Conference Call and Webcast*

A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2018 financial results will be held tomorrow, January 18, 2019 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. 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 Chief Executive Officer Li Yu, President and Chief Operating Officer 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 1, 2019; the passcode is 10127745.

*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 twelve full-service branch banking offices in the California cities of Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2), and one office in Flushing, New York. 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 2017 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,          2018     2018     2017 Interest income:               Loans, including fees    $   49,027     $   46,130     $   38,456    Investment securities        4,892         3,734         3,198    Fed funds sold        454         528         347      Total interest income        54,373         50,392         42,001                    Interest expense:               Interest-bearing demand        4,258         3,911         2,229    Savings        13         15         17    Time certificates        7,117         5,684         3,641    Fed funds purchased        0         -         0    FHLB borrowings        12         14         21    Subordinated debit        1,531         1,531         1,531      Total interest expense        12,931         11,155         7,439      Net interest income        41,442         39,237         34,562  Provision for loan losses        5,550         1,880         1,500      Net interest income after provision for loan losses          35,892         37,357         33,062                    Noninterest income:               Fees & service charges on deposit accounts        290         240         312    Letters of credit fee income        956         1,091         627    BOLI income        91         91         89    Net gain on sale of other real estate owned        2,038         -         -    Net gain on called and sale of investment securities        -         -         4    Other income        1,030         254         183      Total noninterest income        4,405         1,676         1,215                    Noninterest expense:               Salary and employee benefits        8,640         8,666         6,981    Net occupancy expense        1,326         1,340         1,289    Business development and promotion expense        282         203         204    Professional services        1,485         1,337         1,227    Office supplies and equipment expense        373         349         344    Other real estate owned related expense        181         221         169    Other          1,396         1,468         1,562      Total noninterest expense        13,683         13,584         11,776      Income before provision for income taxes        26,614         25,449         22,501  Income tax expense        7,960         7,126         14,775      Net income    $   18,654     $   18,323     $   7,726                    Dividend and earnings allocated to participating securities        (313 )       (312 )       (89 )Net income available to common shareholders    $   18,341     $   18,011     $   7,637                    Income per share available to common shareholders                 Basic    $   1.22     $   1.20     $   0.52      Diluted    $   1.22     $   1.20     $   0.52                    Weighted-average common shares outstanding                 Basic        15,064,578         15,063,685         14,710,680      Diluted        15,064,578         15,063,685         14,751,056                    Dividends per share    $   0.30     $   0.25     $   0.22                    


* **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           2018     2017    %Interest income:               Loans, including fees    $   178,420     $   144,678     23.3 %  Investment securities        14,877         11,792     26.2 %  Fed funds sold        1,868         1,130     65.3 %    Total interest income        195,165         157,600     23.8 %                  Interest expense:               Interest-bearing demand        13,934         7,901     76.4 %  Savings        60         72     -16.5 %  Time certificates        20,753         13,633     52.2 %  FHLB borrowings        65         167     -61.0 %  Subordinated debit        6,124         6,123     100.0 %    Total interest expense        40,936         27,896     46.7 %    Net interest income        154,229         129,704     18.9 %Provision for loan losses        10,130         5,500     84.2 %    Net interest income after provision for loan losses          144,099         124,204     16.0 %                  Noninterest income:               Fees & service charges on deposit accounts        1,201         1,269     -5.4 %  Letters of credit fee income        3,927         2,635     49.0 %  BOLI income        361         351     2.7 %  Net gain on sale of other real estate owned        2,038         -     100.0 %  Net gain on called and sale of investment securities        112         4     100.0 %  Other income        1,762         1,565     12.6 %    Total noninterest income        9,401         5,824     61.4 %                  Noninterest expense:               Salary and employee benefits        34,741         30,041     15.6 %  Net occupancy expense        5,299         4,942     7.2 %  Business development and promotion expense        816         883     -7.6 %  Professional services        5,989         4,390     36.4 %  Office supplies and equipment expense        1,464         1,340     9.3 %  Other real estate owned related expense        615         563     9.2 %  Other          5,878         7,389     -20.5 %    Total noninterest expense        54,802         49,548     10.6 %    Income before provision for income taxes        98,698         80,480     22.6 %Income tax expense        27,705         37,086     -25.3 %    Net income    $   70,993     $   43,394     63.6 %                  Dividend and earnings allocated to participating securities        (1,174 )       (499 )   135.3 %Net income available to common shareholders    $   69,819     $   42,895     62.8 %                  Income per share available to common shareholders                 Basic    $   4.64     $   2.97     56.1 %    Diluted    $   4.64     $   2.96     56.7 %                  Weighted-average common shares outstanding                 Basic        15,056,844         14,438,964     4.3 %    Diluted        15,059,770         14,492,671     3.9 %                  Dividends per share    $   1.02     $   0.80     27.5 %                  


* **PREFERRED BANK** *
* **Condensed Consolidated Statements of Financial Condition** *
* **(unaudited)** *
* **(in thousands)** *                     * *       December 31,   December 31,        2018     2017        (Unaudited)   (Audited)  
* **Assets** *                    Cash and due from banks  $   526,759     $   446,822    Fed funds sold      76,000         108,500      Cash and cash equivalents      602,759         555,322                Securities held to maturity, at amortized cost      8,007         8,780    Securities available-for-sale, at fair value      182,413         188,203    Loans and leases      3,333,377        2,941,093    Less allowance for loan and lease losses      (31,065 )       (29,921 )  Less net deferred loan fees      (2,323 )       (3,099 )    Net loans and leases      3,299,989        2,908,073                Loans held for sale, at lower of cost or fair value      -         440                Other real estate owned      -         4,112    Customers' liability on acceptances      10,074         7,272    Bank furniture and fixtures, net      7,497         5,684    Bank-owned life insurance      9,317         9,066    Accrued interest receivable      14,266         11,291    Investment in affordable housing      43,849         34,708    Federal Home Loan Bank stock      11,933         11,077    Deferred tax assets      18,706         17,476    Income tax receivable      -         2,713    Other assets      6,692         5,642      Total assets  $   4,215,502     $  3,769,859                            
* **Liabilities and Shareholders' Equity** *                    Liabilities:         Deposits:           Demand  $   730,096     $   659,487      Interest-bearing demand    1,397,006       1,353,974      Savings    20,369       24,429      Time certificates of $250,000 or more    738,626       621,648      Other time certificates    753,588       603,152     Total deposits      3,639,685        3,262,690      Acceptances outstanding      10,074         7,272      Advances from Federal Home Loan Bank      1,307         6,401      Subordinated debt issuance      99,087         98,963      Commitments to fund investment in affordable housing partnership      19,530         18,523      Accrued interest payable      6,839         3,833      Other liabilities      24,567         17,143        Total liabilities      3,801,089        3,414,825                Commitments and contingencies         Shareholders' equity:           Preferred stock. Authorized 25,000,000 shares; issued and no outstanding shares at December 31, 2018 and December 31, 2017      -         -      Common stock, no par value. Authorized 100,000,000 shares; issued and outstanding 15,308,688 at December 31, 2018 and 15,122,313 at December 31, 2017, respectively.      210,882         207,948      Treasury stock      (34,529 )       (33,233 )    Additional paid-in-capital      45,187         39,462      Accumulated income      194,855         139,684      Accumulated other comprehensive income (loss):            Unrealized gain (loss) on securities, available-for-sale, net of tax of $(725) and $504 at December 31, 2018 and December 31, 2017, respectively     (1,982 )       1,173        Total shareholders' equity      414,413         355,034      Total liabilities and shareholders' equity  $   4,215,502     $   3,769,859                


* *

* **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,      2018   2018   2018   2018   2017 
* **Unaudited historical quarterly operations data:** *            Interest income  $   54,373   $   50,392   $   46,748   $   43,652   $   42,001    Interest expense      12,931       11,155       9,342       7,508       7,439      Interest income before provision for credit losses      41,442       39,237       37,406       36,144       34,562    Provision for credit losses      5,550       1,880       1,200       1,500       1,500    Noninterest income      4,405       1,676       1,756       1,564       1,215    Noninterest expense      13,683       13,584       13,805       13,730       11,776    Income tax expense      7,960       7,126       6,752       5,867       14,775      Net income  $   18,654   $   18,323   $   17,405   $   16,611   $   7,726                  Earnings per share               Basic  $   1.22   $   1.20   $   1.14   $   1.09   $   0.52      Diluted  $   1.22   $   1.20   $   1.14   $   1.09   $   0.52                
* **Ratios for the period:** *            Return on average assets    1.82 %   1.84 %   1.83 %   1.85 %   0.83 %  Return on beginning equity    18.50 %   18.87 %   18.82 %   18.97 %   9.67 %  Net interest margin (Fully-taxable equivalent)    4.13 %   4.04 %   4.07 %   4.14 %   3.86 %  Noninterest expense to average assets    1.33 %   1.37 %   1.46 %   1.53 %   1.27 %  Efficiency ratio    29.84 %   33.20 %   35.25 %   36.41 %   32.92 %  Net charge-offs (recoveries) to average loans (annualized)    0.80 %   -0.04 %   0.00 %   0.39 %   0.05 %              
* **Ratios as of period end:** *            Tier 1 leverage capital ratio    10.11 %   10.07 %   10.04 %   10.07 %   9.52 %  Common equity tier 1 risk-based capital ratio    10.38 %   10.23 %   10.14 %   10.03 %   10.07 %  Tier 1 risk-based capital ratio    10.38 %   10.23 %   10.14 %   10.03 %   10.07 %  Total risk-based capital ratio    13.72 %   13.65 %   13.62 %   13.58 %   13.83 %  Allowances for credit losses to loans and leases at end of period    0.93 %   0.98 %   0.95 %   0.92 %   1.02 %  Allowance for credit losses to non-performing loans and leases    69.29 %   63.42 %   58.92 %   861.44 %   461.28 %              
* **Average balances:** *            Total loans and leases  $   3,217,850   $   3,184,527   $   3,092,571   $   2,958,382   $   2,853,134    Earning assets  $   3,988,970   $   3,861,346   $   3,696,854   $   3,550,333   $   3,572,826    Total assets  $   4,068,581   $   3,946,924   $   3,804,557   $   3,648,857   $   3,678,237    Total deposits  $   3,498,226   $   3,392,878   $   3,268,490   $   3,131,660   $   3,179,679                                  

* * 

* **PREFERRED BANK** *  
* **Selected Consolidated Financial Information** *  
* **(unaudited)** *  
* **(in thousands, except for ratios)** *                                           For the Year Ended       December 31,   December 31,        2018     2017     Interest income  $   195,165     $   157,600      Interest expense      40,936         27,896        Interest income before provision for credit losses      154,229         129,704      Provision for credit losses      10,130         5,500      Noninterest income      9,401         5,824      Noninterest expense      54,802         49,548      Income tax expense      27,705         37,086        Net income  $   70,993     $   43,394                  Earnings per share             Basic  $   4.64     $   2.97        Diluted  $   4.64     $   2.96                
* **Ratios for the period:** *          Return on average assets    1.84 %     1.24 %    Return on beginning equity    20.00 %     14.56 %    Net interest margin (Fully-taxable equivalent)    4.08 %     3.80 %    Noninterest expense to average assets    1.42 %     1.41 %    Efficiency ratio    33.49 %     36.56 %    Net charge-offs (recoveries) to average loans    0.29 %     0.08 %              
* **Average balances:** *          Total loans and leases  $   3,114,132     $   2,733,369      Earning assets  $   3,790,757     $   3,431,985      Total assets  $   3,868,576     $   3,509,775      Total deposits  $   3,323,295     $   3,038,910                


* **PREFERRED BANK** *
* **Selected Consolidated Financial Information** *
* **(unaudited)** *
* **(in thousands, except for ratios)** *                                                                                     As of                                  December 31,   September 30,   June 30,   March 31,   December 31,          2018     2018     2018     2018     2017   
* **Unaudited quarterly statement of financial position data:** *                    
Assets:                       Cash and cash equivalents $ 602,759     $ 531,240     $ 493,521     $ 421,024     $ 555,322     Securities held-to-maturity, at amortized cost   8,007       8,203       8,370       8,556       8,780     Securities available-for-sale, at fair value   182,413       173,953       176,930       177,823       188,203     Securities equity, at fair value   -       -       -       4,667       -     Loans and Leases:                       Real estate - Single and multi-family residential   587,562       559,050       508,470       552,828       513,953       Real estate - Land   10,646       10,725       11,133       10,766       10,863       Real estate - Commercial   1,358,821       1,337,794       1,319,664       1,315,296       1,244,486       Real estate - For sale housing construction   138,815       122,225       112,236       95,884       85,199       Real estate - Other construction   207,849       246,815       231,276       216,571       198,602       Commercial and industrial, trade finance and other   1,029,684       998,781       955,663       904,798       887,990         Gross loans   3,333,377       3,275,390       3,138,442       3,096,143       2,941,093     Allowance for loan and lease losses   (31,065 )     (31,966 )     (29,772 )     (28,570 )     (29,921 )   Net deferred loan fees   (2,323 )     (2,571 )     (2,287 )     (1,935 )     (3,099 )     Net loans, excluding loans held for sale $ 3,299,989     $ 3,240,853     $ 3,106,383     $ 3,065,638     $ 2,908,073     Loans held for sale $ -     $ -     $ 47,337     $ -     $ 440       Net loans and leases $ 3,299,989     $ 3,240,853     $ 3,153,720     $ 3,065,638     $ 2,908,513                               Other real estate owned $ -     $ 4,112     $ 4,112     $ 4,112     $ 4,112     Investment in affordable housing   43,849       45,555       47,201       33,650       34,708     Federal Home Loan Bank stock   11,933       11,933       12,158       11,076       11,077     Other assets   66,552       60,339       62,792       55,378       59,144       Total assets $ 4,215,502     $ 4,076,188     $ 3,958,804     $ 3,781,924     $ 3,769,859                              
Liabilities:                       Deposits:                       Demand $ 730,096     $ 745,861     $ 713,492     $ 677,629     $ 659,487       Interest-bearing demand   1,397,006       1,360,237       1,372,771       1,346,479       1,353,974       Savings   20,369       21,490       21,918       25,373       24,429       Time certificates of $250,000 or more   738,626       737,465       683,561       627,031       621,648       Other time certificates   753,588       653,697       618,493       585,165       603,152       Total deposits $ 3,639,685     $ 3,518,750     $ 3,410,235     $ 3,261,677     $ 3,262,690                               Advances from Federal Home Loan Bank $ 10,074     $ 6,256     $ 8,313     $ 4,272     $ 7,272     Subordinated debt issuance   99,087       99,056       99,025       98,994       98,963     Commitments to fund investment in affordable housing partnership   19,530       21,514       29,116       17,861       18,523     Other liabilities   32,713       30,643       26,889       28,092       27,377       Total liabilities $ 3,801,089     $ 3,676,219     $ 3,573,578     $ 3,410,896     $ 3,414,825                              
Equity:                         Net common stock, no par value $ 221,540     $ 221,518     $ 220,669     $ 219,423     $ 214,177     Retained earnings   194,855       180,793       166,302       152,728       139,684     Accumulated other comprehensive income   (1,982 )     (2,342 )     (1,745 )     (1,123 )     1,173       Total shareholders' equity $ 414,413     $ 399,969     $ 385,226     $ 371,028     $ 355,034       Total liabilities and shareholders' equity $ 4,215,502     $ 4,076,188     $ 3,958,804     $ 3,781,924     $ 3,769,859        


*Preferred Bank*  
*Loan and Credit Quality Information*                
*Allowance For Credit Losses & Loss History*         Year Ended   Year ended         December 31, 2018   December 31, 2017                                         (Dollars in 000's)  
Allowance For Credit Losses          
Balance at Beginning of Period   $   29,921     $   26,478     Charge-Offs             Commercial & Industrial       4,040         2,274       Mini-perm Real Estate       5,742         -        Construction - Residential       -          -        Construction - Commercial       -          -        Land - Residential       -          -        Land - Commercial       -          -        Others       -          -          Total Charge-Offs       9,782         2,274                   Recoveries             Commercial & Industrial       796         55       Mini-perm Real Estate       -          -        Construction - Residential       -          -        Construction - Commercial       -          17       Land - Residential       -          -        Land - Commercial       -          145         Total Recoveries       796         217                   Net Loan Charge-Offs       8,986         2,057     Provision for Credit Losses       10,130         5,500    
Balance at End of Period   $   31,065     $   29,921    
Average Loans and Leases   $   3,790,757     $   3,431,985    
Loans and Leases at end of Period   $   3,333,377         2,941,533    
Net Charge-Offs to Average Loans and Leases     0.29 %     0.08 %  
Allowances for credit losses to loans and leases at end of period     0.93 %     1.02 %                              


*AT THE COMPANY:* *AT FINANCIAL PROFILES:*
Edward J. Czajka Tony Rossi
Executive Vice President General Information
Chief Financial Officer (310) 622-8221
(213) 891-1188 PFBC@finprofiles.com
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