Preferred Bank (NASDAQ: PFBC), an independent
commercial bank, today reported results for the quarter ended March
31, 2020. Preferred Bank (“the Bank”) reported net income of $16.2
million or $1.08 per diluted share for the first quarter of 2020.
This is down from net income of $18.7 million or $1.23 per diluted
share for the first quarter of 2019 and is down from net income of
$19.6 million or $1.31 per diluted share for the fourth quarter of
2019. The primary reason for the decrease is the provision for
credit losses, which totaled $5.3 million for the first quarter of
2020, as compared to $500,000 in the first quarter of 2019 and
compared to $450,000 in the fourth quarter of 2019. The higher
provision for this quarter is due to the uncertainty of the impact
of the economic shutdown due to the COVID-19 pandemic.
Li Yu, Chairman and CEO, commented, “The speed and the depth of
the events that have transpired in the first quarter have been
truly remarkable. Despite all of this, our first quarter 2020 net
income came in at $16.2 million or $1.08 per diluted share.
“Deposits grew $103.2 million or 2.6% while loans grew $168.4
million or 4.5% on a linked quarter basis. Much of the loan
growth was increased usage of available credit lines by our C&I
customers (which we estimated to be around $100 million to $120
million). With the government’s various stimulus programs, we
do not expect to see a continuation of this magnitude of draws in
the near future. In any event, our Bank has sufficient
liquidity to meet the need should it arise.
“Our net interest margin for the quarter was a strong 3.70%. The
FOMC’s two rate cuts totaling 150 basis points has changed our
Bank’s interest rate sensitivity drastically. As of March 31,
2020, our loan portfolio comprised of 14.9% fixed rate loans, 19.4%
is floating rate without a rate floor and 65.7% of loans are
floating rate with a rate floor. With these March rate cuts,
all but $28.2 million or 1.1% of these loans now have floor rates
equal to or higher than the coupon rate. Due to this,
Preferred Bank is now liability sensitive, after having been asset
sensitive for a number of years. With the TCD portfolio
continuously repricing out of higher coupons, we feel that any NIM
compression will be a short-term event and improving gradually
beginning March 18, 2020.
“Preferred Bank’s efficiency ratio for the first quarter was
34.9%. Based on a study/ranking recently published by S&P
Global Market Intelligence, Preferred Bank’s efficiency ratio was
the best in the nation among all banks $3 - $10 billion in asset
size. Together with the improving net interest margin
discussed above, we feel the Bank’s operating metrics are
sound.
“With the various government stimulus programs, many of our
customers in affected industries will find relief in assistance and
loan deferment. However, our economy has likely already
entered into a recession. Returning to our normal lifestyles
and growth in economic activity will be gradual. Going
forward, managing our credit quality will be our utmost
priority. Through the implementation of the new accounting
standard for credit losses; Current Expected Credit Losses
("CECL"), we have added $8 million to the allowance for credit
losses through a transition adjustment to equity. In
addition, our operating provision for credit losses for the first
quarter was $5.3 million.
“All of our offices are in areas affected by the
coronavirus. Observing the “stay at home order”, roughly 45%
of our employees are working from home. We are devoting our
resources to meet the needs of our borrower requests for deferment
and for the Paycheck Protection Program (“PPP”) loans under the
CARES Act. We have engaged with a third party to offer
an automated solution for PPP loans and meanwhile, we applied and
received approval from the SBA to begin making these loans. Prior
to this, Preferred Bank was not an SBA approved lender but as of
now we are processing applications under the program. In
addition, many of our customers are a good fit for the Federal
Reserve’s Main Street New Loan Facility (“MSNLF”) and Main
Street Expanded Loan Facility (“MSNLF”) programs. We are
committed to supporting our customers during this critical
time. Preferred Bank is pleased to be a part of the
solution.
“The dark days of our nation will be over, soon, we hope.
Meanwhile, we are committed to be a contributor to the
recovery.”
COVID-19 Relief EffortSubsequent to March 31,
2020, the Bank has received and granted many payment deferments
principally related to hotel loans and restaurant loans. As
of March 31, 2020, total loans to hotels and restaurants amounted
to $343 million or 8.8% of the Bank’s total loan portfolio.
Other than a $15 million Shared National Credit (“SNIC”) loan to
a national fast food chain, substantially all of our hotel and
restaurant loans are real estate secured with average LTV of 51%
and average DCR of 1.64x, together with sponsor’s guarantees. 82%
of our loans to hotels are to flagged national brands. The
remaining are boutique hotels in choice beach/oceanfront or in
major city centers. The Bank’s exposure to other parts of the
travel industry is insignificant.
Net Interest Income and Net Interest Margin.
Net interest income before provision for loan and lease losses was
$41.8 million for the first quarter of 2020. This compares
favorably to the $40.9 million recorded in the first quarter of
2019 and the $40.4 million recorded in the fourth quarter of 2019.
The increase over both periods is due to loan growth as well as
declining deposit costs as interest rates have declined. The Bank’s
taxable equivalent net interest margin was 3.70% for the first
quarter of 2020, a 42 basis point decrease from the 4.12% achieved
in the first quarter of 2019 and a 3 basis point increase over the
3.67% posted in the fourth quarter of 2019. The decrease from the
first quarter of 2019 was due to lower rates overall on interest
earning assets while the cost of liabilities did not decline
commensurately. The increase over the fourth quarter of 2019 was
due to declining deposits costs and relatively asset yields over
the two periods.
Noninterest Income. For the first quarter of
2020, noninterest income was $1,672,000 compared with $1,861,000
for the same quarter last year and compared to $1,883,000 for the
fourth quarter of 2019. The decrease from the first quarter of 2019
was due mainly to letter of credit fee income which decreased by
$223,000. The decrease from the fourth quarter of 2019 was due to
other income which was down by $266,000 between the two
periods.
Noninterest Expense. Total noninterest expense
was $15.2 million for the first quarter of 2020. This represents a
decrease of $510,000 from the same quarter last year and an
increase of $1.4 million over the fourth quarter of 2019. Salaries
and benefits expense totaled $10.9 million for the first quarter of
2020, an increase of $1.1 million over the first quarter of 2019
and an increase of $1.2 million over the fourth quarter of 2019.
The increase over the prior quarter is mostly to payroll taxes,
which were higher by $837,000 in the first quarter due to the
payout of annual incentives. The increase over the prior year is
due mainly to equity compensation expense which was up by $567,000
over the first quarter of last year. Staffing increases were also
part of the reason for the increase over last year. Occupancy
expense totaled $1.4 million for the quarter and was flat compared
to the fourth quarter of 2019 but was up compared to the same
period last year. In the first quarter of 2019, the Bank
implemented the Lease Accounting Standard, ASC 842, which resulted
in a small benefit of $229,000. Professional services expense was
$1.0 million for the first quarter of 2020 compared to $1.3 million
for the same quarter of 2019 and $834,000 recorded in the fourth
quarter of 2019. The decrease from the prior year is due primarily
to lower legal fees which were associated with a repossessed
property which was disposed in the first quarter of 2019. The
increase over the fourth quarter of 2019 was due to legal fees
recovered of $159,000. Other expenses were $1.2 million for
the first quarter of 2020 compared to $1.3 million for the first
quarter of 2019 and compared to $1.1 million in the fourth quarter
of 2019.
Income Taxes
The Bank recorded a provision for income taxes of $6.8 million
for the first quarter of 2020. This represents an effective tax
rate (“ETR”) of 29.7% and a slight decrease from the ETR of 30.1%
for the fourth quarter of 2019 and nearly flat compared to the
29.5% recorded in the first quarter of 2019. The Bank’s ETR will
fluctuate slightly from quarter to quarter within a fairly small
range due to the timing of taxable events throughout the year.
Balance Sheet Summary
Total gross loans at March 31, 2020 were $3.89 billion, an
increase of $168.4 million or 4.5% over the total of $3.72 billion
as of December 31, 2019. Total deposits eclipsed $4 billion to end
at $4.09 billion, an increase of $103 million or 2.6% over the
$3.98 billion as of December 31, 2019. Total assets reached $4.73
billion as of March 31, 2020, an increase of $99.2 million or 2.1%
over the total of $4.63 billion as of December 31, 2019.
Asset Quality
As of March 31, 2020, nonaccrual loans totaled $2.1 million,
flat when compared to the same total as of December 31, 2019 and
down from the $3.6 million as of March 31, 2019. As of March 31,
2020, total classified loans stood at $31.1 million compared to
$27.6 million as of December 31, 2019. Total net recoveries for the
first quarter of 2020 were $0 compared to $315,000 in the first
quarter of 2019 and compared to $330,000 for the first quarter of
2019.
In the first quarter, the Bank implemented the CECL methodology
under Accounting Standards Codification ("ASC") 326, in which the
allowance for credit losses now reflects expected credit losses
over the life of loans and held-to-maturity debt securities, and
incorporates macroeconomic forecasts as well as historical loss
rates. The allowance for expected credit losses at the end of the
first quarter incorporates a change in the economic forecast late
in the first quarter of 2020, to reflect the pandemic conditions,
as compared to our initial adoption of CECL. As a result of the
implementation of ASC 326, the Bank recorded an additional $8.0
million to the allowance for credit losses through a transition
adjustment to equity. The effect of this capital charge on
regulatory capital is now being phased in over a five-year
period.
The Bank recorded a provision for credit losses of $5.3 million
for the first quarter of 2020, which reflects the anticipated
impacts from the current economic environment. This compares to a
provision of $500,000 recorded in the first quarter of 2019 and
compared to $450,000 recorded in the fourth quarter of 2019. The
allowance for credit losses at March 31, 2020 was $48.1 million or
1.24% of total loans compared to $34.8 million or 0.94% of total
loans at December 31, 2019.
Below is a brief summary of the quantitative and qualitative
portions of the allowance for credit losses currently and at year
end 2019:
|
CECL |
Day One CECL Adoption |
Incurred Losses |
|
3/31/2020 |
1/1/2020 |
12/31/2019 |
Allowance for Credit Losses |
Loss Rate |
Total Allowance |
Loss Rate |
Total Allowance |
Loss Rate |
Total Allowance |
Total Quantitative |
0.79 |
% |
$ |
30,591,053 |
|
0.78 |
% |
$ |
28,911,612 |
|
0.24 |
% |
$ |
8,854,120 |
|
|
|
|
|
|
|
|
Total Qualitative |
0.44 |
% |
|
16,747,611 |
|
0.36 |
% |
|
13,131,185 |
|
0.68 |
% |
|
24,641,350 |
|
|
|
|
|
|
|
|
Total Impairment |
|
|
575,470 |
|
|
|
878,776 |
|
|
|
878,776 |
|
Estimated Allowance |
|
$ |
47,915,870 |
|
|
$ |
42,921,572 |
|
|
$ |
34,374,246 |
|
|
|
|
|
|
|
|
Allowance for Credit Losses |
|
$ |
48,129,713 |
|
|
$ |
42,829,713 |
|
|
$ |
34,829,713 |
|
Unallocated Allowance |
|
$ |
213,843 |
|
|
-$ |
91,858 |
|
|
$ |
455,468 |
|
% Increase Over Prior Period |
|
|
38.19 |
% |
|
|
- |
|
|
|
- |
|
Allowance as a % of Total Loans |
|
|
1.24 |
% |
|
|
1.15 |
% |
|
|
0.94 |
% |
|
|
|
|
|
|
|
Below is a breakdown of the Bank’s loan portfolio by segment as
of March 31, 2020:
Category |
Loan Count |
Total Balance |
% of Portfolio |
Average LTV |
Average DCR |
Cash Secured |
81 |
$ |
91,841 |
2.36 |
% |
NA |
|
NA |
Commercial |
1,401 |
|
1,159,552 |
29.78 |
% |
NA |
|
NA |
International |
251 |
|
17,940 |
0.46 |
% |
NA |
|
NA |
Construction - 1-4 Residential |
57 |
|
177,364 |
4.56 |
% |
51.8 |
% |
NA |
Construction - Commercial |
45 |
|
223,385 |
5.74 |
% |
54.1 |
% |
NA |
Real Estate - 1-4 Residential |
160 |
|
240,178 |
6.17 |
% |
53.0 |
% |
1.72 |
Real Estate - Industrial |
102 |
|
257,506 |
6.61 |
% |
47.6 |
% |
1.78 |
Real Estate - Multifamily |
61 |
|
234,561 |
6.02 |
% |
55.5 |
% |
1.22 |
Real Estate - Office |
69 |
|
302,594 |
7.77 |
% |
50.8 |
% |
1.29 |
Real Estate - Retail |
131 |
|
423,979 |
10.89 |
% |
55.4 |
% |
1.45 |
Real Estate - Special Purpose |
74 |
|
510,340 |
13.11 |
% |
51.0 |
% |
1.64 |
Real Estate - Vacant Land |
3 |
|
7,818 |
0.20 |
% |
36.9 |
% |
NA |
Consumer |
5 |
|
1,123 |
0.03 |
% |
42.3 |
% |
NA |
Residential Mortgage |
373 |
|
245,144 |
6.30 |
% |
56.0 |
% |
NA |
|
|
|
|
|
|
Total |
2,813 |
$ |
3,893,325 |
100 |
% |
|
|
|
|
|
|
|
|
CapitalizationAs of March 31, 2020, the Bank’s
leverage ratio was 10.05%, the common equity tier 1 capital ratio
was 10.80% and the total capital ratio was 14.26%. As of December
31, 2019, the Bank’s leverage ratio was 10.25%, the common equity
tier 1 ratio was 10.51% and the total risk based capital ratio was
13.63%.
Conference Call and WebcastA
conference call with simultaneous webcast to discuss Preferred
Bank’s first quarter 2020 financial results will be held tomorrow,
April 23, 2020 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 May 7, 2020; the passcode is 10142684.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks
headquartered in California. The Bank is chartered by the State of
California, and its deposits are insured by the Federal Deposit
Insurance Corporation, or FDIC, to the maximum extent permitted by
law. The Bank conducts its banking business from its main office in
Los Angeles, California, and through eleven full-service branch
banking offices in California (Alhambra, Century City, City of
Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera,
Tarzana and San Francisco (2)) and one branch in Flushing, New
York. 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 StatementsThis 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 2019 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 |
|
March 31, |
|
December 31, |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
|
2019 |
|
Interest
income: |
|
|
|
|
|
Loans, including fees |
$ |
51,564 |
|
|
$ |
51,052 |
|
|
$ |
50,460 |
|
Investment securities |
|
3,979 |
|
|
|
4,269 |
|
|
|
4,691 |
|
Fed funds sold |
|
124 |
|
|
|
162 |
|
|
|
306 |
|
Total interest income |
|
55,667 |
|
|
|
55,483 |
|
|
|
55,457 |
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
Interest-bearing demand |
|
3,368 |
|
|
|
3,490 |
|
|
|
4,743 |
|
Savings |
|
14 |
|
|
|
16 |
|
|
|
12 |
|
Time certificates |
|
8,963 |
|
|
|
10,038 |
|
|
|
8,248 |
|
FHLB borrowings |
|
- |
|
|
|
- |
|
|
|
12 |
|
Subordinated debit |
|
1,531 |
|
|
|
1,530 |
|
|
|
1,532 |
|
Total interest expense |
|
13,876 |
|
|
|
15,074 |
|
|
|
14,547 |
|
Net interest income |
|
41,791 |
|
|
|
40,409 |
|
|
|
40,910 |
|
Provision
for loan losses |
|
5,300 |
|
|
|
450 |
|
|
|
500 |
|
Net interest income after provision for loan losses |
|
36,491 |
|
|
|
39,959 |
|
|
|
40,410 |
|
|
|
|
|
|
|
Noninterest
income: |
|
|
|
|
|
Fees & service charges on deposit accounts |
|
405 |
|
|
|
392 |
|
|
|
368 |
|
Letters of credit fee income |
|
848 |
|
|
|
806 |
|
|
|
1,070 |
|
BOLI income |
|
94 |
|
|
|
93 |
|
|
|
91 |
|
Other income |
|
325 |
|
|
|
592 |
|
|
|
332 |
|
Total noninterest income |
|
1,672 |
|
|
|
1,883 |
|
|
|
1,861 |
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
Salary and employee benefits |
|
10,902 |
|
|
|
9,746 |
|
|
|
9,781 |
|
Net occupancy expense |
|
1,396 |
|
|
|
1,374 |
|
|
|
1,148 |
|
Business development and promotion expense |
|
151 |
|
|
|
258 |
|
|
|
286 |
|
Professional services |
|
1,014 |
|
|
|
834 |
|
|
|
1,344 |
|
Office supplies and equipment expense |
|
489 |
|
|
|
448 |
|
|
|
425 |
|
Net (gain) loss on sale of other real estate owned and expense |
|
1 |
|
|
|
3 |
|
|
|
1,391 |
|
Other |
|
1,231 |
|
|
|
1,107 |
|
|
|
1,319 |
|
Total noninterest expense |
|
15,184 |
|
|
|
13,770 |
|
|
|
15,694 |
|
Income before provision for income taxes |
|
22,979 |
|
|
|
28,072 |
|
|
|
26,577 |
|
Income tax
expense |
|
6,825 |
|
|
|
8,456 |
|
|
|
7,834 |
|
Net income |
$ |
16,154 |
|
|
$ |
19,616 |
|
|
$ |
18,743 |
|
|
|
|
|
|
|
Dividend and
earnings allocated to participating securities |
|
(51 |
) |
|
|
(164 |
) |
|
|
(158 |
) |
Net income
available to common shareholders |
$ |
16,103 |
|
|
$ |
19,452 |
|
|
$ |
18,585 |
|
|
|
|
|
|
|
Income per
share available to common shareholders |
|
|
|
|
|
Basic |
$ |
1.08 |
|
|
$ |
1.31 |
|
|
$ |
1.23 |
|
Diluted |
$ |
1.08 |
|
|
$ |
1.31 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
Basic |
|
14,870,715 |
|
|
|
14,836,374 |
|
|
|
15,145,923 |
|
Diluted |
|
14,870,715 |
|
|
|
14,836,374 |
|
|
|
15,145,923 |
|
|
|
|
|
|
|
Dividends
per share |
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
PREFERRED
BANK |
Condensed
Consolidated Statements of Financial Condition |
(unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(Unaudited) |
|
(Audited) |
Assets |
|
|
|
|
|
|
|
Cash and due
from banks |
$ |
461,369 |
|
|
$ |
498,645 |
|
Fed funds
sold |
|
23,500 |
|
|
|
37,000 |
|
Cash and cash equivalents |
|
484,869 |
|
|
|
535,645 |
|
|
|
|
|
Securities
held to maturity, at amortized cost |
|
7,077 |
|
|
|
7,310 |
|
Securities
available-for-sale, at fair value |
|
235,097 |
|
|
|
240,640 |
|
Loans and
leases |
|
3,893,325 |
|
|
|
3,724,922 |
|
Less
allowance for loan and lease losses |
|
(48,130 |
) |
|
|
(34,830 |
) |
Less net
deferred loan fees |
|
(3,084 |
) |
|
|
(3,028 |
) |
Net loans and leases |
|
3,842,111 |
|
|
|
3,687,064 |
|
|
|
|
|
Customers'
liability on acceptances |
|
6,507 |
|
|
|
7,379 |
|
Bank
furniture and fixtures, net |
|
12,084 |
|
|
|
12,236 |
|
Bank-owned
life insurance |
|
9,635 |
|
|
|
9,571 |
|
Accrued
interest receivable |
|
14,809 |
|
|
|
14,961 |
|
Investment
in affordable housing |
|
51,400 |
|
|
|
53,142 |
|
Federal Home
Loan Bank stock |
|
13,101 |
|
|
|
13,101 |
|
Deferred tax
assets |
|
22,459 |
|
|
|
19,560 |
|
Income tax
receivable |
|
4,461 |
|
|
|
3,368 |
|
Operating
lease right-of-use assets |
|
16,842 |
|
|
|
17,103 |
|
Other
assets |
|
7,182 |
|
|
|
7,401 |
|
Total assets |
$ |
4,727,634 |
|
|
$ |
4,628,481 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
Deposits: |
|
|
|
Demand |
$ |
753,750 |
|
|
$ |
835,790 |
|
Interest-bearing demand |
|
1,503,618 |
|
|
|
1,328,863 |
|
Savings |
|
23,035 |
|
|
|
23,784 |
|
Time certificates of $250,000 or more |
|
1,030,282 |
|
|
|
976,727 |
|
Other time certificates |
|
775,792 |
|
|
|
818,130 |
|
Total deposits |
|
4,086,477 |
|
|
|
3,983,294 |
|
Acceptances outstanding |
|
6,507 |
|
|
|
7,379 |
|
Subordinated debt issuance |
|
99,242 |
|
|
|
99,211 |
|
Commitments to fund investment in affordable housing
partnership |
|
21,195 |
|
|
|
24,149 |
|
Operating lease liabilities |
|
20,007 |
|
|
|
20,497 |
|
Accrued interest payable |
|
4,377 |
|
|
|
3,324 |
|
Other liabilities |
|
16,044 |
|
|
|
20,612 |
|
Total liabilities |
|
4,253,849 |
|
|
|
4,158,466 |
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock. Authorized 25,000,000 shares; issued and no
outstanding shares at March 31, 2019 and December 31, 2018 |
|
— |
|
|
|
— |
|
Common stock, no par value. Authorized 100,000,000 shares; issued
and outstanding 14,916,048 and 14,933,768 at March 31, 2020 and
December 31, 2019, respectively. |
|
210,882 |
|
|
|
210,882 |
|
Treasury stock |
|
(57,375 |
) |
|
|
(55,054 |
) |
Additional paid-in-capital |
|
56,584 |
|
|
|
55,170 |
|
Retained earnings |
|
261,095 |
|
|
|
255,050 |
|
Accumulated other comprehensive income: |
|
|
|
Unrealized gain on securities, available-for-sale, net of tax of
$1,013 and $1,546 at March 31, 2020 and December 31, 2019,
respectively. |
|
2,599 |
|
|
|
3,967 |
|
Total shareholders' equity |
|
473,785 |
|
|
|
470,015 |
|
Total liabilities and shareholders' equity |
$ |
4,727,634 |
|
|
$ |
4,628,481 |
|
|
|
|
|
PREFERRED
BANK |
Selected
Consolidated Financial Information |
(unaudited) |
(in
thousands, except for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended |
|
|
|
|
|
|
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
|
2020 |
2019 |
2019 |
2019 |
2019 |
Unaudited historical quarterly operations
data: |
|
|
|
|
|
Interest income |
$ |
55,667 |
|
$ |
55,483 |
|
$ |
57,959 |
|
$ |
57,822 |
|
$ |
55,457 |
|
Interest expense |
|
13,876 |
|
|
15,074 |
|
|
16,482 |
|
|
15,981 |
|
|
14,547 |
|
Interest income before provision for credit losses |
|
41,791 |
|
|
40,409 |
|
|
41,477 |
|
|
41,841 |
|
|
40,910 |
|
Provision for credit losses |
|
5,300 |
|
|
450 |
|
|
900 |
|
|
1,600 |
|
|
500 |
|
Noninterest income |
|
1,672 |
|
|
1,883 |
|
|
1,737 |
|
|
1,985 |
|
|
1,861 |
|
Noninterest expense |
|
15,184 |
|
|
13,770 |
|
|
13,898 |
|
|
13,885 |
|
|
15,694 |
|
Income tax expense |
|
6,825 |
|
|
8,456 |
|
|
8,383 |
|
|
8,362 |
|
|
7,834 |
|
Net income |
$ |
16,154 |
|
$ |
19,616 |
|
$ |
20,033 |
|
$ |
19,979 |
|
$ |
18,743 |
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
Basic |
$ |
1.08 |
|
$ |
1.31 |
|
$ |
1.32 |
|
$ |
1.31 |
|
$ |
1.23 |
|
Diluted |
$ |
1.08 |
|
$ |
1.31 |
|
$ |
1.32 |
|
$ |
1.31 |
|
$ |
1.23 |
|
|
|
|
|
|
|
Ratios for the period: |
|
|
|
|
|
Return on average assets |
|
1.40 |
% |
|
1.74 |
% |
|
1.81 |
% |
|
1.89 |
% |
|
1.83 |
% |
Return on beginning equity |
|
13.82 |
% |
|
16.95 |
% |
|
17.61 |
% |
|
18.54 |
% |
|
18.24 |
% |
Net interest margin (Fully-taxable equivalent) |
|
3.70 |
% |
|
3.67 |
% |
|
3.84 |
% |
|
4.07 |
% |
|
4.12 |
% |
Noninterest expense to average assets |
|
1.31 |
% |
|
1.22 |
% |
|
1.25 |
% |
|
1.31 |
% |
|
1.54 |
% |
Efficiency ratio |
|
34.93 |
% |
|
32.56 |
% |
|
32.16 |
% |
|
31.68 |
% |
|
36.69 |
% |
Net charge-offs (recoveries) to average loans (annualized) |
|
0.00 |
% |
|
-0.01 |
% |
|
0.05 |
% |
|
-0.04 |
% |
|
-0.04 |
% |
|
|
|
|
|
|
Ratios as of period end: |
|
|
|
|
|
Tier 1 leverage capital ratio |
|
10.05 |
% |
|
10.25 |
% |
|
10.27 |
% |
|
10.50 |
% |
|
10.32 |
% |
Common equity tier 1 risk-based capital ratio |
|
10.80 |
% |
|
10.51 |
% |
|
10.40 |
% |
|
10.53 |
% |
|
10.54 |
% |
Tier 1 risk-based capital ratio |
|
10.80 |
% |
|
10.51 |
% |
|
10.40 |
% |
|
10.53 |
% |
|
10.54 |
% |
Total risk-based capital ratio |
|
14.26 |
% |
|
13.63 |
% |
|
13.53 |
% |
|
13.74 |
% |
|
13.82 |
% |
Allowances for credit losses to loans and leases at end of
period |
|
1.24 |
% |
|
0.94 |
% |
|
0.93 |
% |
|
0.94 |
% |
|
0.94 |
% |
Allowance for credit losses to non-performing loans and leases |
|
2263.66 |
% |
|
1631.42 |
% |
|
895.30 |
% |
|
981.65 |
% |
|
887.75 |
% |
|
|
|
|
|
|
Average balances: |
|
|
|
|
|
Total securities |
$ |
247,689 |
|
$ |
248,904 |
|
$ |
249,060 |
|
$ |
241,664 |
|
$ |
189,684 |
|
Total loans and leases * |
$ |
3,717,212 |
|
$ |
3,614,621 |
|
$ |
3,534,283 |
|
$ |
3,450,583 |
|
$ |
3,327,005 |
|
Total earning assets |
$ |
4,548,512 |
|
$ |
4,381,206 |
|
$ |
4,298,523 |
|
$ |
4,134,320 |
|
$ |
4,034,284 |
|
Total assets |
$ |
4,651,956 |
|
$ |
4,482,210 |
|
$ |
4,395,357 |
|
$ |
4,235,612 |
|
$ |
4,142,906 |
|
Total time certificate of deposits |
$ |
1,765,816 |
|
$ |
1,756,480 |
|
$ |
1,650,965 |
|
$ |
1,627,953 |
|
$ |
1,521,209 |
|
Total interest bearing deposits |
$ |
3,244,711 |
|
$ |
3,050,318 |
|
$ |
3,051,007 |
|
$ |
2,924,526 |
|
$ |
2,874,045 |
|
Total deposits |
$ |
4,010,629 |
|
$ |
3,849,825 |
|
$ |
3,772,097 |
|
$ |
3,625,021 |
|
$ |
3,555,981 |
|
Total interest bearing liabilities |
$ |
3,343,933 |
|
$ |
3,149,511 |
|
$ |
3,150,167 |
|
$ |
3,024,452 |
|
$ |
2,974,442 |
|
Total equity |
$ |
475,409 |
|
$ |
463,849 |
|
$ |
460,451 |
|
$ |
445,101 |
|
$ |
428,136 |
|
|
|
|
|
|
|
*Incudes loans held for sale
PREFERRED
BANK |
Selected
Consolidated Financial Information |
(unaudited) |
(in
thousands, except for ratios) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
|
2019 |
|
|
|
2019 |
|
|
|
2019 |
|
Unaudited quarterly statement of financial position
data: |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
484,869 |
|
|
$ |
535,645 |
|
|
$ |
465,189 |
|
|
$ |
351,121 |
|
|
$ |
623,002 |
|
Securities held-to-maturity, at amortized cost |
|
7,077 |
|
|
|
7,310 |
|
|
|
7,545 |
|
|
|
7,702 |
|
|
|
7,861 |
|
Securities available-for-sale, at fair value |
|
235,097 |
|
|
|
240,640 |
|
|
|
242,655 |
|
|
|
238,589 |
|
|
|
182,280 |
|
Loans and Leases: |
|
|
|
|
|
|
|
|
|
Real estate - Single and multi-family residential |
|
721,006 |
|
|
|
686,906 |
|
|
|
642,824 |
|
|
|
646,830 |
|
|
|
625,416 |
|
Real estate - Land |
|
7,818 |
|
|
|
7,838 |
|
|
|
7,950 |
|
|
|
9,330 |
|
|
|
9,352 |
|
Real estate - Commercial |
|
1,494,694 |
|
|
|
1,504,594 |
|
|
|
1,533,566 |
|
|
|
1,419,224 |
|
|
|
1,395,074 |
|
Real estate - For sale housing construction |
|
177,364 |
|
|
|
173,951 |
|
|
|
179,651 |
|
|
|
171,584 |
|
|
|
152,418 |
|
Real estate - Other construction |
|
223,385 |
|
|
|
218,562 |
|
|
|
216,812 |
|
|
|
212,988 |
|
|
|
228,174 |
|
Commercial and industrial, trade finance and other |
|
1,269,058 |
|
|
|
1,133,071 |
|
|
|
1,090,647 |
|
|
|
1,125,730 |
|
|
|
994,571 |
|
Gross loans |
|
3,893,325 |
|
|
|
3,724,922 |
|
|
|
3,671,450 |
|
|
|
3,585,686 |
|
|
|
3,405,005 |
|
Allowance for loan and lease losses |
|
(48,130 |
) |
|
|
(34,830 |
) |
|
|
(34,281 |
) |
|
|
(33,811 |
) |
|
|
(31,896 |
) |
Net deferred loan fees |
|
(3,084 |
) |
|
|
(3,028 |
) |
|
|
(2,518 |
) |
|
|
(1,401 |
) |
|
|
(1,501 |
) |
Net loans, excluding loans held for sale |
$ |
3,842,111 |
|
|
$ |
3,687,064 |
|
|
$ |
3,634,651 |
|
|
$ |
3,550,474 |
|
|
$ |
3,371,608 |
|
Loans held for sale |
$ |
- |
|
|
$ |
- |
|
|
$ |
2,999 |
|
|
$ |
- |
|
|
$ |
- |
|
Net loans and leases |
$ |
3,842,111 |
|
|
$ |
3,687,064 |
|
|
$ |
3,637,650 |
|
|
$ |
3,550,474 |
|
|
$ |
3,371,608 |
|
|
|
|
|
|
|
|
|
|
|
Investment in affordable housing |
|
51,400 |
|
|
|
53,142 |
|
|
|
39,780 |
|
|
|
41,136 |
|
|
|
42,492 |
|
Federal Home Loan Bank stock |
|
13,101 |
|
|
|
13,101 |
|
|
|
13,101 |
|
|
|
13,101 |
|
|
|
11,932 |
|
Other assets |
|
93,979 |
|
|
|
91,579 |
|
|
|
89,564 |
|
|
|
92,302 |
|
|
|
89,095 |
|
Total assets |
$ |
4,727,634 |
|
|
$ |
4,628,481 |
|
|
$ |
4,495,484 |
|
|
$ |
4,294,425 |
|
|
$ |
4,328,270 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
Demand |
$ |
753,750 |
|
|
$ |
835,790 |
|
|
$ |
774,869 |
|
|
$ |
718,611 |
|
|
$ |
731,795 |
|
Interest-bearing demand |
|
1,503,618 |
|
|
|
1,328,863 |
|
|
|
1,435,144 |
|
|
|
1,279,104 |
|
|
|
1,372,760 |
|
Savings |
|
23,035 |
|
|
|
23,784 |
|
|
|
21,985 |
|
|
|
20,927 |
|
|
|
20,550 |
|
Time certificates of $250,000 or more |
|
1,030,282 |
|
|
|
976,727 |
|
|
|
849,574 |
|
|
|
839,203 |
|
|
|
778,020 |
|
Other time certificates |
|
775,792 |
|
|
|
818,130 |
|
|
|
787,392 |
|
|
|
819,163 |
|
|
|
816,678 |
|
Total deposits |
$ |
4,086,477 |
|
|
$ |
3,983,294 |
|
|
$ |
3,868,964 |
|
|
$ |
3,677,008 |
|
|
$ |
3,719,803 |
|
|
|
|
|
|
|
|
|
|
|
Advances Outstanding |
$ |
6,507 |
|
|
$ |
7,379 |
|
|
$ |
7,333 |
|
|
$ |
8,074 |
|
|
$ |
8,417 |
|
Subordinated debt issuance |
|
99,242 |
|
|
|
99,211 |
|
|
|
99,180 |
|
|
|
99,149 |
|
|
|
99,118 |
|
Commitments to fund investment in affordable housing
partnership |
|
21,195 |
|
|
|
24,149 |
|
|
|
12,904 |
|
|
|
15,186 |
|
|
|
17,340 |
|
Other liabilities |
|
40,428 |
|
|
|
47,253 |
|
|
|
48,023 |
|
|
|
43,566 |
|
|
|
51,460 |
|
Total liabilities |
$ |
4,253,849 |
|
|
$ |
4,161,286 |
|
|
$ |
4,036,404 |
|
|
$ |
3,842,983 |
|
|
$ |
3,896,138 |
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Net common stock, no par value |
$ |
210,091 |
|
|
$ |
208,178 |
|
|
$ |
215,123 |
|
|
$ |
224,314 |
|
|
$ |
222,782 |
|
Retained earnings |
|
261,095 |
|
|
|
255,050 |
|
|
|
239,914 |
|
|
|
224,401 |
|
|
|
209,012 |
|
Accumulated other comprehensive income |
|
2,599 |
|
|
|
3,967 |
|
|
|
4,043 |
|
|
|
2,727 |
|
|
|
338 |
|
Total shareholders' equity |
$ |
473,785 |
|
|
$ |
467,195 |
|
|
$ |
459,080 |
|
|
$ |
451,442 |
|
|
$ |
432,132 |
|
Total liabilities and shareholders' equity |
$ |
4,727,634 |
|
|
$ |
4,628,481 |
|
|
$ |
4,495,484 |
|
|
$ |
4,294,425 |
|
|
$ |
4,328,270 |
|
|
|
|
|
|
|
|
|
|
|
Preferred
Bank |
Loan and
Credit Quality Information |
|
|
|
|
Allowance For Credit Losses & Loss
History |
|
Quarter Ended |
|
Year ended |
|
March 31, 2020 |
|
December 31, 2019 |
|
(Dollars in 000's) |
Allowance For Credit Losses |
|
|
|
Balance at Beginning of Period |
$ |
34,830 |
|
|
$ |
31,065 |
|
Charge-Offs |
|
|
|
Commercial & Industrial |
|
- |
|
|
|
526 |
|
Mini-perm Real Estate |
|
- |
|
|
|
101 |
|
Total Charge-Offs |
|
- |
|
|
|
627 |
|
|
|
|
|
Recoveries |
|
|
|
Commercial & Industrial |
|
- |
|
|
|
527 |
|
Mini-perm Real Estate |
|
- |
|
|
|
415 |
|
Total Recoveries |
|
- |
|
|
|
942 |
|
|
|
|
|
Net Loan Charge-Offs |
|
- |
|
|
|
(315 |
) |
Provision for Credit Losses: |
|
|
|
CECL Cumulative Effect Adjustment |
|
8,000 |
|
|
|
- |
|
Current provision |
|
5,300 |
|
|
|
3,450 |
|
Balance at
End of Period |
$ |
48,130 |
|
|
$ |
34,830 |
|
Average
Loans and Leases Held for Investment |
$ |
3,717,175 |
|
|
$ |
3,482,218 |
|
Loans and
Leases Held for Investment at end of Period |
$ |
3,893,325 |
|
|
$ |
3,724,922 |
|
Net
Charge-Offs to Average Loans and Leases |
|
0.00 |
% |
|
|
-0.01 |
% |
Allowances
for credit losses to loans and leases at end of period |
|
1.24 |
% |
|
|
0.94 |
% |
|
|
|
|
AT THE COMPANY:Edward J. CzajkaExecutive Vice
PresidentChief Financial Officer(213) 891-1188 |
|
AT FINANCIAL PROFILES:Tony RossiGeneral
Information(310) 622-8221PFBC@finprofiles.com |
|
|
|
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